latest figures, is at the rate of $1,900 annually. In Appalachia, it is approximately $500 less on a yearly basis-$1,400 a year.

Governor MOORE. I am sure those figures hold true in many counties in our State, though in some, as I stated, I think it would be higher. Senator RANDOLPH. Thank you very much, Governor Moore. The committee has been helped by your testimony.

Governor MOORE. Thank you, sir.

Senator RANDOLPH. That we may expedite the witnesses forming our panel, I will ask Mr. Pyles, Dr. Yoho, and Mr. Mersereau to come to the table together.

Mr. Pyles, you, in a sense, are in the middle today, but we know it is a cooperative panel. We would like you to identify yourself for the record and I believe that the three of you will each have some 5 minutes of presentation and then we will work back and forth with the committee and questions.

STATEMENT OF HAMILTON K. PYLES, DEPUTY CHIEF, FOREST SERVICE, DEPARTMENT OF AGRICULTURE

Mr. PYLES. Thank you, Mr. Chairman.

Mr. Chairman and committee members, I am Hamilton Pyles, Deputy Chief of the Forest Service, Department of Agriculture.

I appreciate this opportunity to appear before your committee once again to comment on section 204 of the Appalachian Regional Development Act relating to timber development organizations. Since the hearings on Appalachia last June, we have been studying the timber development organization concept with the committee staff, representatives of the timber industry, and with State and extension foresters. Our hope was to reach agreement on an approach to an organization that would do the best job for the Appalachian region and its people.

The forests of Appalachia are potentially among the best hardwoodproducing areas of the country. If properly developed, managed, and utilized, Appalachia's timber resources can become the foundation for permanent economic strength in countless rural areas of the region.

Much of the Appalachian forests are unmanaged regrowth that has followed clearcutting of heavy stands of timber which reached its peak about 50 years ago. Much of the timber that is left after subsequent, repeated "high-grading" is small or defective low-grade material. Millions of acres need planting and stand-improvement

measures.

One of the principal reasons that the people of Appalachia have not been able to properly manage or utilize their timber resources is the fragmented pattern of timber ownership throughout the region. About three-fourths of the timberland is in some 1 million farm and other small holdings averaging less than 50 acres in size. Our studies indicate that a lack of investment funds, limited knowledge, or technical assistance, and the very "smallness" of these holdings are some of the reasons that the small landowners fail to develop and use their potentially valuable timberlands.

There is now and will continue to be a strong demand for highquality timber. Small forest owners in Appalachia can be assured of markets for their trees if they can produce high-quality logs of desirable species.

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We believe the proposed organizations can be an effective vehicle for helping small owners in Appalachia improve the productivity and quality of their woodlands. They could provide needed technical assistance to encourage consolidated, long-term, professional management of small private timber holdings.

Section 204 would provide for the creation of private, nonprofit organizations established under State law. Operating under a State charter, the forest owners, with technical guidance and assistance from State and extension foresters, would determine the character of their own organization.

These organizations will have to be adapted in form and purpose to the particular needs of specific local areas. They will be established only after careful study of all relevant factors bearing on their chance of success. These factors would include the patterns and size of timber holdings, transportation systems, existing markets, and possible support and membership. The character and size of an organization would be completely flexible. Only after careful study and discussion with affected people, industries, and organizations would the ultimate character of any one organization be formulated.

There is a wide range of possible sizes, objectives, and types of organizations from which an individual organization could be developed. On one hand, an organization could be patterned after the work of the New England Forestry Foundation, which is an organization that has been successful in the last 20 years. This type of organization could provide the individual woodland owner with a complete forestry service. This includes the development of a management plan, marking, and measuring trees for sale, supervision of sale and harvesting, and timber-stand improvement. This type of organization is a private, nonprofit corporation which operates through forest development cen

ters.

Each center is in charge of a professional forester who serves a geographical area within reasonable traveling distance of his headquarters. The only timberlands owned by the organization would be donated tracts managed for demonstration purposes. A permanent fund would be established from donations made to perpetuate its work. The objective of such an organization would be the administrative consolidated management of small forest properties without formally binding the individual owner.

On the other hand, there is a need for a type of organization which would permit the consolidation of small forest properties into management units large enough for efficient development and operation. This nonprofit organization could be formed by any association of landowners who would set up an organization to manage their lands.

The organization would manage these forest tracts under long-time agreement. There would be no movement of people from their lands, although some key tracts may need to be purchased by the organization if owners wished to sell. The consolidated timberlands would be rehabilitated and managed by professional foresters with receipts from the sale of timber from his land going to the individual landowner, less the costs of the organization's service.

Between these two examples, any number of organizations of different characters could be developed to meet the needs of particular sit

uations. We would expect to set up three or four such organizations throughout Appalachia as pilot projects in fiscal year 1966.

Under section 204, the Federal role in the establishment of an organization would be: First, the Secretary of Agriculture would contract for a feasibility study resulting in a prospectus for a particular organization.

Second, the Secretary of Agriculture would provide up to one-half of an organization's initial capital requirements through loans under the Consolidated Farmers Home Administration Act. Applications for such loans would be supported by management plans and programs of the organization.

Third, the Secretary of Agriculture would provide technical assistance through the established channels of State foresters and/or extension foresters in the organization and operation of the organization. The Federal role would thus be limited to the initial survey and study, processing of loan applications, and financial support of State-level technical assistance.

The organizations which would be established under section 204 will aid the people of Appalachia in taking a more substantial place among other States and regions of this country in supplying the Nation's timber needs and sharing in the timber economy. Additional benefits such as urgently needed watershed protection and beautification of the Appalachian landscape will result from forest resource development, adding to the area's recreational attraction. Certainly idle acres or unproductive acres have no place in the Great Society. Senator RANDOLPH. Thank you, Mr. Pyles.

Senator Copper and Senator Fong, if agreeable, we will have Dr. Yoho and Mr. Mesereau present their statements and then we will come to the questions.

Dr. Yoho, will you identify yourself and, of course, we know your university, but you appear in another capacity today.

STATEMENT OF JAMES G. YOHO, PROFESSOR OF FOREST ECONOMICS, DUKE UNIVERSITY, RESOURCES FOR THE FUTURE, INC.

Dr. Yoно. My name is James G. Yoho, and I am professor of forest economics of Duke University. For the past 6 months I have been engaged in a study of the potential role of the forests of the Appalachian region as a possible vehicle for the economic redevelopment of the area. Most of the opinions expressed here are based on the preliminary results of that research. They also are the product of many years of study and research in this specialized field. My most relevant previous work was "North Carolina Lands," a 372-page book coauthored with K. B. Pomeroy of the American Forestry Association and published by that organization. This was a detailed study of the ownership, use, and management of forest and related lands in North Carolina.

This statement is aimed most directly at section 204 of S. 3, but it has implications for all of the forest-related problems likely to be encountered by the Appalachian Regional Commission as it undertakes to implement this act. It will likely encounter such problems quite often since the commercial forest area of the region totals some 67 million acres, or about three-fifths of the total land surface. These

forest resources play a significant role in the economy of Appalachia today, as they have for many years. No doubt the Commission will find many of its decisions have implications for this sector of the economy since it is so deeply intertwined with the total regional economy. In turn, the welfare of this segment of the economy will bear strongly on the economic welfare of the region.

TIMBER DEVELOPMENT ORGANIZATIONS

The timber development organizations provided for under section 204 resemble cooperatives in certain key aspects. This is due to the fact that the scheme makes use of the pooling device to secure better marketing opportunities for individual forest-land owners and as a means for providing effective forest improvement work on the lands of participating owners.

Forest cooperatives in the United States have been characterized by a long history of failures, thus a cautious approach for this effort is suggested, the suggestion, as I think Mr. Pyles has indicated, that we ought to view these efforts as experimental to a considerable extent. Nowhere have forest cooperative schemes met with such failure as in the United States when they have been quite successful in other parts of the world, mainly Scandinavia and even in Japan. Of course, forest cooperatives have been fraught with all the difficulties that have beset all sorts of cooperative ventures in the United States, and in particular, agricultural cooperatives, but the remarks I want to make this morning apply more specifically to the unique difficulties of operating a forest cooperative. I think the basic difficulty for these failures has been that we have insisted that they accomplish forest development objectives as well as to perform marketing services. The marketing efficiencies that have been gained in the form of greater returns per comparable sale for members versus nonmembers has not been sufficient to sustain the costs of the developmental work that has been recommended for the forest by the foresters managing these organizations. The result has been that owners selling through cooperatives may actually have ended up with less cash in hand at the end as opposed to one not operating through the cooperative. Of course, he may have had, and undoubtedly did have in most instances, an improved woodlot, but he may not have ended up with any more and may have actually ended up with less cash in hand. So the owners frequently lost interest under those circumstances.

Another factor has been that the market bargaining advantages of these cooperative efforts have tended to dwindle over time. Now, this follows because the membership was usually limited to a relatively small area, such as a single county, and the forest resources haven't been sufficiently scarce to force timber operators to restrict their operations to these few counties that might have enjoyed the services of the cooperative. Thus, the forest industry being the almost perfectly competitive industry that it is, was forced to seek its raw material supply outside the co-op, outside the operating area of the co-op.

One of the fundamental causes of these failures has been that the marketing efficiencies gained through pooled selling efforts have not been great enough to finance the investment in timber development for deferred yield which the managing foresters usually advised; that is

to say, although the cooperatives were usually able to secure increased gross returns for members as opposed to nonmembers per comparable sale, the organization ordinarily reinvested in the members' lands an amount in excess of this additional return. Thus, the owner very often ended up with less cash from his sale than a nonparticipating neighbor from a comparable sale, and this was usually enough to discourage his continued cooperation despite the fact that his forest was put into better condition for future prospective yields than his neighbor's.

This dilemma suggests that if the landowners participating in the proposed timber development organizations could draw from agriculture conservation program funds or from similar governmental sources for a significant portion of the costs of their forest improvement work, their interest would be retained and perhaps the success of the venture sustained. Unfortunately, however, only a small share of ACP funds have ever been funneled into forestry practices-and that share has averaged less than 3 percent per year. Increased ACP money specifically earmarked for forestry purposes in Appalachia would seem to be a logical answer. In addition, if a sufficiently large appropriation were available for this purpose, it could have a significant impact on the underemployment which exists in the rural areas of the region since most forestry improvement work is very labor intensive.

What are some of the partial answers to some of these dilemmas? One, I think, in the case of Appalachia, is this: that perhaps increased ACP funds could be made available to the small owners working through these timber development organizations to help more directly sustain the forest development costs that the organization is undoubtedly going to recommend to them.

The other, of course, would be something that would step up the local demand for timbers or the demand for timber generally. The result would be increased advantages for these local efforts, of course.

With regard to the forestry practices themselves, most forestry practices are quite labor intensive, so I could envision they would contribute somewhat to the underemployment in the rural areas of Applachia, for example, if ACP funds could be made available for that purpose.

Now, if following through on my assumptions is correct, that many of these people actually have the funds for investing in their timberlands, but are not doing so for the lack of followup guidance, then certainly the TDO could perform that function.

Now, in conclusion, regarding the potential role: Timber development organizations in the total perspective of all of the problems of Appalachia, I doubt seriously whether we would expect a great deal of economic uplift from the timber development organization itself. The main reason for this, in my judgment, is that the timber development organization is essentially supply oriented and I fear that the basic problem besetting forestry in Appalachia and through most of the hardwood regions of the Eastern United States is a lack of demand rather than a supply problem.

My previous research into the problems faced by forest-land owners in many sections of the country leads me to believe that timber development organizations operated along the lines of the New England Forestry Foundation could fill an important need. I refer to the difficulty