Senator RANDOLPH. Thank you very much.

Dr. Yoho, we have read your testimony, and particularly in my role as a Senator from West Virginia, I am concerned about what you have said here on page 11 regarding the trend toward fewer and larger plants in the lumber manufacturing business and the problems of establishing a new concern with a small amount of capital.

I refer to your language:

This possibility has lead to very costly business instability in the region in the past. For instance, in West Virginia there were 811 active entrepreneurships in the sawmill business in 1959 but by 1963, 525 of these had ceased operations

out of this 811

and 195 entirely new operators had entered the field.

Dr. Yоно. Yes.

Senator RANDOLPH. Can you add to this?

Dr. Yоно. We, of course, work with the Bureau of the Census data from the census of manufacturers which brings out the decreasing number of sawmills in the industry. But I was able to put together these figures which aren't brought out by census figures by checking through the names of individual entrepreneurs in the directory of industries assembled and published by the extension_foresters in the State of West Virginia. It was a surprise to me. I knew that the number of mills had been dropping, although lumber production was tending to remain rather stable.

But I had no idea of the extent of turnover that has taken place. And I think that there is considerable wasted effort and actually lost investment on the part of individuals who undertake such ventures with false optimism.

Senator RANDOLPH. At that point, I would like the record to note the name of one successful operator in West Virginia who resides in my county. His name is Richard Benson, the head of the Benson Lumber Co., and he has been successful over a period of years in the hardwood timber industry, not in manufacturing but in growing and harvesting. He has said that there have been these false notions in the minds of those not familiar with the problems of timbering, who have been led to believe they can come into West Virginia and other regions of Appalachia and reap a harvest of dollars.

He referred to many of these situations. That is why I mention this at this point here today. Do your studies confirm this?

Dr. Yoно. Yes; I think that is definitely true. Many studies have been made of the details of these operations and why they have failed. Essentially they boil down to two reasons, undercapitalization and poor management.

I think a training program for entrepreneurs could readily be conducted in conjunction with the ARA program, for example.

Senator RANDOLPH. And the manpower and retraining program perhaps?

Dr. YоHO. Yes. Some operations along these lines are already underway. I am sure Senator Cooper is familiar with the operation over in eastern Kentucky attempting to train people for this particular business.

I was quite impressed with that operation when I visited there last summer. I think they are definitely on the right track. Many of these sawmill operators in depressed areas, or areas of high rural underemployment enter this business simply as a way of providing employment for themselves without moving away from the area. If they cannot obtain employment with someone else, here is a means for obtaining perhaps a low-paying job, but at least a job.

Senator RANDOLPH. I think that the major trouble would be in management rather than among the workers themselves.

Dr. Yоно. Yes.

Senator RANDOLPH. These people in the mountains by and large have the aptitudes for this work and yet they need training. You realize that in Nicholas County and Richwood you would find a great reservoir of people with high aptitude for this kind of employment. Isn't that true, Mr. Mersereau?

Mr. MERSEREAU. Yes; I agree with Dr. Yoho.

Senator RANDOLPH. Sitting here is a former member of the Legislature of West Virginia, Mr. John C. Cruikshank, of Clay County. Do you wish to make a comment on the sawmill situation in Clay County, because this is one of the counties that has experienced instability in the lumber industry. If you want to comment, please do. STATEMENT OF JOHN C. CRUIKSHANK, CLAY COUNTY, W. VA.

Mr. CRUIKSHANK. I would like to comment, Senator, on Dr. Yoho's statement about the number of sawmills that have gone out of business. In Clay County, where the Georgia-Pacific Corp. has a tremendous operation, we have several small millowners marketing a low grade of timber. They were selling their products to the mines. Whereas so many mines have mechanized and have modernized in such matters as the use of roof bolts, they no longer need timber in the volume they once did.

Consequently these people went out of business because they lost their market. I could name among customers-I am a retail country merchant-17 different sawmill operations in my area that went out of business due to losing their customers because of mechanization in the mines. As I say, they were marketing a low grade of timber which probably couldn't be used for anything else. Thank you.

Senator RANDOLPH. Thank you very much, Mr. Cruikshank. I didn't want to impose on you but your actual experience has been very helpful. What is the population of Clay County?

Mr. CRUIKSHANK. Eleven thousand nine hundred and forty-two at the 1960 census.

Senator RANDOLPH. Though this is not our primary concern at the present, I would point out the importance, especially in such areas as Clay County, W. Va., of the health facilities to be provided in this

program.

In Clay County with 12,000 persons-Mr. Cruikshank I believe will reinforce what I am saying-there is only 1 doctor.

Mr. Cruikshank. Eighty-some years old, Senator.

Senator RANDOLPH. Yes, this is a fact, a general practitioner, of over 80 years. He cannot travel those mountains and really administer to the needs of the people. What is it, Mr. Cruikshank, 50 miles to a hospital from the county seat?

Mr. CRUIKSHANK. From the county seat, four different directions, it is 40 miles to a medical facility.

Senator RANDOLPH. That is why, even at this point as we are discussing timber, we must recognize the deficit in such facilities as health clinics.

Dr. Yoho, you have made many contributions, here in your prepared statement, though we will not take time to mention them all. I am very appreciative, as I know Senator Cooper is. But there is one point in conclusion.

On page 12 of your statement you refer to the inadequacy of research in the forest products industry. Mr. Mersereau, would you like to comment? Has your industry not had the dollars for research? The coal industry often in the past has said it has not had the dollars to research. What about timber?

Mr. MERSEREAU. I think you are right. To me, of the two most important phases in this entire legislative proposal, one is the construction of access roads and highways, and the other is the stimulation of research.

I think you must have both. I wouldn't know which one is more important, but we certainly are lacking in both in the Appalachian

area.

Senator RANDOLPH. Senator Cooper.

Senator COOPER. I would like to comment on this section because I believe Mr. Mersereau has raised the most crucial issue connected with this section, one which is debatable and one which I raised last year and about which I have doubts-that is whether or not these timber development organizations should be authorized to buy timber holdings from individuals.

I wholly agree with the main thrust of this section, which is to establish timber development organizations working with the Forest Service and the States, which would educate small timber holders in the way that they can manage their holdings selectively, cut their timber and market their timber.

The Forest Service has given that kind of education. It is analogous to the work that the Extension Service, Soil Conservation Service, and other agricultural agencies do with respect to small farmers and large farmers all over the Nations.

I think that is a very constructive proposal and should receive full support. I am going to make a few comments on whether or not these organizations should be permitted to buy timber holdings. And I may say, if you permit me, I do it from personal observation of the timber operations in eastern Kentucky which, as you have stated, is a great hardwood growing section.

I can remember, and I know from observation, the great timber holdings in eastern Kentucky. In the first phase of recent industry history, large and powerful companies from outside the area came into this section, purchased vast acreage, and then established what, for that time, were modern mills. At the beginning the land was stripped of all its timber without any provision for reforestation.

When all the timber was cut, they left the operation, though sometimes they retained ownership of the land, and sometimes they sold it off in small parcels to local residents. In this phase, there was employment at the time, but it ended when the timber was gone, and the profits from the operation chiefly went outside the area.

There was another type of operation which developed at that time. Individuals of the area who had some capital resources would buy smaller tracts of timber, would move a sawmill into place on the timberland, and follow the same practices that the larger companies followed.

I must say I think there has been a change in that kind of operation. The large lumber companies now pay greater attention to reforesta tion and to selective cutting, and so do these local individuals who are able to buy 300 or 400 acres or 1,000 acres of timber and follow better practices.

But I think also that with roads and with modern equipment, a different practice has occurred. Small landowners, such as those we are trying to help in this bill often own 50 acres or less. Because it is a small stand of timber, they cut the timber themselves and haul it to a mill for sale.

These owners of small stands of timber are usually very poor, poverty stricken people, so what happens? They do not selectively cut their timber. When tax time comes, or when debts come due, they cut all the timber that might be sold, including some which is not ready for cutting because of size, quality, and other characteristics. And because the long-term possibility of reforestation seems rather remote and far removed, since their timber is different from Georgia and Alabama where you get quick growth in pine, it is difficult to encourage them in reforestation practices and in selective cutting.

I mention this from personal observation and also from practice, because it may surprise you, but some 30 years ago I had a small operation with sawmills. I well remember the old adage, "if you have an enemy give him a sawmill."

It seems to me the crux of the matter is that these proposed timber development organizations can have tremendous value, so long as they are developed and operated to educate these small farmers in the protection, cultivation, selective cutting, and marketing of their timber. But if you plan to go out and buy up their little stands of timber, and put them in these development organizations, then you have just taken away this last little resource that they have.

I would oppose this section if the the purpose cannot be better defined. I am for education, for teaching management and better marketing methods, but I do not know how far the organization will go. I am for this accumulation of timber holdings for demonstration purposes, but I think this proposition might be used to work against the long-range interest of the very small timber holder the bill is designed to help, if he must give up his last property resource.

What will happen if the small wood lot owner has the same pressures and the same desires to get some quick money when tax and debt times come, and what happens if he sells his timber for practically nothing.

I don't know that you would see that occur with a timber development organization, but I think it may go against the purposes of this main process of education and management and better marketing that everyone wants. I would like to have your comments on this subject, and I would like to ask about the connection these organizations may have to one of the problems timber operation in my State, and I am sure in West Virginia also.

Generally the small mills have been operated to purchase timber in the raw, rough sawed lumber and stave bolts, and it has been said again and again if these States could develop like North Carolina the idea of encouraging the establishment of a small woodworking industry where value could be added to the product in terms of labor and in terms of profits to the local industry, it would have a great effect.

I do not know whether it is contemplated that these timber development organizations will lead to this type of encouragement. I would ask: Do they contemplate education or provision of any kind of initiative to local bodies to develop these woodworking industries which add value to the raw product? I know at Berea College there is an organization, an operation, which works to educate timber growers in that way. I ask, is there anything in this section which would give advice or education toward the development of these added values such as woodworking?

Mr. PYLES. Should I respond to that, Senator Cooper?

Senator CoOPER. Yes.

Mr. PYLES. I will try to answer your last question, first. This particular section is very narrow. It just goes to the resource. It must naturally be a part of a training process, an encouragement process to landowners, to manage their lands under accepted good forest practices.

There are other parts of our program that deal directly with this problem that you are talking about that is in the field of utilization both in research and in our cooperative programs with the States. Kentucky for example has a department of utilization under the State forester which is working directly at this problem.

On the timber development organization and the purchase of land, because first of all it must be a group of landowners that want to join together under an agreement to achieve consolidated management of their lands. They are the sponsors of this organization.

Senator CoOPER. I am for that.

Mr. PYLES. And the organization itself is nonprofit so that the only purpose that the organization would have in acquiring a tract of land within this unit, that has been determined could be successfully managed, would be because the owner of that tract didn't want to join in with the other owners in this particular area.

And the profits of that land would have to go back into the land or either the organization's fund. As Mr. Mersereau says, it would be inconsistent to attempt to acquire a lot of these lands for nonprofit purposes. What we are trying to do is to provide a means of consolidation of these owners in the event that some tracts within this unit didn't want to get in the cooperative unit.

Senator COOPER. Then your idea of land acquisition is directed toward consolidation of the area which could be properly managed. It is limited to that.

Mr. PYLES. Yes, that is right.

Senator COOPER. That is very important.

Senator RANDOLPH. Thank you very much, Mr. Pyles, Dr. Yoho, and Mr. Mersereau. We may be calling on you for further information and assistance to the committee.