Maxxam at it again with threats

With Kaiser Aluminum Corp. almost three years into reorganization, Maxxam Inc. has threatened to put a second subsidiary into bankruptcy.

Unless California allows more logging in the state’s majestic redwood forests, the company, Pacific Lumber, will cease operations and lay off hundreds who depend on its mills for their livelihood.

And just to make sure California officials understand the gravity of the threat, Pacific two weeks ago announced the layoff of 38 employees and the reassignment of others. The cause, they say, is their inability to harvest enough timber to sustain operations at the current level.

Welcome to chainsaw politics.

Maxxam and California have been going at it since 1986, when the Houston-based company purchased Pacific, a company that had taken good care of its forests and employees for decades. The new owners immediately increased harvest far beyond what was sustainable in order to carry debt taken on to make the deal. An overfunded pension plan was raided, and the employees left with annuities.

Finally, sickened by the environmental destruction caused by Pacific’s woeful stewardship, California and the federal government in 1996 worked out the $480 million Headwaters Forest Agreement. The deal, consisting of land purchases and swaps, safeguarded 7,000 acres of the most prized, old-growth timber. Logging on another 200,000-plus acres that remained in Pacific’s possession was subject to strict environmental controls imposed in 1999.

But darn, just six years into that agreement, Pacific is running out of trees. To make more available, the company has asked the California Department of Forestry and the water quality authority for Northern California to approve 12 timber harvest plans that will increase the potential harvest.

Water quality officials are involved because cutting trees on steep slopes increases stream sediment, which in turn has increased flooding problems downstream. Pacific scientists contend the company’s harvest plans will actually help solve problems left by 130 years of poor logging practices. You can forgive Humboldt County officials for not buying those claims.

In fact, District Attorney Paul Gallegos has accused Pacific of deliberately submitting doctored studies to state authorities during the environmental reviews done during drafting of the 1999 logging guidelines. Pacific’s motion to dismiss a county lawsuit boils down to an assertion it should not be penalized for exercising its First Amendment rights, and that the county, as the people of California, cannot also do what the California Department of Forestry is doing.

But that is just the genteel lawyering part of the dispute. The fight in the streets and voting booths was more confrontational.

With their livelihoods at stake, loggers took to demonstrations, certainly their democratic right. But someone also twice broke into Gallegos’ home, and the office computer of Deputy District Attorney Tim Stoen was hacked. Pacific largely financed an unsuccessful effort to recall Gallegos.

“It got really very nasty,” says Stoen.

So influential is Pacific, he adds, four judges have disqualified themselves from hearing the case. The political pull does not end there.

The Los Angeles Times Tuesday reported Maxxam Chairman Charles Hurwitz and Pacific officials met with Gov. Arnold Schwarzenegger’s environmental deputies — in the governor’s office — to argue their case for additional logging permits. Without those permits, Pacific might have to close mills and lay off workers. If bankruptcy was the ultimate outcome, they warned, the bondholders likely to inherit Pacific would not be bound by the stricter logging standards company that are part of the Headwaters agreement.

That agreement, the Times notes, was negotiated in part by James Branham, who was a Pacific executive at the time. Now he is undersecretary of the California Environmental Protection Agency. Yikes!

According to the Humboldt County lawsuit, those allegedly strict standards are predicated on bogus environmental studies that increased the allowable cut by some 30 million board feet. For example, the suit says, information submitted to justify more harvest said only 15 percent of landslides in one drainage were the result of recent logging. In reality, the study done for the company indicated the correct figure was 60 percent. Those landslides have caused severe siltation and flooding.

In its bid to get some of the harvest restrictions lifted, Pacific says it will repair “legacy problems” that put 40 cubic yards of sediment into streams while its “modern harvest activity” will generate only one cubic yard. Sure. Give them a cubic yard, and …style?

Many Inland Northwest counties can relate to the situation in Humboldt County, where hundreds of workers get their checks from Pacific, or from the logging and trucking companies that depend on its mills. Lack of timber has been blamed for recent announcements mills in this area will close.

That’s not what the Humboldt County case, or Pacific, are all about.

“We don’t treat this as an environmental case, we think of this as a fraud case,” Stoen says. “They are willing to lie.”

Business columnist Bert Caldwell can be reached at (509) 459-5450, or at bertc@spokesman.com.