RECORD TYPE: PRESIDENTIAL  (ALL-IN-1 MAIL)

CREATOR: Kathleen A. McGinty ( MCGINTY_K ) (CEQ)

CREATION DATE/TIME:29-MAR-1996 11:49:20.59

SUBJECT: contract cancellation

TO: Ron Klain                            ( KLAIN_R ) Autoforward to: Remote Addressee                     ( Ron Klain@LNGATE@EOPMRX ) (VPO)
READ:NOT READ

TEXT:
this is a paragraph that will be in memo to vp for his lunch 
discussion with p on timber.  i'm forwarding it separately to you 
so you can see the last paragraph i've written.  i do have this 
concern.  but, i do not believe it overrides going forward with 
the contract cancellation.  
==================== ATTACHMENT   1 ====================
ATT CREATION TIME/DATE:29-MAR-1996 11:32:00.00

ATT BODYPART TYPE:B

ATT CREATOR: Kathleen A. McGinty

ATT SUBJECT: contract cancellation

ATT TO: Thomas C. Jensen                     ( JENSEN_T )

TEXT:
In addition to the issue of offering substitute volume, there has 
been a question as to whether we have the authority to cancel 
timber contracts.  Timber contracts always or at least almost 
always contain clauses that allow the contracts to be terminated 
for, among other reasons, adverse environmental impact.  For 
months, the Department of Justice -- both the environment and the 
contracts divisions -- have forcefully held that those contract 
clauses have been overridden by the timber rider and that, 
therefore, we no longer have the right to cancel contracts.  The 
thrust of their argument is that the whole purpose of the rider 
was to force these sales out the door.  If we claim that the sales 
can be cancelled due to these contract clauses, that would 
essentially render the rider a nullity.  Justice has felt so 
stronly about this that they have refused to sign court papers 
claiming a right to cancel contracts on the grounds that it would 
be frivolous and they could be subject to Rule 11 sanctions.
Jim Lyons, meanwhile, has been loudly protesting this and making 
emotional statements that he is ready to go to jail in order to 
stop these sales.
So, intervention was had last week at higher levels.  Senior 
leadership at DOJ now say that there is a colorable argument and 
that we can at least put it to the judge.  They are preparing a 
brief to that effect for Monday.
But, in runs Jim Lyons once again.  Now he is proclaiming loudly 
that he strongly opposes contract cancellation.  His reason is 
that he thinks that will upset the timber companies and the 
dialogue we supposedly have going with them.
Now my own view is that we have to try the contract cancellation 
effort.  However, we are not in as good a position as we should 
be.  Since Jim has now told everyone that the contract holders 
have not been offered alternative timber because the White House 
has told him not to, it looks like we are taking out the machine 
gun before we have ever even tried a small pistol, let alone 
trying cooperation with the companies.
================== END ATTACHMENT   1 ==================