Smith, Citing Report, Defends Timber Purchaser Road Credits-Price Waterhouse Report Concludes Credits Not an Industry Subsidy

May 20, 1997

WASHINGTON, D.C. - Congressman Bob Smith (R-OR), Chairman of the House Committee on Agriculture, today strongly defended the U.S. Forest Service's Timber Purchaser Road Credit Program, as a key House Subcommittee met to evaluate a newly-released price waterhouse report concluding that the Road Credit Program is not a subsidy to timber purchasers.

The report, prepared by Price Waterhouse and The Federal Budget Consulting Group, concludes that purchaser road credits are not a subsidy to the timber industry. Without the road credit program, timber purchasers would submit lower timber bid prices, reflecting their anticipated road construction costs. The report was the subject of a hearing Tuesday in the Agriculture Subcommittee on Forestry, Resource Conservation, and Research, chaired by Rep. Larry Combest (R-TX).

Indeed, according to the report, the major consequence of eliminating the purchaser credit program and of letting the timber contract system reflect road construction costs would be quite negative -- reduced payments to states and counties, payments generally used for roads and schools, that are based on gross timber receipts, and greater strain on smaller mills, for which reduced cash flow is particularly burdensome. The purchaser road credit is entirely budget neutral, having no impact whatsoever on the federal deficit.

"I have spent a career working to balance our nation's budget, and will continue to fight wasteful government spending when I find it, but the timber road credit program is demonstrably not an industry subsidy," said Smith.

"For years, self-described and misinformed opponents of 'corporate pork' have targeted timber road credits. Now, we have an independent, unbiased study, by a nationally-known, highly respected accounting firm, concluding that timber road credits are not a subsidy. This study should, once and for all, put an end to the timber road credit debate, and none too soon. Let's move on to a serious discussion about real corporate pork."

"The last thing timber communities need is an uninformed Ralph Nader-supported attempt to deprive them of federal payments in lieu of taxes and drive small mills out of operation," Smith said.

"I recently visited some of the most heavily timber dependent communities in California and I can attest to the concern these folks feel. Attacking the road credit, as unfounded as this report says that is, is just one more way of attacking the industry and ultimately those communities. We ought to recognize the reality here and let some common sense creep into this debate," said Larry Combest, the Subcommittee's Chairman.

Most National Forest road construction funding is provided by timber purchasers as part of timber sales contracts. In exchange, the timber purchaser receives a credit for the estimated value of the road construction work they have performed, which the purchaser can then use to pay for the timber that is being harvested. Certain interest groups have criticized the timber road credit program as "corporate pork," failing to recognize that purchaser road credits are not federal spending but are simply an accounting mechanism that allow the Forest Service to keep track of an in-kind exchange.

Smith represents Oregon's Second Congressional District - which includes most of eastern, southern, and central Oregon - in the U.S. House of Representatives. The district is home to ten national forests.