sale of Indian timber. A complete revision of the regulations is now under review for approval. They contain the following:

"141.17 Time for cutting timber. Unless otherwise authorized by the Secretary, the maximum period which shall be allowed, after the effective date of a timber contract, for cutting of the estimated volume of timber purchased shall be 5 years."

A revision of the forest management portion of the Bureau's manual is in preparation, and it will contain a statement essentially as follows:

"For most forested reservations, the cutting schedules and forest management plans required by title 25, Code of Federal Regulations, section 141.5, will provide for a series of contract sales of stumpage. Each sale should include the smallest volume of timber, to be removed in the shortest period of time, that is consistent with orderly development of the forest resource and with the best interests of the Indian owners.' ""

The committee's particular concern with the size of Indian Bureau timber sales may be because of the following statement at page 78, part II of its report:

"The Bureau of Indian Affairs' sales are generally large by any standard of comparison. On the Quinaielt Reservation in western Washington sales have been in excess of a quarter of a billion board-feet. Without exception, sales have been made, and often with some difficulty, to one bidder at the appraised price. ***The Bureau's version of a small sale on the Quinaielt was a 5-year contract for 41.7 million board-feet. However, on other reservations in the Northwest the sales program has been built around somewhat smaller offerings which have generally provided an opportunity for more companies to bid. *** Official spokesmen for the Warm Springs Indians and individual spokesmen for Quinaielt and Colville tribal groups testified that this program does not meet with their approval. No Indians testified favoring continuation of large sales." The question of the Indians' reaction to the size of sales will be covered in connection with recommendations 5 and 6.

Although the committee's staff report indicates that a sale of 10 million feet is considered a large sale in the West, it also points out that there is a considerable difference of opinion in this matter. We find no particular basis for the belief that 10 million feet is a large sale. In the western pine and Pacific coast regions, a medium-size sawmill will probably consume about 20 million feet per year. On this basis, provided there was a smooth flow of raw material, the sawmill would be constantly involved with at least 6 "large" sales of 10 million feet each; 2 contracts expiring, 2 under operation, and 2 in anticipation. Such a situation would not be conducive to stabilized, efficiently managed operations. We suggest that a more logical division according to the size of sale would be; 0 to 10 million feet, small; 10 to 50 million feet, medium; and more than 50 million feet, large.

Regardless of individual conceptions of the size of "large" sales, the Department agrees that the need for very large sales is much less today than it was in the earlier days of railroad logging. In those earlier days the usual practice, dictated by financial necessity, was to offer timber in large blocks in order to provide the volume of timber necessary to write off the large investments in logging railroads. The statement that "the Bureau of Indian Affairs sales are generally large by any standard of comparison" does not stand up under critical analysis. The following discussion is confined to Bureau timber sales in the four Western States (California, Oregon, Washington, and Idaho) because this is the general area covered by the committee in its report. The data presented represent conditions as of June 1, 1958, as revealed by records in the central office of the Bureau.

1 There is apparently some misunderstanding on this point. According to the Bureau of Indian Affairs records a total of 59 timber-sale contracts were executed on the Quinaielt Reservation during the 7-year period 1950-56. Of these 59 sales, 54 were very small sales of less than 1 million board-feet, and 2 were in the 1 to 5 million foot class. The remaining 3 were the Boulder Creek, Taholah, and Crane Creck sales, covering estimated volumes of 42, 545, and 614 million board-feet, respectively.

BUREAU OF INDIAN AFFAIRS

TABLE 1.-Summary of timber sales made January 1950 to May 1958, inclusive (California, Oregon, Washington, and Idaho) and active sales as of May 31, 1958

Unit

NOTE.-No contract which has expired is included as active, even though not formally closed. Of the 17 sales of 15 MM board-feet and over, entered into during the period, 5 were completed within the same period.

TABLE II.-Timber sales of 15,000,000 feet or more, active as of May 31, 1958

Reservation

NOTE.-Includes all unexpired contracts on which certificates of completion have not been issued.

Table I reveals that during the 81⁄2-year period a total of 482 sales were entered into. Of these, only 17 sales covered an estimated volume of 15 million board-feet

or more.

Table II presents more detailed information regarding the 17 timber sales of 15 million feet or more that were active as of May 31, 1958. Since the committee has suggested that large sales tend to restrict the number of potential bidders, the table also shows the number of individuals who submitted bids in each case.

The foregoing data indicate that the trend in the sale of Indian timber has been away from large-volume long-term sales, in the direction of smaller-volume, shorter-term sales. It can be expected that the trend will be accelerated through the completion of currently active long-term sales.

The sales program on each reservation is geared to a management plan in which the allowable annual cut is determined. As one timber-sale contract is completed other sales are made, in order to continue the annual cut at the desired level. As each currently active long-term sale is completed it is apt to be replaced by one or more short-term sales, and there will thus be a continuing trend toward elimination of the long-term sales from the Bureau programs.

We suggest that the present policy, as expressed by the proposed changes in regulations and manual, quoted above, is workable, and that the authority for making larger sales when the need is indicated should be retained. We cannot, at the moment, foresee any situation that would indicate the future need of a sale of Indian timber involving several hundred million feet, and extending over

15 or 20 years. But our policy should be sufficiently broad and flexible to cover situations, presently unforeseen, which may arise.

Before closing this discussion, reference should be made again to the belief of the committee and its staff that more bidders participate in small sales (those under 25 million board-feet) than in the so-called large sales, that there are fewer one-bid sales in the smaller offerings, and that the small sales result in a larger increase of bid price over the appraised value. This opinion is revealed in the report under the headings "F. Special Indian Problems" and "G. Restrictions Affecting the Sale of Timber."

We have not make a detailed study of all recent Indian Bureau sales of less than 25 million board-feet. However, we find that of the 56 small sales on the Quinault Reservation, referred to above in the footnote to page 15, the bid price exceeded the appraised price in 19 sales. The other 37 sales were made at the appraised prices. Information regarding the number of bidders is not readily available.

Table II, above, reveals no fixed relationship between size of sale and number of bidders. Of the 17 sales listed in table II, with estimated volumes of 15 million board-feet or more:

5 offerings resulted in 1 bid.
million board-feet.

4 offerings resulted in 2 bids.
lion board-feet.

1 offering resulted in 3 bids.
4 offerings resulted in 4 bids.
million board-feet.

3 offerings resulted in 5 bids.

million board-feet.

Estimated volumes ranged from 108 to 614

Estimated volumes ranged from 29 to 50 mil

Estimated volume was 163 million board-feet.
Estimated volumes ranged from 30 to 280

Estimated volumes ranged from 20 to 302

The foregoing analysis reveals that the number of participants in bidding for Indian timber is affected not alone by the volume of timber offered. It is also affected by physical location of the timber in relation to mill facilities of prospective users, the timber species and quality, etc. Of great importance, market conditions at the time of sale affect the number of bids received.

Recommendations F-3 and F-7

These two recommendations should be considered together, because the practice of requiring advance payments has been followed in order to provide funds to meet the immediate financial needs of the Indians.

The question of advance payments and distribution of timber sale income came to the committee's particular attention in its review of conditions on the Quinault Indian Reservation. This heavily timbered reservation is almost completely subdivided into individual trust allotments.

On other reservations in the Pacific Northwest, most of the timberlands are in tribal ownership, and little more than 15 percent of timber volume is on trust allotments. Advance payments for allotment timber, therefore, are not ordinarily a matter of serious concern to reasonably well-financed operators on any reservation except the Quinault. An exception is found on the Yakima Reservation, where steps are now being taken to sell the timber in a concentrated block of about 80 trust allotments. This is the last large block of timbered allotments on the Yakima Reservation that has not been logged or placed under contract. Advance payments and the distribution of income from joint sales of allotted timber were the subject of a very thorough investigation at the hearings on Quinault Reservation timber sale practices. The published record of that investigation and subsequent correspondence with the Senate Committee on Interior and Insular Affairs are therefore referred to for more detailed acknowledgment of the above-quoted recommendations.

In brief, the Department has agreed that there are many undesirable features in connection with the requirements of advance payments. The Department also agrees that there are undesirable features in the present arrangement for distributing income from joint sales. No better alternative has come to our attention, however. For this reason, the Department cannot agree with the statements at page 62 of the committee staff report that the manner of distributing allotted income involves "* * * deficiencies in the trustee function of the Government, which can be corrected.”

The record of the Quinault hearings contains an outline of many different proposals for solving this difficult situation. Careful analysis reveals, however, that none of them is more satisfactory than the one that has been followed.

As one solution, appendix 6 of the staff report presents an interesting example of a theoretical sale involving 10 allotments and running for 8 years. Advance

payments are made to each allottee from a revolving loan fund which is reimbursed with interest from the timber sale receipts. The example provides for payment from the loan fund of 25 percent of the estimated timber value on each allotment at the beginning of the first year, 15 percent at the beginning of the second year, and 10 percent at the beginning of the third year. This is an accelerated version of the Bureau's present schedule of advance payments over a 6-year period. Interest on the loan is computed at the rate of 4 percent annually. Stumpage payments, in the amount of 90 percent of the estimated value, less the advance payments and interest charges, are made at the time the timber on each allotment is cut. When the contract has been completed, the stumpage value for each allotment is recomputed, using the average stumpage rates over the entire contract period, interest charges are recomputed on the adjusted stumpage values, and final stumpage payments are made. In practice it would probably be necessary to reserve more than 10 percent of the estimated value on the allotments that are cut first, if there is to be adequate protection from overpayment resulting from rapidly declining stumpage values.

Our review of the plan, as we interpret it, indicates that there may be some inequities in the suggested method or prorating interest. In other respects the proposed sale, considered by itself alone, would eliminate some of the objectionable features of the present long-term, large-volume sales. For example, the smaller sale would arouse greater competitive interest, and all allottees in the sale area would receive the same rate per thousand-feet for timber of a given species, regardless of changing stumpage rates during the life of the contract.

Other objectionable features of the long-term contracts would not be eliminated, however. The small sale, like the large ones, would benefit only the Indians whose timber is actually under contract. The owners of higher value timber would still subsidize the owners of less valuable timber. The estimated volumes of timber stipulated in the contract would still be based upon timber inventories far antedating the contract-unless it is contemplated that all sales would be held in abeyance until the unforseeable future when more accurate inventories can be financed and completed.

Of great importance, the small sale would be no more successful than the large ones in providing the regular annual payments recommended by the committee. This is one of the problems that originated when the reservation was allotted. Each allottee receives an income only from the sale of timber on an allotment in which he has a beneficial interest. The best technically feasible method of managing this forest is by clear cutting, preferably by so-called staggered settings. When a tract is clear cut it takes about 60 years for the regrowth of timber to pulpwood size, and at least 100 years for the production of saw timber.

Under the small-sale plan suggested in appendix 6, as we understand it, a group of 10 allotments would be combined in 1 sale, and clear cutting would be accomplished over a period of about 8 years. The 10 allottees would receive incomes in varying amounts during the 8-year period. Then they would face the prospect of nearly a half century or more with no timber sale income except from minor salvage sales or from the development of a market for small products that could be grown in fewer years. The plan in appendix 6 may contemplate clear cutting of only a part of each allotment under one sale, to be followed by another similar sale 10 or 20 years later. In that event, the initial 8-year income would be reduced proportionately, and the half century of no income would be broken by an intermediate short period when some income would be received from the second sale.

All of the foregoing shortcomings would be found within a single contract covering 10 allotments and running for about 8 years. If we should attempt to apply the small-sale technique to the entire reservation, in order to benefit all the allotees, the shortcomings would be multiplied. There are about 2,000 allotments on the reservation. The small-sale technique would subdivide the reservation into about 200 units of 10 allotments each. These 200 units would be sold at different times, under different conditions of competitive interest. Two adjoining units of identical timber quality might easily be sold at different stumpage rates, and the inequity of different stumpage rates for timber of equal quality would return to haunt us.

Problems that are foreign to the present large sales would arise. Greater difficulty would be encountered in applying the techniques of clear cutting by staggered settings. Access problems would be multiplied. Under present law and regulations, with some specific exceptions, no right-of-way may be granted across individually owned restricted lands without the prior consent of the owners. In connection with the sale of timber from mixed ownerships it is,

therefore, the practice to obtain from each allottee within the sale area a reasonable right-of-way for removal of timber from any other portion of the same sale area. No right is granted in connection with logging operations outside the sale area. There is accordingly much greater right-of-way flexibility in one large sale than there would be if the same area were subdivided into several small sales. The whole question of access to Indian timber is being studied, however, as discussed above under the caption "B. Access."

We may compare the present Crane Creek sale with the way in which the same area might have been subdivided for small sales. The pertinent facts are:

1. The total estimated volume of saw timber to be cut is 614 million boardfeet.

2. There are about 475 allotments within the area.

3. The average estimated volume on each allotment is therefore about 1 million board-feet.

4. The timber is to be harvested during a period of 30 years, or at the rate of 20 million feet per year.

5. The 20 million foot annual cut equals the volume on about 15 allotments which, if combined in 10-allotment timber-sale units, equals 11⁄2 such units to be cut annually.

6. The 475 allotments in the Crane Creek unit would subdivide into about 47 10-allotment sale units.

If 11⁄2 of the 10-allotment sale units were sold annually, according to the foregoing analysis, it would be about 30 years before the last of such units would be

placed under contract. This procedure would greatly magnify the condition that is so strongly condemned in the staff report; namely, that the only beneficiaries, at any moment, are the Indians whose timber is actually under contract. The strong desire to get as many allotments under contract as possible, and thus provide some income to the greater number, had an important bearing on the decision to enter into the large sales.

Another objection to the small-sale procedure is the probability that, in the subdivision, there would be some units with timber so poor in quality that it would be sold at distress prices, if at all. This, admittedly, points up the present tendency to have high-value allotments subsidize those of lower value. It is, perhaps, a partial offset to the inequities that developed in the allotment process.

There will probably be no need or opportunity to enter into any more really large-volume, long-term sales on the Quinault Reservation. The only large area on the reservation that has not been logged, or is not at present under contract, is the so-called Queets unit in the northwest corner of the reservation. This area of about 45,000 acres, subdivided into about 500 allotments, with an estimated 467 million board-feet of saw timber, was advertised for sale at the same time as the Taholah and the Crane Creek units. No offer was received for the Queets unit. Under the recently liberalized policy governing the granting of patents in fee to competent Indians, and supervised sales of land and timber at the allottees' request, a checkerboard pattern of trust allotments and alienated lands is developing within the Queets unit. It is becoming obvious that the allotments remaining in trust will be so situated that they will be managed under a plan of small sales. In the circumstances, therefore, the question of large sales and large advance payments on the Quinault Reservation is concerned only with sales that have already been made. With minor exceptions, including the proposed Yakima Reservation sale previously referred to, it is an academic question when considering future sales policies.

The objective of providing funds adequate to meet the immediate financial needs of the Indians, and of providing for regular annual payments, cannot be attained with complete satisfaction by any plan that has previously been suggested or, in our opinion, by any plan suggested in the staff report.

Recommendation F-4 (a)

"The appraised price for Indian timber and the renegotiated prices under existing contracts should closely approximate the prices currently being received for comparable timber sold competitively. Prices for Quinault Indian timber under existing contracts should be revised in accordance with this recommendation. Major objectives in planning the sales of Indian timber should be to obtain the maximum price, and adhere to sustained-yield principles" (p. 16).

This subject was also covered in great detail at the hearings on Quinault timbersale policies before the Subcommittee on Indian Affairs. Reference to those hearings and to subsequent correspondence with the Committee on Interior and Insular Affairs is therefore made as a partial answer to the recommendation. Those hearings included testimony regarding stumpage prices not only on the