Wednesday, March 1, 2000
2000 San Francisco Chronicle Page A17

Headwaters Trouble
Conservation plan for forest in Humboldt County may be unraveling

Glen Martin, Chronicle Staff Writer

It was one year ago today that the Headwaters deal was closed,
preserving in perpetuity a 7,500- acre grove of ancient redwoods, the
largest such tract then in private hands.

The pact hinted at resolution of California's long-running timber
wars. But the conflict over logging in the state's redwood forests
has smoldered during the past 12 months and now threatens to grow
more acrimonious. The agreement, ironically, has served to fan the

Environmentalists say Pacific Lumber Co. and its parent firm Maxxam
Corp. of Houston are avoiding proper implementation of a conservation
plan that spelled out logging rules designed to protect endangered
species, such as coho salmon and marbled murrelets.

Some conservationists go so far as to advocate scrapping the plan
altogether, calling it fundamentally flawed.

They are also upset about Pacific Lumber's plan to log the "Hole In
Headwaters," a 705-acre patch of second-growth timber inside the
preserve. The tract was not covered by the agreement, and logging
could begin as early as April 1.

Critics of the Headwaters deal support a `'debt-for-nature" swap that
would place the disputed timberlands under full protection in
exchange for discharging about $800 million that Maxxam might have to
pay the federal government for losses incurred when a savings and
loan owned by the company collapsed.

Pacific Lumber claims it is properly implementing the conservation
plan. In fact, says company President John Campbell, the firm has
posted significant financial losses this year because the plan has
dramatically slowed the approval of logging by state agencies.

"We are making every effort to get the (conservation plan) up and
running," said Campbell. "We have spent over $2.5 million on our
first watershed assessment (which analyzes the potential impact of
logging on streams and hillside lands), and the first draft is out.
We've had 22 public meetings and cadres of scientists working on (the

When the $440 million Headwaters deal was signed with state and
federal governments, it was hailed by many as a precedent-setting
document -- one that would serve as a template for other "consensus"
preservation deals.

But North Coast environmentalists, critical of the deal from the
start, say they are unimpressed with Pacific Lumber's performance
under the conservation plan.

Paul Mason, executive director of the Garberville-based Environmental
Protection Information Center (EPIC), says Pacific Lumber has been
working actively to reinterpret the plan at

the expense of endangered species, particularly coho salmon.

Coho populations have declined dramatically in North Coast streams in
recent years, a development many biologists attribute to excessive
logging and the consequent siltation of spawning beds and warming of
water temperatures.

"Pacific Lumber is using all their political influence, and the
regulating agencies are backing off," Mason said.

"(The company) is developing their watershed assessments with a
methodology that was panned by the National Marine Fisheries Service
and the U.S. Forest Service last September," Mason said, "and if you
have a bunk methodology, you won't be able to protect the fish."

Hoping to force the state's hand, the environmental protection center
and the California Center for Biological Diversity will announce a
suit today charging the California Department of Forestry

--the agency that oversees logging on state and private lands -- with
illegally allowing timber companies to kill coho because the timber
harvest plan is too lax.

But Louis Blumberg, a spokesman for the forestry department, defends
the Gov. Gray Davis administration's approach to logging. The
conservation plan is working on Pacific Lumber lands, Blumberg said.

"Critics tend to focus on a small area of the redwood region, but
we're looking at the broader issue," said Blumberg. He noted that the
state has funded 71 new staff positions among various agencies just
to review state timber harvest plans.

"For its part, Pacific Lumber has met the requirements of their
(conservation plan). They're meeting restrictions tougher than those
placed on any other private landowner, and the state is providing
more oversight and monitoring than we've provided for any other

But other environmentalists say that if they are obsessing over a
relatively small region of redwoods, it is because that area is so
rich in threatened ecosystems and endangered wildlife.

That is why some advocates are pushing for a ban on logging on
Pacific Lumber's most sensitive lands and promoting an unorthodox
means of achieving that end: a debt-for-nature swap.

This plan would transfer from 7,800 to 63,000 acres of prime Pacific
Lumber timberland to public ownership. The exchange would satisfy
$820 million dollars in claims brought in 1995 by the Federal Deposit
Insurance Corp. and the federal Office of Thrift Supervision against
Maxxam for the 1988 failure of the United Savings Association of
Texas, a savings and loan association owned by the corporation.

At the time, it was the fifth-biggest savings-and-loan failure in
history. A federal administrative law judge is expected to rule on
the case later this year.

Jill Ratner, president of the Rose Foundation, an East Bay
environmental group that is the lead advocate of the swap, said the
move would benefit Maxxam in the long run.

"Their stock is performing abysmally," she said. "They were just
listed by Business Week as having one of the worst board of directors
in the country. If they don't (agree to a swap), they'll face
continued organized opposition and have difficulties running a
profitable operation."

But Josh Reiss, a spokesman for Maxxam, said the debt-for-nature swap
concept is fundamentally flawed. "That's because there is no debt,"
he said. "No ruling has yet been made on the claims of the FDIC and
(thrift supervision office)."

And even if Maxxam is liable for the savings-and-loan failure,
Pacific Lumber would not be, said Campbell. "That (savings and loan)
had nothing to do with us," he said. "The only debt we have is with
our bondholders, and that's secured by the timber we own."

Ratner responded that Pacific Lumber's old-growth groves, in fact,
are excluded from the company's collateral base. And she said there
is nothing to stop the company from restructuring its bond debt and
freeing up more assets.

Yet, there is one small island of peace in the raging ocean of this
seemingly intractable controversy: Headwaters grove itself. As they
have since the end of the last ice age, the great trees still stand.
Marbled murrelets and spotted owls still nest in them.

Shortly after the preserve was established, the U.S. Bureau of Land
Management opened up a northern access route that requires a 5-mile
hike to reach the grove. On May 1, the agency will open a new, 2-mile
route on the southern portion of the preserve. Visitors using the new
access will be restricted to guided tours.

There were initial concerns about excessive public visitation, but so
far use is at an acceptable level, said Dan Averill, an assistant
field manager for the bureau stationed in Arcata.

But while logging will never intrude directly in the preserve, it
will continue around it. And it is unclear how that will affect the
wildlife and water quality of the grove.

"Timber harvest plans are proceeding as usual, but there are
monitoring safeguards for any logging near us," Averill said. "It
hasn't affected us so far, but we don't know if it will be an issue."

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