The Bay Area FOREST ACTIVIST
Mini-newsletter from the
Bay Area Coalition for Headwaters
Spring Equinox ~~ March 2008
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Pacific Lumber Heading Into
the Post-Maxxam Era
When the 140-year old Pacific Lumber (PL) filed for bankruptcy on Jan. 18, 2007, it didn't surprise many people. In fact, more than a year and a half before the filing, after PL had been loudly and pointedly threatening bankruptcy to pressure regulatory agencies to give them more freedom to log, forest and community activists began talking. New alliances have emerged from those meetings and subsequent ones among those who want the community and the environment with a strong stake in the future of PLís land.
We are looking forward to a reshuffle that will bring Humboldt County and the redwood forests into a Hurwitz-free and Maxxam-free era. But it is a rocky road to that new day. PL filed chapter 11 corporate bankruptcy, which triggers reorganization, not a shut-down. Under bankruptcy law, the debtor (PL) got first whack at a proposed reorganization plan.
When PL submitted its first reorganization documents in September, 2007, they proposed to sell 22,000 acres as a high-end housing development, sell the town of Scotia, and retain ownership of approximately 181,000 acres of forestland for continued timber production. They also proposed to sell the Marbled Murrelet Conservation Areas, six groves of ancient redwood forest, some 6,600 acres, set aside for 50 years under provisions of the 1999 Headwaters Deal.
PLís much-anticipated proposal, completely under wraps until its release on the court-ordered September, 2007 deadline, drew swift and strong negative reactions from the public, including the Humboldt County Board of Supervisors. On October 9, the Humboldt Supes, in direct response to the proposed plan, passed a temporary housing permit ban on TPZ lands (Timber Production Zones) in the county.
The moratorium was hotly debated in the packed meeting before a body that has been friendly to PL more often than not. Many timberland owners opposed an outright building ban, but nonetheless expressed dismay at the
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baldness of PLís proposal. George OíBrien, the CEO PL hired from timber industry giant International Paper called the proposal a ìwin-winî since PL proposes to pay creditors in full. That ìwin-winî is based on the presumption that there are buyers for the grossly overpriced land, on the order of $36,000 an acre! (Thatís without a houseÖin rural Humboldt County.)
In December, the bankruptcy court ended PLís right of exclusivity, opening the field for other creditors and interested parties to submit reorganization plans, giving a deadline of January 30, 2008 for submission of reorganization plans. Three reorganization plans emerged, and PL responded to the new deadline by dividing up their ideas and submitting three re-worked plans.
The proposals went out to creditors the first week of February for voting, which is to be concluded by March 25. Everyone is back in court the first week in April. See the chart, this issue, for a comparison of the plans, or to see all the proposals in full, follow the web link at the end of this article and look under ìDisclosure Documentsî.
More about the Proposals for Reorganization:
Marathon Investment Company and Mendocino Redwoods Company
Marathon Structured Finance Fund, a hedge fund and part of Marathon Asset Management LLC, headquartered in New York, is a creditor of Palco, its $160 million secured by Palcoís mills and other real property. As a result of Marathonís position as liquidity provider, they have a first priority lien on ìsubstantially all of the assets of the Palco Debtors (i.e., all of the Debtors except ScoPac). Marathon recently partnered with Mendocino Redwood Company (MR), as Marathon jockeys for control. While many in Humboldt are reacting to MR favorably, since their operation is promoted as "lite" industrial logging and since they have proposed to keep the mill open, MR management would not necessarily mean an end to destructive logging in Humboldt County. MR came in on the heels of heavy liquidation logging in Mendocino County a decade ago, purchasing mostly cut-over land from Louisiana Pacific. But their parent company, the Fisher family-owned Gap store empire, has long been boycotted for use of sweatshop labor in their clothes line and for their unsustainable forestry practices. See article, this issue, about MR and about the Forest Stewardship Council.
Noteholders
Scotia Pacific (ScoPac) is a subsidiary of PL formed as part of the 1998 refinancing plan. It is the subsidiary that carries PLís entire debt burden as well as all the timberland. For PL, linking the mammoth debt and the forestland meant that the harvest rate was directly driven by the payments required on the debt. Over 90% of the ScoPac timber bonds are now owned by big-name Wall Street firms: Bank of America, Citigroup, Deutsche Bank, J.P. Morgan, and others. These Wall Street investment institutions hold over $750 in debt collateralized by approximately 210,000 acres of commercial timberland. The bondholders have, at times, argued on
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a track fairly in sync with community and environmental interests about the importance of sustainable operations, and against Maxxamís self-serving interests, recently they tried to fast-track settlement of their interests by separating ScoPacís assets (the timberlands). They have now come out in favor of an auction of the land and other assets to provide the quickest return on their investmentói.e., they do not propose to continue ownership or management of the land, collateralized by the standing timber, otherwise known as trees.
Öand of course Pacific Lumber
As mentioned above, PLís first proposal was roundly condemned. Now on the table are three re-worked proposals which seek to restructure the company's debt, while maintaining Maxxam's shareholder and management status. They still operate under the delusion that they can sell developable land for grossly inflated prices, and still propose to see the 6,600 acres of old growth set-asides (protected for 50 years by the Headwaters Deal) for $300 million. It is doubtful the feds or anyone else would pay to protect it again. It also suggested Marathon Finance Fund take over the town of Scotia and its mill complex in return for the debt owed Marathon, and also other company assets in Arcata, Fortuna and Carlotta, but since Marathon teamed up with Mendocino Redwood Co. they donít appear to be interested in being part of PLís plan, restructured or otherwise.
And a ray of hope from the Community Forestry Team
Iíll say it loud and clear: this is the team we are rooting for. The Community Forestry Teamís plans, unveiled in January, bring together the Nature Conservancy, Save the Redwood League, investment funds and many representatives from community organizations to collaborate on an innovative plan to sustainably manage and restore the damaged lands, and keep jobs and forest management decisions in the community. A very tough play, given the impossible stage set by Hurwitz and Maxxam through years of self-serving refinancing, but the only proposal with such a keen eye to the future. Financing commitment was secured from Bank of America and Atlas Holding Company. If the Community Forestry Team plan were to become a winning proposal, it could stand as a model for so many timber-dependant rural economies facing a slow death.
The coalition has laid out these goals:
_ Place approximately 197,000 acres under a permanent conservation easement that ensures the forests are managed in an environmentally sustainable way while providing a continuous supply of timber to mills in Northern California
_ Set aside nearly 12,000 acres of the most ecologically important habitat, including old-growth forests, in publicly protected wildlife areas
_ Deploy the private capital and operating expertise of Atlas Holdings to
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_ maintain the operations of the Scotia sawmill
_ Invest private capital from Bank of America, Conservation Forestry and Redwood Forest Foundation Inc. to create a sustainable timber operation
_ Support the current local economy by keeping the forests in sustainable timber management in perpetuity regardless of future ownership
_ Position Humboldt County to potentially take advantage of future economic opportunities, such as the emerging carbon market
_ Offer the Humboldt community, through the Community Forestry Team, the opportunity for optimum participation and the option of a level of community ownership
These goals stand as overarching guidelines as we trek down this rocky road of corporate reorganization. We hold the goals we have always had for the north coast redwood forest:
_ Protection of remaining old growth
_ An end to clearcutting, by any name
_ No conversion of forests into development
_ Protection of riparian habitat of threatened species like the Coho.
Get Involved!
There are not many entry points for public action and input in the bankruptcy process, but there are ways you can help! Right now, we need your help researching and compiling information about Mendocino Redwood Company. We need a web person, and also someone to help pull together news of recent events so we can have displays and handouts at our upcoming events. Please call us!
For more information:
The Alliance for Sustainable Jobs and the Environment has press clips and the legal filings and Reorganization Plans at http://www.asje.org/PL_Bankruptcy.html
The law firm representing the unsecured creditors has a website at http://www.plbankruptcy.com/
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Mendocino Redwood Company: Is the New Boss Too Much Like the Old Boss?
Mendocino Redwood Co. (MR) has drawn interest in their bid to take over Pacific Lumber land in the much-anticipated post-Hurwitz era. Their promises to log these
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forests sustainably deserve strong skepticism.
The Marathon/Mendocino Redwood proposal for PL forests commits to reduce harvests from PL levels of 126.2 mbf to 55 mbf, but their figures are followed by a disclaimer in bold ñ unforeseen market forces could mean all bets are off. Note that with MR sustainable stewardship means the public review of industry plans mandated under CEQA has essentially been lost to the Forest Stewardship Council (FSC), since the company proves its good stewardship through private certification by FSC in meetings conducted behind closed doors and paid for by the company.
Further, MR is decidedly not a local company. MR (a.k.a., Sansome Investment Group) is owned by the Fisher family (known for their use of sweatshop labor to supply Gap and other stores), and is a relative newcomer. Its longevity in the timber business is unknown ñ reminiscent of Maxxamís foray into this industry.
MR claims they adhere to strict principles of environmental stewardship, yet they proceeded on their Mendocino acreage with a program of targeting the last big trees, intense clear-cutting, toxic pesticide use, and other practices that have led local watershed workers to describe MR as "Louisiana Pacific (L-P) with better P.R." L-P left 97% of the forest in 1 to 21 inch diameter trees, with only rare, scattered, old growth.
When MR purchased L-P's 230,000 acre forest lands in Mendocino in 1998, optimism about their plans was short-lived, as MR picked up right where L-P left off, with 104 L-P timber harvest plans (THPs), including a 400-acre clear-cut above a fragile coho fishery, clear-cuts above a town water supply, immediate targeting of the big trees in the Albion watershed, and logging in slide-prone areas. Local residents arranged meetings with MR to convince them to stop these practices, to no avail. Through legal action they were they able to get relief on only three of several disastrous plans, with MR fighting the lawsuit every step of the way.
Meanwhile, MR was filing numerous new THPs, dramatically increasing ñ by 200% ñ the number of clear-cuts and the acreage to be logged ('97 through '02). The successful litigation required MR to produce a long-term management plan (or Sustained Yield Plan-SYP), evaluating potential impacts on all resources, with regard to the three THPs. But when MR held hearings, they provided no information to the public on MR logging levels or potential impacts. FSC certified MR without a public SYP, and without the public ever knowing what the plan was.
To appear to have reduced logging levels, they began calling their clear-cuts "alternative prescription", and claimed to cease logging old growth. However, they define old growth in such a way that almost any tree can be cut. The FSC has
certified based on vague promises of reform, with no public review.
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MR's proposal will certainly mean further reductions in an already slashed and demoralized PL workforce. In Mendocino, the coastal mills are now closed forever, and talk is of real estate development. At this juncture, itís easy to look better than PL. Humboldt deserves more than slightly better.
See http://www.gapsucks.org/ for info on the past campaign against Mendocino Redwood Company
The Bay Area Coalition for Headwaters grew out of the campaign to save Headwaters Forest, and has worked for over 10 years for the preservation of our precious redwood forests on Californiaís north coast.
We carry out media outreach, grassroots organizing, public education and activist support and serve as a link between the rural grassroots groups of northern California and people who care about forests in the Bay Area.
We sometimes work on local campaigns, and currently are engaged with the campaign to save the threatened oak grove in Berkeley, trying to hold the University of Californiaís chain saws at bay and to support the activists involved with the tree-sit in the oak grove, now in its 15th month!
We depend on volunteers, and we depend on your donations to carry on. Please call or write us, join our email list serve for news of north coast forests and the oaks (visit www.HeadwatersPreserve.org) and support our work by sending a check made out to BACH/Ecology Center to
Bay Area Coalition for Headwaters
2530 San Pablo Ave., Berkeley, CA 94702
(510) 548-3113
May the forest be with you.
