(4) Total costs do not include the following Program Budget stona: Payments to Bureau of Employment Compensation; Coop. Koră (Trust Fund); ASCS Exprases (alloc.) OGC Grant Land (Allee.); and Federal Highway Adsin. Trust (Alloc).

(3) Conversion rate for 278 Timber sale offerings is 5 board feet par cubic foot.

(6) Total propres for any station whose boundaries overlap with an Region are included in that Region's summery, (7) F: Suppression Costs not disaggregated shown in 3 overhe

(0) Regional Index not additive. (National indexe. of States W/ Region I Regional Index divided by 30 States). (9) 75 share of (RPA) National Total.

PRESERVATION VERSUS UTILIZATION

Senator HATFIELD. I think when you provide this to the committee for our information, we will find in reviewing these various targets that the percentage of fiscal year 1980 RPA goals as we show in the program justification, just one example of what I consider the imbalance in protection and utilization. Resource protection programs have reached 99 percent of target, and the forest utilization programs are at 71 percent of target.

Mr. CUTLER. I guess our philosophy is that first we have to protect the resource as a custodian, and then go on to whatever level we can to manage in a more intensive way.

DEFINITIONS OF PROTECTION

Senator HATFIELD. Mr. Secretary, the Chief a while ago mentioned having 16 billion board feet as our feasible harvest, providing all of those factors of market and personnel and what have you. This budget is at 11.7 billion board feet. And it seems to me that, again, it is a matter of protection.

All of us want to protect that area that is designated for protection. But we are talking about the area of multiple-use management and of its inventory and

Mr. CUTLER. We are talking about two different definitions of protection, I think. In the context of the heading on the budget, we have land and resource protection. We talk about forest fire, law enforcement, road and trail maintenance, and minerals area management to accompany the development plans of mining companies that have a right under the Mining Act to proceed with mineral development of the national forests-these are not wilderness programs. These are basic resource protection programs against fire and bugs and disease and this sort of thing.

IMPACTS OF BUDGET REDUCTIONS

Senator HATFIELD. I understand minerals is the only one in that category you named that was increased for development or utilization.

Mr. Secretary, the 1980 budget request of $1.2 billion is a reduction of about 18 percent over current fiscal year and about 12 percent reduction over 1978 level. Have you assessed the long and short-term impact on this particular budget reduction?

Mr. CUTLER. I'm not sure we have. I am not sure we are able to do that. I do know that it wasn't a unique reduction within the Department of Agriculture, that other agencies, including the other two for which I am responsible, also suffered-I should say, were provided with budgets that were reduced by quite a bit.

The Science and Education Administration was reduced by 6 percent, the Soil Conservation Service by almost 9 percent, the Animal and Plant Health Inspection Service by 7 percent from 1979. The ASCS budget is down 24 percent.

So the Forest Service was simply one of several agencies within the Department that, in order to achieve the reduced budget for the Department set by the White House, had to sustain a cut in its 1980 budget.

Senator HATFIELD. I wonder if you could review that question somewhat and provide us something in addition for the record. Mr. CUTLER. The program outputs that would be reduced from the current level?

Senator HATFIELD. The short- and long-term impact on such programs of this reduction, yes. I am not asking for a detailed study of this particular issue. But I think certainly, within the professional role of the Department, we ought to be able to get some kind of assessment on these impacts.

Let me illustrate. Hasn't the demand for forest or range products been increasing?

Mr. CUTLER. Yes.

Senator HATFIELD. Then it has been rising faster than the availability of supply, I believe, at least according to my assessment. Now, doesn't a budget restraint in the utilization area of our Federal Forest Service System tend to contribute under these circumstances to rising prices and inflation? Is that a short-term impact?

Mr. CUTLER. We have to weigh it against the cost-effectiveness of our programs. And as we move into timber sale programs beyond what we have recommended, at least in the short term, we are spending more money on those sales than is returned to the Treas

ury.

We will try to provide something for the record.

Mr. Chairman, that analyzes those impacts.

[The information follows:]

SHORTRANGE IMPACTS

Overall the shortrange impacts will be a slowing down of research, National Forest System and State and private forestry programs. The disadvantages will be offset by the advantages of reducing Federal spending to aid in slowing inflation and reducing the Federal budget deficit. Other major components of the President's budget are policy changes which switch program emphasis. For instance, a major change in the State and private forestry area from Federal support of all programs to a more limited role targeted at insect and disease management, rural forestry assistance, and assistance in management, planning and technology implementation thereby increasing State and local contributions while targeting the Federal contribution into specific areas. Similarly the comparison between Young Adult Conservation Corps and the Youth Conservation Corps is based on the groups targeted for Federal employment.

Specific shortrange impacts on the National Forest System will be: A limiting of our ability to begin management activities in roadless areas opened to multiple use management due to limited funds available to provide access; some dampening effect on harvest levels due to a decreased sales preparation level; and, some limited reduction in the level of services offered the general public.

LONGTERM IMPACTS

Longterm effects will be minor when examining the impacts of a single budget year. Effects would be more pronounced if investments in National Forest, State and private forest land management and Research activities remained low for several years. The 1980 RPA assessment indicates demand for forest and rangeland resources will continue to rise. The ability to respond to this demand is dependent on the level of investments made in the next few years.

MARKET DEMAND AND THE NATIONAL ECONOMY

Mr. CUTLER. We also would encourage the Appropriations Subcommittee to look at programs beyond the public land sector of this budget. As I said earlier, we are optimistic about the positive impact on timber supply, for example, that can come from our research and technology transfer programs.

Senator HATFIELD. That is being cut. Research is being cut.

Mr. CUTLER. Well, selectively. I think if you look at some of the line items, you see those programs that deal most effectively with increasing timber supplies have been held constant or are increased.

Senator HATFIELD. Bear in mind, Mr. Secretary, when we talk about utilization in the short term as well as the long term, as I have indicated in this matter of availability of supply and demand, we are directly relating this to the housing market. I think there is a cost-effectiveness that one can get locked into, that isolates one from the reality of the world in which we are living.

We have to consider, in that particular world, the demands from the housing market and what alternative building materials are available. And when we begin to look at that alternative building materials, we are immediately confronted with another cost-effective issue; namely, energy. I don't think that we can restrict cost

effectiveness to merely the routine of planting and harvesting and managing a given number of acres, unrelated to either the marketplace or unrelated to the energy impact on alternative supplies that are available over and against the timber products.

Mr. CUTLER. The other constraint we are up against is an ecological or hydrological constraint. Regardless of the economists' calculations, there is a limit to the amount of disturbance that a watershed can accommodate without having serious adverse consequences on the stream, the watershed, and the soil, particularly with respect to the road construction associated with those activities.

The National Forest Management Act constrains us in many ways in that regard. We have to protect water courses and wildlife habitat. We cannot administer the national forest as if the only output to be counted seriously was timber.

ECONOMIC AND ENVIRONMENTAL STANDARDS

Senator HATFIELD. I urge you, in your testimony, to indicate such language in referring to the 11.7 billion board feet in the 1980 budget.

I believe you said that it is the most that can be sold "in an environmentally and economically acceptable manner," quoting now, I think, from page 2 or 3 of your statement.

Now, would you explain to me why a higher timber sale program would be economically and environmentally unacceptable?

Mr. CUTLER. As I attempted to explain in my testimony, the 11.7 billion board foot sell puts region 6, Oregon and Washington, at its maximum production level. As we expand beyond region 6 into northern California, into the Rockies and into other parts of the national forest system, the cost of administering the sale, particularly the road construction costs versus the value of the timber become more and more negative from the standpoint of cost versus benefits.

We very seriously looked at a 12.2 billion board foot sale level. We asked the Chief and his staff to develop that for us. That was looked at in the context of the White House September sale report. After looking at it in detail and looking at how expensive this incremental volume would be, we came back to 11.7 billion board foot target.

Senator HATFIELD. I would like to ask the Chief the same question.

I know this is a very difficult spot to be in, but I want you to take off your political hat.

Mr. CUTLER. He doesn't have a political hat, Mr. Chairman. He is a career public servant

Senator HATFIELD. Yes, I know; I have been around here long enough to know what kind of hats these people wear. I want you to put on your forestry hat, Chief, your professional forester's hat, the same hat under which your computer mind cranked out the figure 16 billion board feet as a feasible cut, providing all market conditions, et cetera, et cetera. Tell me why it would be economically and environmentally unsound to have a higher sale level than 11.7 billion board feet.

Mr. MCGUIRE. OK, on the environmental side, we cannot cut at a higher level in the roaded areas because of the additional disturbance affecting sedimentation and wildlife habitat, and so on. So, for environmental reasons, we would have to go to other parts of the system.

Senator HATFIELD. Even though you got up to over 12 billion in the previous year, was that economically and environmentally unsound?

Mr. MCGUIRE. It was not environmentally unsound.
Senator HATFIELD. It wasn't?

Mr. MCGUIRE. It wasn't, but it may have been economically unsound by certain standards. One standard is that you compare the entire cost of the sale, including capital investments in roads, against the returns from that sale.

I am sure that we had many sales in the Rocky Mountains, where the capital costs of the roads were in excess of the returns to the timber.

Senator HATFIELD. You had some other deficit sales, too.
Mr. MCGUIRE. That's right.

Senator HATFIELD. In region 6.

Mr. MCGUIRE. That's right, there also. But the problem is greater in other areas, even on the east side of region 6, as you get over into the intermountain region and into the Rocky Mountains. Another problem we have is the pipeline effect. Timber sales cannot be turned on and off easily. It takes several years of preparation for road layout, for appraisal of timber, for cruising the sale area, and so on, in order to get sales ready. We have drawn down our pipeline very substantially to meet this 12.4 billion board foot level.

ALTERNATIVE HARVESTING METHODS

Senator HATFIELD. Have you considered alternatives to roadssuch as helicopters, air frames, to lift timbers, those kinds of programs?

Mr. MCGUIRE. Yes. And we do have a proposal for development of a new kind of equipment called a helistat aerial-logging system. Senator HATFIELD. You asked for some funding on this, didn't you? What happened to it?

Mr. MCGUIRE. It is still being considered in OMB.
Senator HATFIELD. It was cut out, wasn't it?

Mr. MCGUIRE. Our proposal, of course, was developed after the 1980 budget was developed. It would be either an amendment or a supplemental if OMB were to approve.

BUDGET IMPACT ON LUMBER PRICES

Senator HATFIELD. Chief McGuire, the justification states that the budgeted level of timber offerings is sufficient to sustain current and anticipated housing needs. Is that a complete description of the situation? Doesn't the housing market demand more lumber?

Mr. MCGUIRE. Fiscal years 1978 and 1979 timber offerings were budgeted at the 12.2 and 12.4 billion board foot level with housing starts at 2 million units annually. Housing starts are projected to decline 17 percent or to the 1.6-1.7 million annual level by January