March 27th 2008

By Hank Sims
The North Coast Journal
March 27, 2008

We got quite a few responses to our "Palco Bankruptcy Contest," in which readers were invited to lobby us and try to influence our vote in the Pacific Lumber bankruptcy case. If you recall, the North Coast Journal is a participant in the case; subsidiary Britt Lumber of Arcata -- since shuttered -- owed us $85 when the company finally went belly-up in January of last year. Small potatoes when set next to the billion-odd dollars of total debt carried on the books of Pacific Lumber and its various sister companies, but that $85 write-off gave us a small, squeaky voice in the outcome of the case and therefore the future of Humboldt County. For that we are grateful. Money well spent, we believe.

The ballots are all in now, and the next real action begins on Tuesday, April 8. That's the start of the "confirmation hearing," the legal proceeding that marks the end of the bankruptcy case. At the close of confirmation, there's two possible outcomes, broadly speaking. Either one of the four post-bankruptcy reorganization plans currently on the table will be chosen (likely) or the whole case will be deemed hopeless and everything will start over again, the last year-and-a-quarter of bankruptcy having served no other purpose than to rapidly dig the company even further in debt. Obviously, no one wants to see that happen.

When we announced the contest two weeks ago, we stated our prejudice up front. We were inclined to support the plan sponsored by the Marathon Capital Group and the Mendocino Redwood Company. That plan would keep Pacific Lumber together as a company and scale way back on the often insane rate of cut that the Houston-based Maxxam Corp. has imposed on the people of Humboldt County and the state of California. It would stop the cutting of old-growth redwood and Douglas fir trees, and it would make the company eligible to be recognized by the Forest Stewardship Council, the industry leader in sustainable forestry certification. At the same time, it would keep the mill operational and ensure that the Pacific Lumber pensioners are taken care of.

As it happened, the great majority of readers backed us up on our initial decision. "It makes the most sense to me," wrote an education professional who wished to remain anonymous. "I think it is the best plan for the workers, the forests and the North Coast region."

Shirley Shelburn of Eureka, a veteran Palco watcher, cited Mendocino Redwoods' experience in turning around overcut Louisiana-Pacific lands in Mendocino County. "It looks like the only way to escape from Maxxam's stranglehold is to vote for the Marathon/Mendocino Redwoods plan," she wrote, "which fortunately does seem to be based on successful experience in bringing formerly abused timberlands up to Forest Stewardship Council standards in less than 10 years."

Fisheries biologist Pat Higgins, a member of the board of commissioners of the Humboldt Bay District, seconded Shelburn's vote, but, like Shelburn, he took a moment to wax wistful about an alternative outcome that neither of them thought likely. That is, both of them wished for some way for the much talked-about coalition of environmentalists and high financiers led by the Nature Conservancy to get into the game. Though never completely fleshed out, various outlines of the plan seemed to promise everything that Mendo Redwoods is promising and more -- permanent Nature Conservancy stewardship of the most ecologically valuable lands, local input into forestry planning, creative strategies for revenue generation. But the Nature Conservancy coalition's chances depend upon a risky (for locals) reorganization plan sponsored by the Wall Street-based owners of Pacific Lumber's "timber bonds," who want to put the timber land, which secures their notes, up for auction. At that point, the Nature Conservancy could bid, if it is indeed real. But so could any number of greedhead capitalists of the Hurwitz stripe. Who wins? (Dr. Ken Miller, a Maxxam foe, acknowledged this bleak scenario in a letter to the Journal advocating no plan in particular, but hoping for some level of community control.) Furthermore, the auction would sever ties between the land and the mill.

So although love for Mendocino Redwoods is far from universal -- witness the letter from Karen Pickett of the Bay Area Coalition for Headwaters in our March 14 issue -- most everyone seems to believe it's the best option on the table. Forest activist Jeff Muskrat thinks so. The Environmental Protection Information Center thinks so. The Greater Eureka Chamber of Commerce thinks so. And if the Eureka Chamber of Commerce and EPIC agree on something, than it's pretty fair to assume that that thing has widespread support.

To our knowledge, absolutely no one at all outside of Maxxam has voiced any support whatsoever for the plans promulgated by Pacific Lumber itself, each of the various permutations of which would depend on massive residential development in the hills outside Fortuna and sales of land to the government at extortionary prices. But Maxxam's last hope is that strife and disagreement amongst the company's creditors will lead to the judge "cramming down" their plan upon all the creditors, and against their objections.

So there we were, pen poised over ballot, ready to tick the box indicating our approval of the Mendocino Redwoods plan and no others. Then the computer dinged, indicating that we had mail. It was a letter from Jesse Noell, a resident of the Elk River neighborhood. Noell, we knew, lives downstream from Pacific Lumber land in that troubled watershed, and had long been active in the legal battle to stop the flooding of his and his neighbors' lands. Noell's letter was titled "Vote NO on bankruptcy plans."

"Because none of the proposed plans will stop the threats to health, safety and property, the NCJ should vote against all of the plans," Noell wrote. "If you vote for any of the plans, please assume the financial responsibility for our damaged property in Elk River and establish a fund to cover the lost wages and motel bills of scores of people who are repeatedly trapped by the flood waters."

This letter, we admit, was sort of a buzzkill. It took all the fun out of the voting process. It seemed to threaten legal action against us. Furthermore, we weren't entirely certain it was logically flawed. Wasn't Noell asking us to assume the role of the state regulatory agencies who oversee timber harvesting operations, and who are theoretically tasked with preventing the damage he is talking about? When we gave a call to clarify this point, Noell told us not to hold our breath.

"The government has failed us," Noell said. He said that even though the water quality agencies have placed watershed-wide limits on logging and sedimentation in Elk River and elsewhere, he fully expected the bulk of Mendocino Redwoods' harvesting over the next few years to take place in his neighborhood -- it held the most marketable trees, he said.

"By voting on these plans, you're voting on our future," he said. "Your vote can be much more powerful if you throw it away in order to raise an ethical and moral issue."

Well, consider the issue raised. But when we returned to our ballot we decided that this was not so different than any other election. We don't get to vote on the candidate or policies of our dreams. We get a list of boxes -- a, b, c or d -- and there's no point coloring outside the lines. As always, we were doomed to live in the world as it exists, rather than the world we might like it to be. So we pulled the lever for Mendocino Redwoods with just a tiny twinge of conscience.