Negotiations for Headwaters Forest Falter

Four months after announcing a deal to save the ancient redwood core of the Headwaters Forest in Northern California, state and federal officials have been unable to satisfy the demands of Charles Hurwitz, the corporate raider who took control of the forest 11 years ago.

Hope is fading that negotiations to acquire 7,500 acres of old growth redwoods and adjacent forest near Eureka from Hurwitz’s Pacific Lumber Co. will be largely complete by June, as anticipated when the $380-million deal was struck.

There are also new concerns that Pacific Lumber’s recently revealed plans for logging outside the 7,500 acres will undermine the government’s stated intent of ensuring the survival of wildlife throughout the 200,000-acre Headwaters on the state’s rugged North Coast.

Negotiations over the financial terms faltered last week, when Hurwitz rejected a long list of properties offered by the Wilson administration as its contribution to the $380-million Headwaters acquisition price.

This week, Hurwitz is disputing the value of most of the $250 million in federal assets put on the table to help close the deal.

Sources say Hurwitz, who contends he is selling the Headwaters acreage at a bargain price, is angry that federal officials haven’t presented him with a formal appraisal of the assets they are offering in exchange.

Meanwhile, at a series of government hearings on Headwaters issues around the state, some members of the public have criticized the Clinton administration for offering anything to Hurwitz.

“You can’t make deals with criminals,” one speaker told a panel of state and federal officials at a hearing in Manhattan Beach earlier this week.

Hurwitz, a Houston-based entrepreneur with wide-ranging financial interests, has not been charged with any crimes. But he has been sued by the Federal Deposit Insurance Corporation and by the federal Office of Thrift Supervision, accused of contributing to the 1988 collapse of a Houston savings and loan that cost creditors and taxpayers an estimated $1.6 billion.

Environmental groups have argued that the Clinton administration ought to lay claim to at least 60,000 acres of the Headwaters Forest as compensation for the United Savings Association debacle. Hurwitz says he was not responsible for what happened to the Texas thrift, blaming the failure of the institution on an economic downturn.

Lawyers for the Interior Department maintain that it would be improper for the administration to intervene in the lawsuits, and point out that there is no guarantee that the government agencies will prevail in the cases against Hurwitz.

The decade-long struggle to protect the Headwaters Forest redwoods came to a head after Hurwitz filed a lawsuit arguing, in effect, that the government should either drop environmental restrictions on logging or pay him for the trees he is prohibited from cutting down.

The Headwaters Forest is believed to contain the largest stands of giant redwood trees in the nation not under government protection. When Hurwitz took over Pacific Lumber, he revealed plans to speed the removal of the biggest and oldest trees for lumber.

Complicating the Headwaters negotiations, federal biologists have expressed apprehension about another aspect of the deal--a habitat conservation plan required of Hurwitz to ensure preservation of threatened birds and fish in sensitive parts of the forest that will remain under his control.

Hurwitz has not submitted the plan, but in another document filed by Pacific Lumber with the state recently, the company indicated its intent to heavily log all of the ancient redwood stands not being transferred to the government, said Phil Detrich, the ranking federal biologist involved in the negotiations with Hurwitz.

“They are essentially proposing to take the rest of the virgin old-growth groves and turn them into tree plantations,” Detrich said.

Within the Headwaters Forest, said Detrich, such an approach could decimate up to 50% of the prime nesting habitat of the marbled murrelet, a threatened sea bird that nests in very large trees. The marbled murrelet, the northern spotted owl and the coho salmon have been identified as the most imperiled species in the Headwaters region.

But Detrich also pointed out that, as part of the Headwaters agreement, Pacific Lumber has assembled a panel of wildlife experts to examine the status of the marbled murrelet and determine whether the company’s logging practices would jeopardize the survival of the species along the Pacific Coast from Northern California to the Canadian border.

Earlier this week, U.S. Sen. Dianne Feinstein, who is helping broker an agreement with Hurwitz, insisted that progress is being made, at least on the financial front, in the Headwaters negotiations.

“I am now confident that the Interior Department can deliver a package of assets that can satisfy the terms of agreement and be protective of the public trust,” Feinstein said after a meeting with Interior officials and Hurwitz.

Behind the scenes, other officials were sounding less upbeat, pointing out that Hurwitz and federal negotiators differed by $40 million or $50 million on the value of the federal oil and gas leases that represent the bulk of the assets being offered in exchange for the Headwaters acreage.

Government negotiators have estimated the value of the leases, located in Kern County, at $200 million, while Hurwitz has placed their worth closer to $150 million, according to sources close to the negotiations.

The leases represent the Clinton administration’s largest contribution to the $380-million Headwaters price tag. The Wilson administration is responsible for $130 million.

One way now under discussion to establish the value of the Kern County leases would be to auction them off--since Hurwitz would prefer cash anyway--and let the market determine how much they are worth.

Federal negotiators have not indicated how they would make up the difference if the price paid at auction was less than $200 million.

Nor have federal officials indicated how they plan to compensate the state of California for the $8 million to $12 million in current annual royalties that the state would stop receiving if the leases were sold.

“The issue of the royalties will have to be addressed before the deal can be finalized,” said Jim Branham, California’s deputy secretary for resources.

Sources close to the negotiations said that federal officials hope to return to the bargaining table in two to three weeks with specific proposals both for appraising the leases and auctioning them off.