Deal to Forgive Firm’s Debt to Save Redwoods Could Help Other Areas

An innovative proposal to forgive a logging company’s debt in exchange for saving California’s largest private forest of old-growth redwoods would set a precedent that could help preserve thousands of environmentally sensitive properties across the nation, state officials said Tuesday.

State officials estimate that at least 15% of more than 41,000 properties seized by the federal government from bankrupt savings and loans could be obtained for public use under similar arrangements. Doing so, however, would require a change in federal policy now being sought by the Wilson Administration.

California Resources Secretary Douglas Wheeler called on the federal Resolution Trust Corp. to release assets seized from the S&Ls; that could be turned into parks and nature preserves and help save a portion of the Headwaters Forest in Northern California.

“I would say there is no single way in which the government could better achieve a national conservation objective than to make use of these assets for conservation,” Wheeler said. “It’s a wonderful opportunity.”

Federal officials, however, were dubious about the use of the seized assets to protect the environment, noting that a congressional mandate requires them to achieve the greatest return possible to lessen the taxpayers’ burden of the savings and loan bailout.

“We love redwoods too,” said Steve Katsanos, chief spokesman for the Resolution Trust Corp. “But our mission is to maximize the recovery for the taxpayer.”

The debate over the seized property was sparked by a state proposal to acquire a portion of the Headwaters Forest with $55 million in junk bonds issued by the forest’s owner, Pacific Lumber Co. The bonds became the property of the federal government when it took over the assets of Columbia Savings & Loan in Beverly Hills. Under the proposal, the state would acquire the bonds and return them to Pacific Lumber in exchange for placing part of the forest in public ownership.

Gov. Pete Wilson is trying to negotiate the purchase of the Headwaters Forest at a time when the state is facing a $10-billion budget crisis. The forest near Eureka, the largest stand of old-growth redwood trees remaining in private ownership, has been avidly sought by environmentalists.

The acquisition of the forest is a high priority for Wilson and the junk bond swap is appealing because it could reduce the state’s cost.

Such a trade could help pay for a portion of the 3,000-acre property. But state officials are also considering other sources of money, including a state bond measure, a land swap and federal conservation funds. No value has officially been placed on the land, but estimates have ranged from $100 million to $500 million.

To acquire the junk bonds, the state must persuade the board of the Resolution Trust Corp., or Congress, to change its policy to make environmental protection a priority for disposing of the assets of failed thrifts.

A more limited option would be for the state to acquire the junk bonds by giving the federal government other property of equal value. That would then set the stage for the trade with Pacific Lumber.

Times staff writers James Bates and Michael Parrish contributed to this story.