March 30th 2008

Editorial
The Times-Standard
March 30, 2008

The Pacific Lumber bankruptcy case is a complicated one, with many stakeholders elbowing each other to get the nod from the federal bankruptcy judge in Texas.

This week, former California Gov. Pete Wilson weighed in to push a proposal by the creditors of Scotia Pacific, the Palco subsidiary now controlled by Maxxam Corp. Then there are three recovery plans offered by Palco itself, and a joint proposal by Mendocino Redwood Co. and Marathon Structured Finance Fund, the key Palco creditor.

There are a lot of ways to look at the decision faced by Judge Richard Schmidt. We prefer to examine the plans from the perspective of what's best for the community and the environment, and thus -- along with Palco's unsecured creditors -- we support Mendocino Redwood's proposal because:

• The company knows the redwood business, proposing to manage the timberlands in a sustainable way and keep the Scotia mill open as well. It has promised to meet the same strict standards for certification by the Forest Stewardship Council that it has in Mendocino.

• It plans to invest $7.5 million in improving the mill, and anticipates employing at least 250 workers -- jobs vitally needed in the Eel River Valley. Also, during the mill's refitting, local millworkers may have an opportunity to work at Mendocino Redwood's Ukiah mill.

• The company appears to have done its homework, much more so than the other plans on the table. Their long-term plans for forest management and short-term marketing strategy for the mill's lumber give us greater faith that this company will keep Pacific Lumber -- founded in 1863 -- a viable member of the community till its bicentennial and beyond.
That has not been the case since the hostile takeover of Palco by Charles Hurwitz's Maxxam in 1986. The company has gone from debt-free to bankrupt in 22 years -- years that have been filled with conflict and strife. Any judgment that gets Maxxam out of the picture will be a good one.

As for the noteholders, they look to get control of the timberlands, and the future is left uncertain. We have no confidence in their ability to manage Humboldt County's most precious natural assets, and in fact anticipate they would sell the land to third parties to be named later. And their plan doesn't address Palco itself -- the sawmill, the town of Scotia, the employees.

For the sale of our North Coast communities, we encourage Judge Schmidt to give his highest consideration to the Mendocino Redwood/Marathon plan.