511 F.Supp. 139 (D.Alaska 1981), Civ. A80-311, South-Central Timber Development, Inc. v. LeResche

Docket NºCiv. A80-311
Citation511 F.Supp. 139
Party NameSouth-Central Timber Development, Inc. v. LeResche
Case DateJanuary 05, 1981
CourtUnited States District Courts, 9th Circuit, District of Alaska

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511 F.Supp. 139 (D.Alaska 1981)

SOUTH-CENTRAL TIMBER DEVELOPMENT, INC., Plaintiff,

v.

Robert LeRESCHE, Commissioner of Department of Natural Resources of the State of Alaska; Geoffrey Haynes, Director, Division of Natural Resources, and Deputy Commissioner of Department of Natural Resources of the State of Alaska; and Theodore G. Smith, Director of Division of Forest, Land and Water Management, of Department of Natural Resources of the State of Alaska, Defendants,

Kenai Lumber Company, Intervenor.

Civ. No. A80-311.

United States District Court, D. Alaska.

Jan. 5, 1981

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LeRoy E. DeVeaux, Wanamaker, DeVeaux & Crabtree, Anchorage, Alaska, for plaintiff.

Shelley J. Higgins, Asst. Atty. Gen., State of Alaska Dept. of Law, Mark L. Figura, Burr, Pease & Kurtz, Anchorage, Alaska, for defendants.

MEMORANDUM AND ORDER

VON DER HEYDT, Chief Judge.

THIS CAUSE comes before the court on cross motions by plaintiff and defendant for summary judgment, and defendant-intervenor's motion to dismiss. The parties agree that the sole issue to be decided is whether the State's requirement of primary manufacture violates the Commerce Clause of the United States Constitution. 1 As the matter in controversy exceeds the sum of $10,000, this court has jurisdiction pursuant to 28 U.S.C. s 1331(a).

I. FACTS

In September, 1980, the State of Alaska gave notice that it would sell approximately 49,185,000 board feet of timber in the area of Icy Cape, Alaska, on October 23, 1980. The notice of the sale provided, pursuant to 11 A.A.C. s 76.130, 2 that "primary manufacture within the State of Alaska will be required as a special provision of the contract." The inclusion of the primary manufacture requirement in the timber sales contract requires a successful bidder to pre-cut the sale timber in Alaska prior to export.

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Plaintiff South-Central Timber Development, Inc. (South-Central) is an Alaskan corporation engaged in the business of purchasing Alaska standing timber, logging such timber, and shipping the resulting logs into foreign commerce. Although South-Central desires to bid on the Icy Cape No. 2 timber sale, it is hampered by its lack of a working mill in Alaska. South-Central must take into account the added costs of having primary manufacture performed in-state. This added cost effectively precludes South-Central from bidding on the timber.

II. THE COMMERCE CLAUSE AND PRIMARY MANUFACTURE

The State and intervenor contend that the primary manufacture requirement is permissible under the commerce clause for two reasons: 1) Alaska's policy of requiring primary manufacture as a term of a state timber contract is consistent with federal policy as expressed by Congress; and, 2) by including primary manufacture as a term in the state timber contract, the state is not regulating interstate commerce; rather it is acting in a proprietary capacity as a market participant and is therefore exempt from commerce clause requirements.

A. FEDERAL POLICY OF PRIMARY MANUFACTURE

It is clear that if Congress had consented to the State's primary manufacture requirement, any commerce clause restrictions would be waived. E. g. Southern Pacific Co. v. Arizona, 325 U.S. 761, 769, 65 S.Ct. 1515, 1520, 89 L.Ed. 1915 (1945). To determine whether Congress has consented to the requirement, the court must examine the relevant Congressional provisions in this area.

The State points out that the federal government historically has placed restrictions on the export of unprocessed logs from federal lands in the western states, including federal lands in Alaska. Since 1928, the United States Forest Service has restricted the export of unprocessed timber from national forest timber sales in Alaska under the general authority granted by Congress. 16 U.S.C. s 471 et seq. (1976) (National Forests).

Section 475 provides in part that one of the purposes for establishing a national forest is "to furnish a continuous supply of timber for use and necessities of the citizens of the United States...." Section 551 allows the Secretary of Agriculture, under the provisions of s 471, to make necessary "rules and regulations and establish such service ... to regulate ... and to preserve the forests...." Regulations currently in effect restrict the export, in unprocessed form, of timber harvested from sales in national forest land in Alaska. 36 C.F.R. s 223.10(i). 3

An examination of the relevant statutory provisions shows that Congress has not consented to any primary manufacture requirements imposed by the states. When Congress has exempted state laws from commerce clause restrictions, it has used language specifically directing that certain interstate commerce may be regulated as though it were purely local. See the Wilson Act, 27 U.S.C. s 121 (1976); see also the

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McCarran-Ferguson Act, 15 U.S.C. s 1011 et seq. (1976) ("silence ... of Congress shall not be construed to impose any barrier to ... regulation ... by the several states.").

Although Congress has authorized the Secretary of Agriculture to make necessary rules to regulate the national forests, and has imposed export quotas on unprocessed timber from federal lands, it has in no way expressly exempted state timber laws from commerce clause restrictions. Given Congress' silence, a negative is presumed to bar state action inimical to the national commerce, and in such cases the Supreme Court is "the final arbiter of the competing demands of state and national interests." South Pacific Co. v. Arizona, 325 U.S. at 769, 65 S.Ct. at 1520.

B. THE STATE AS A PROPRIETOR

The State maintains that it is acting in a proprietary capacity (as the timber subject to the primary manufacture requirement is state owned) and is therefore unrestricted by the commerce clause. Reeves v. Stake, 477 U.S. 429, 100 S.Ct. 2271, 65 L.Ed.2d 244 (1980); Hughes v. Alexandria Scrap, 426 U.S. 794, 96 S.Ct. 2488, 49 L.Ed.2d 220 (1976). The Supreme Court has made clear, however, that "(a)ll objects of interstate trade merit Commerce Clause protection; none is excluded by definition at the outset." Philadelphia v. New Jersey, 437 U.S. 617, 622, 98 S.Ct. 2531, 2534, 57 L.Ed.2d 475 (1978). The court must determine whether Alexandria Scrap and Reeves allow the State to require primary manufacture of state-owned timber within Alaska as a condition of sale.

1. ALEXANDRIA SCRAP AND REEVES

In Alexandria Scrap, the Court upheld a Maryland statute which promoted the disposal of abandoned automobiles through cash payments to scrap processors. Even though the payments favored in-state processors, the Court found no commerce clause problems. Relying on the fact that Maryland was acting in a proprietary capacity, the Court held that "(n)othing in the purposes animating the Commerce Clause prohibits a State, in the absence of congressional action, from participating in the market and exercising the right to favor its own citizens over others." 426 U.S. at 810, 96 S.Ct. at 2498.

In Reeves, the Court ruled that the commerce clause did not prohibit South Dakota from refusing to sell cement from a state owned and operated cement plant to out-of-state customers, pursuant to its policy of supplying South Dakota customers first. The Court noted that "(t)he basic distinction drawn in Alexandria Scrap between States as market participants and...

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