to the existence of the pulp industry in Southeast
Alaska, timber was harvested primarily to meet the
needs of the resident population and the ever-expanding
fishing and mining industries. Timber was used as material
for fish traps, piling, packing cases, mine timbers,
dock piles and timbers, and lumber for construction.
By 1909, nearly all of
the commercial timber in Southeast Alaska was incorporated into
the Tongass National Forest. Timber harvest in the region averaged
about 15 million board feet annually. Most of the timber was
used locally, although some products were shipped to Seattle.
World War I increased the demand for fish and the use of timber
for pilings, fish boxes and construction. The war also increased
the use of Sitka spruce in airplane manufacture, some of which
was supplied from Alaska.
In 1920, the annual harvest
volume reached 20 million board feet, including a large volume
of free use for the Alaska Railroad and other entities. Even
at this point in time, mills in the Puget Sound area posed a
threat to local processors, as large volumes of Douglas-fir were
shipped to Alaska at costs below those of local suppliers. Despite
its relatively high production costs, the timber industry increased
its stronghold in Alaska throughout the 1930s. As a result, the
States import share of total wood consumption dropped to
16 percent, compared to an average of 68 percent in the previous
The 1940s brought renewed
interest in Alaskan spruce as a source of material for airplane
manufacture to support the war effort. Through a special program,
logging on the Tongass was intensified to supply logs to mills
in Puget Sound for further processing. The concentrated effort
continued until early 1944 when lumber was replaced by metal
in the manufacture of airplanes. When wooden fish boxes were
displaced by cardboard cartons, and market demand declined following
the war, the need to develop new markets for Alaskan timber intensified.
Nationally, the Administration
and Congress also wanted to bolster the Southeastern Alaska population
in response to the threats of the Japanese Empire and later,
during the Cold War, the Soviet Union.
The 1950s marked a turning
point for the timber industry in Southeast Alaska and established
a foundation for development that remained in place for over
forty years. An extensive search for new industrial development
to offset the declines in fishing and mining activity concluded
in 1951 with the signing of a fifty-year Forest Service timber
contract. This contract for timber supply underpinned the construction
and operation of the first large-scale pulp mill in Southeast
Alaska. The Ketchikan Pulp Company (KPC) obtained cutting rights
for approximately 8.25 billion board feet of timber on the north
half of Prince of Wales Island and the northwest portion of Revillagigedo
Island. In exchange, the company agreed to build a mill of not
less than 300 tons daily operating capacity. A series of upgrades
to the plant increased its capacity to 650 tons per day, or 200,000
short tons annually. At the time it was built, the mill cost
nearly $52.5 million to complete and represented the largest
single industrial investment made in the Territory of Alaska.
During the same time
period, Japan turned to Alaska in search for timber to rebuild
its postwar economy. Much of Japans native timber resources
had been lost during the war, serving to aggravate the shortage
in Japans domestic wood supply. In 1953, after preliminary
investigation of the feasibility of the venture, Alaska Lumber
and Pulp Company, Inc. (ALP) was incorporated in Juneau with
one hundred percent investment by its Japanese parent firm, Alaska
Pulp Company, Ltd. Shortly afterward, in July 1954, Wrangell
Lumber Company, Inc. was also incorporated by the Japanese parent
firm for the purpose of initiating a wood processing business
in Alaska. In October 1957, a second long-term contract was agreed
upon, committing 5.25 billion board feet of timber to be supplied
over a fifty-year period. The primary sale area included Baranof
Island and portions of Chichagof Island. In exchange, ALP constructed
a pulp mill in Sitka with an initial production capacity of 340
tons per day. Upgrades and expansion subsequently increased the
mills capacity to 600 tons per day or 192,000 short tons
annually. The mill was completed and operational in November
1959 at an approximate cost of $66 million. It was the first
major foreign investment made by Japan after World War II.
The regions pulp
mills represented a foundation for industry structure as well
as a substantial source of revenue to their host communities.
Pulp manufacturers utilized by-product chips from independent
sawmills, laid the foundation for small operators to acquire
timber supplies, provided an outlet for wood that could not be
processed by others, and helped to buffer cyclical trends in
wood products markets.
The 1960s signaled a
new market era for sawmilling in Southeast Alaska. An upward
spiraling economy increased Japans reliance on Alaska for
timber to be used in home construction and industrial development.
The bulk of the products were shipped overseas in the form of
rough sawn cants or dissolving pulp. Over the course of five
years, Alaskas sawnwood exports to Japan nearly quadrupled,
expanding from 68 MMBF in 1965 to 315 MMBF in 1970.
At the same time, despite
the growing population and increasing demand for building materials,
Alaskans became much less dependent on local suppliers for their
wood products. Economic growth around Southcentral ports improved
transport efficiency to the region and lowered the cost of importing
lumber and lumber substitutes from the Pacific Northwest states.
In addition, building specifications required an air or kiln-dried
product, neither of which was offered locally. By 1968, lumber
was no longer being shipped from Southeast Alaska to other locations
in the state.
exports continued to increase throughout the 1960s, peaked in
1973, and then declined until 1985. The volume of lumber exported
from Alaska dropped off in the early 70s following a sharp decline
in the number of Japanese housing starts (along with a decline
in the share of wood-based houses) and increased competition
from lumber producers in the Pacific Northwest and British Columbia.
Japanese softwood lumber consumption fell by 22 percent between
1973 and 1985; however, Alaskas exports to Japan and total
production fell even more steeply, declining by 78 percent over
the same time period.
Although some of the
decrease in lumber exports from Alaska in the 1970s and 80s can
be attributed to conditions in the Japanese market, increased
competition impacted Alaskan lumber trade as well. In the mid-70s,
lumber producers in the Pacific Northwest began to look beyond
the United States for markets; in part attempting to find outlets
for products during U.S. recessions, and in part responding to
long-term trends in domestic purchasing patterns. At the same
time, and for similar reasons, producers in British Columbia
also increased shipments to overseas markets. As a result, Alaskas
role in Pacific Rim markets was sharply diminished.
manufacturers enjoyed yet another resurgence in demand in the
early 1990s when housing starts in Japan hit an all-time high.
Following a generally upward trend throughout the late 1980s,
Alaskas lumber exports reached a peak of 225.5 MMBF in
1990. Indeed all of Alaskas wood-related sectors prospered
in 1990 with an unprecedented total export value of $641 million
in logs, lumber, chips and dissolving pulp. Since that time,
output and employment have steadily declined.
At the end of 1992, excess
production left producers with record inventories of chemical
grade market pulp. Mill closures and extended downtime throughout
1993 finally pulled inventories back in line with demand but
not until inflation-adjusted prices for most grades had dropped
to their lowest point since the 1930s. Citing adverse world market
pulp conditions, increasing production costs, and a shortfall
in the amount of timber available at an affordable price, the
Alaska Pulp Corporation (APC) announced its intent to suspend
operations at the Sitka pulp mill at the end of September 1993.
The companys long-term timber contract was subsequently
terminated by the Forest Service in April 1994. The company shut
down its sawmill in Wrangell, Alaska at the end of November 1994.
World pulp markets recovered
in 1995 and prices rebounded to unprecedented highs. The rapid
recovery from the worst market conditions in years was nothing
short of remarkable, and prices nearly doubled in a nine-month
span. At the same time, significant environmental concerns were
developing in the U.S. and Europe with regard to the dioxin released
during chlorinated pulp bleaching processes. The Environmental
Protection Agency (EPA) began a rigorous assessment and proposed
regulatory changes to address these concerns. Ketchikan Pulp
Company (KPC), owners of Southeast Alaskas remaining pulp
mill, began looking into the prospect of converting to a chlorine-free
In 1996, KPC estimated
that investments totaling $200 million would be needed to keep
the companys Ketchikan mill competitive in world pulp markets
and to meet EPA pollution requirements. At the same time, the
company was facing the end of its long-term contract in just
eight years. KPC officials determined there was an immediate
need to secure an extension of the contract extension and to
revise some of the contract terms before additional investments
could be justified. Federal legislation intended to satisfy these
requirements encountered strong resistance and shutdown of the
mill was targeted for March 1997.
In lieu of a legislative
solution, the company sought a negotiated settlement with the
Clinton Administration. An agreement was reached in February
1997. While the companys long-term timber contract was
canceled under the settlement, it was agreed that KPC would receive
300 MMBF of contract close-out volume over a three year period.
This timber supply would allow for the continued operation of
the companys sawmills in Metlakatla and Ketchikan. Also
under the agreement, the U.S. government agreed to pay KPC $140
million to resolve all past and future legal claims.
Excerpted from: Southeast
Timber Task Force Report, October 1997, Prepared for Governor
Tony Knowles by the Southeast Regional Timber Industry Task
Force, Kathleen Morse, Lead Staff and Author.