September 5th 2008

By Nathan Rushton

Eureka Reporter

September 5, 2008

Officials from the newly formed Humboldt Redwood Co. declared themselves an official member of the community during a town-hall-style meeting at the Monday Club in Fortuna on Thursday evening.

During the informal conversation with residents, HRC executives offered a glimpse into the behind-the-scenes work HRC has been focused on since the company first took over the bankrupt Pacific Lumber and Scotia Pacific companies on July 30 after nearly 18 months of legal battling.

HRC Chief Executive Officer Richard Higgenbottom, along with several other executives, kicked off the meeting to about 30 residents, landowners and former PALCO employees who showed up.

From a human perspective, Higgenbottom told those gathered at the meeting that it’s been fun to be part of the transition process that’s yielded positive results — noting the considerable patience and understanding of the PALCO employees caught up in the bankruptcy transfer.

“The acceptance has been phenomenal,” Higgenbottom said.

Mike Jani, HRC president and chief forester, was on hand to offer the highpoints of the company’s transition after the rehiring on the bulk of Scotia Pacific Co.’s forestry crews, who he said have been tremendous in pulling their weight to get things up and running.

But, Jani said, what seemed like simple things at first turned out to be difficult, such as changing all of the names of PALCO’s timber harvest plans.

Working with the North Coast Regional Water Quality Control Board staff on THP and other permitting issues, Jani said he is hoping he will gain their support for changes and possible improvement to the environmental protection regulations they inherited with the land that came with the historic Headwaters Forest agreement.

As its sister company has done in Mendocino County, HRC Forest Operations Manager Tom Schultz said HRC is working on getting the next two years worth of THPs ready to go by the beginning of the new year.

Schultz said it would give HRC, as it does with Mendocino Redwood Co., the ability to better plan out harvest levels and to have the flexibility to react and make changes if any problems arise.

As summer winds down, HRC is working on getting its log decks filled to sustain the mill through the winter.

With its projected harvest of 55 million board feet per year, Higgenbottom said the company is still trying to figure out what the best configuration will be for the Scotia mill based on consumer demand, log volume and availability.

Although he wants to avoid any mill shut down, Higgenbottom said it’s possible that a shut down might be needed early next year to reconfigure equipment.

“How long will it be down?” Higgenbottom asked. “It may not be down at all.”

But any down time, which Higgenbottom acknowledged is costly for the company and troublesome for employees, depends on the nature of the retrofit that is needed to tailor its operations to the market.

HRC officials told residents at the meeting that they are aggressively looking to purchase logs from area landowners — both Douglas fir and redwood—and have already bought 5 million board feet of timber.

As part of getting settled in on the 210,000 acres of lands it’s taken over, company officials said they are dealing with a lot of cleanup issues, as well as with the challenges of making contact with the many leaseholders to figure out what comes next.
While HRC is still reviewing the lists of lease-holders, company officials said the general approach the company is taking is to allow existing land leases to continue.

One of the better known leases on former PALCO property is that of the late Supervisor Roger Rodoni and his widow Johanna Rodoni’s 9,000-acre Rainbow Ranch near Stafford.

It’s a cattle ranch arrangement that dates back to 1969 and was the focus of a well-publicized conflict-of-interest allegation in 2003 over a Board of Supervisors vote related to PALCO, which Roger Rodoni was cleared of by the California Fair Political Practices Commission.

Johanna Rodoni said Friday she hasn’t yet discussed the lease with HRC yet.

“I don’t have any interest in not leasing,” Rodoni said.

The past five weeks since HRC was formed has been something of a learning experience for the new company as they delve into the more than 150-year-old timber company’s inner working and deep roots in the community.

In one example, Higgenbottom said he learned this week that he had a person living in a home on HRC’s lands he didn’t know the company owned.

“I think every day I get one of those,” Higgenbottom said. “It’s absolutely fascinating.”

There are other long-standing arrangement that have also surfaced for HRC officials to mull over, such as what to do with a 30-year lease with the Boy Scouts for access to former PALCO property for use as an archery range and other activities.
And then there is the PALCO tradition of employee access for deer and other hunting, as well as wood cutting.

Higgenbottom said managers have been holding meetings to discuss the short-term solutions, which he said will be reviewed again at the end of the year to hammer out more long-term policies.

For now, the company is issuing hunting permits to employees, for Townco employees and PALCO retirees.

“I think we are going to review this very hard to make sure we come up with something fair,” Higgenbottom said.

While he said it’s their intent to give equal access to everyone here, Higgenbottom said MRC turned over hunting access on its Mendocino County lands to a third party.

And still on the horizon for HRC is an appeal by the Timber Noteholders pending in the U.S. 5th Circuit Court of Appeals, which threatens to possibly unravel all the work completed so far.

The 5th Circuit is scheduled to hear in early October attorneys’ arguments related to the Timber Noteholders claims they were denied their legal rights in the federal bankruptcy court’s ruling.

Higgenbottom doesn’t seem too concerned and said he has faith in Judge Richard Schmidt’s decision, which he described as fair and legally sound.

MRC attorneys have a motion to dismiss the appeal on the grounds that so much has changed since the confirmation of the plan that an appeal would be moot.

Higgenbottom said the courts are well aware of the transition and the progress HRC has made.

But for Jani, he said he thinks about the pending legal review daily and the chaos that would happen if Schmidt’s decision was reversed.

“It would be a giant step backwards,” Jani said.