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Counties ask Oregon Supreme Court to reinstate $1.1 billion timber verdict against the state

July 8, 2022 Updated Fri., July 8, 2022 at 7:38 p.m.

The Storey Burn Trail runs through the Tillamook State Forest in Oregon’s Coast Range, near the start of the original Tillamook Burn fire in 1933.  (Jamie Hale)
The Storey Burn Trail runs through the Tillamook State Forest in Oregon’s Coast Range, near the start of the original Tillamook Burn fire in 1933. (Jamie Hale)
By Ted Sickinger The Oregonian

A group of 13 rural counties and some 150 taxing districts is asking the Oregon Supreme Court to reinstate a $1.1 billion award against the state for failing to maximize timber harvests on state forests and resulting payments to those local governments.

The Oregon Court of Appeals this spring ruled that the Oregon Department of Forestry and its policy-setting board are not obligated to maximize timber harvests and associated payments to counties where the forests are located.

That opinion overturned a 2019 decision by a jury in Linn County that concluded the state breached a statutory contract with the counties and shortchanged them on harvest revenues for two decades.

The latest appeal had been expected, given the huge sum at stake. The Supreme Court is not obligated to review the case, but its previous involvement and precedent in related cases make it more likely. There is no established timeline for a decision.

As a result, the final outcome of the $1.1 billion verdict remains unclear. The state never made payments in the case and had been racking up $262,829.44 a day in interest.

The Linn County lawsuit has its origins in 1941, when state and county officials cut a deal that eventually resulted in the transfer of some 600,000 acres of logged-over and burned forest lands to the state. Those once-derelict lands now comprise the bulk Oregon’s state forests, and as a condition of their transfer, the state agreed to rehabilitate them, protect them from fire and share a portion of timber revenues with the counties when they became productive again.

The state’s formal mandate, codified in the Forest Acquisition Act of 1941, was to manage the forests for the “greatest permanent value of such lands to the state.”

The counties, which receive two-thirds of the timber sale revenues off the lands, contend that the Forest Acquisition Act and subsequent amendments constituted a contract between the counties and the state, and that in 1941, “greatest permanent value” was understood to mean that the state would manage the lands to maximize timber production and resulting revenue transfers to the counties.

The state has asserted that the legislation never constituted a statutory contract, and that even if it did, the language around “greatest permanent value” gave it discretion to manage the lands for multiple purposes, including clean water, wildlife habitat and recreation.

In their petition for review filed this week the counties maintain that a three-judge panel of the Court of Appeals misinterpreted a prior decision by the Supreme Court that recognized their enforceable contract rights regarding management of the state forestlands, then misapplied the Supreme Court’s framework for identifying statutory contract terms.

“Failure to review and reverse the Opinion will mean that local governments and future contract partners will never again be able to trust the State to honor its promises,” John DiLorenzo, the counties’ lawyer, said in an emailed statement.

The state’s response to the counties’ filing, if it chooses to file one, is due by July 20. The Oregon Department of Justice could not immediately be reached for comment.

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