Lumber Firm Rejects Plan to Save Headwaters Forest

The $480-million Headwaters Forest agreement to save the grandest redwood trees on Earth still in private hands has apparently collapsed, raising the prospect of renewed conflict over the coveted parcel of land.

Officials of Pacific Lumber Co., which owns the forest on the Northern California coast, announced that the company’s board of directors voted Friday to reject the deal to turn portions of the forest into a preserve run by the federal and state governments. The company cited unacceptable logging restrictions that would have been part of the agreement.

“The terms would have cut operations nearly in half, forcing hundreds of employee layoffs . . . and [would have] made our company uncompetitive,” said John Campbell, president of Pacific Lumber.

Campbell said that proposed environmental regulations designed to protect the habitat of endangered fish and birds would have forced the company to drop its annual timber harvests to an untenable level--from 210-million board feet a year to 136-million board feet.

Campbell cited two conditions as deal breakers: a ban on logging within 30 feet of seasonal streams and a requirement that those and other logging restrictions be in effect for 50 years.

Gov. Gray Davis, in a statement released Friday, said: “It is unfortunate that the company turned its back on an agreement that would have brought an end to 10 years of protest, litigation, heartache and economic uncertainty.”

State Resources Secretary Mary Nichols said Davis has ordered a doubling of inspection and enforcement activities as they relate to logging in the Headwaters region.

The collapse of the Headwaters plan raises the prospect of a renewed siege in the woods, one that has brought turmoil to tiny northern coastal communities, led to thousands of arrests and cost the life of a protester killed last fall by a tree that was being cut down while he sought to stop logging.

Still, there remains the faintest hope that an agreement can be salvaged before the Monday deadline, when federal funds earmarked for the Headwaters will no longer be available.

All sides said Friday they do not intend to alter their positions.

The 2-year-old Headwaters talks are famous for going to the wire, however, and neither Campbell nor other participants in the talks would rule out the possibility of further discussions.

“As you know, the funding is still available. I am not aware of any negotiations going on, but reasonable people can talk from time to time,” Campbell said.

Davis criticized Pacific Lumber and its parent company, Maxxam Inc. of Houston, for rejecting the terms.

“Despite an offer of nearly half a billion dollars, the company was unwilling to accept reasonable limits proposed by the federal and state governments on its ability to log ancient redwoods,” Davis said.

As its share of the agreement, the state was prepared to pay $230 million to help purchase three ancient redwood groves.

“I am deeply disappointed that an environmentally sound agreement to preserve an incredible natural resource and help retain thousands of jobs has been rejected by the company,” said Sen. Dianne Feinstein (D-Calif.), who played a critical role in holding the talks together over the past two years.

“I believe that this transaction would have been in the best interests of both Pacific Lumber and the American public,” said Interior Secretary Bruce Babbitt.

The Clinton administration included the pending Headwaters deal as one of its major accomplishments during the 1996 presidential campaign.

Sources within the administration Friday blamed the failure on a decision by Maxxam to restructure corporate debt in such a way that excessive logging would be required to pay off $867 million in bonds.

“They boxed themselves in financially, assuming a level of timber harvest that they had no right to assume,” said one administration spokesman.

Added another: “We are going to begin very tough enforcement of the Endangered Species Act on Pacific Lumber land. If they think they can walk away from the act by walking away from this deal, they’re wrong.”

The struggle over the fog-draped 200,000-acre forest in Humboldt County dates back to 1986, when Maxxam took over Pacific Lumber Co. in a deal that involved junk bond wizard Michael Milken. Then Maxxam president, Charles Hurwitz, announced that the company would triple the rate of trees being cut down.

That set off a storm of protest and litigation. State and federal officials, under constant legal pressure from environmental groups, ultimately imposed regulations that caused Pacific Lumber to file “takings” suits, accusing the government of preventing the company from making a profit on its own land.

It was the prospect of that litigation, which challenged the legality of the Endangered Species Act, that prompted state and federal officials to enter into the negotiations that fell apart Friday.

Campbell was noncommittal when questioned about the company’s plans to reinstate the takings suits. He was also somewhat vague about Pacific Lumber’s logging plans.

He said that there was no intention to start logging immediately in the places that government officials had hoped to preserve through the purchase agreement. But he would not rule out cutting down those trees in the future.

“We will be looking at all our options on Monday,” he said.

By rejecting the agreement, Pacific Lumber could find itself in an even more hostile regulatory environment, presided over by a governor who said during his campaign last year that he was opposed to cutting down old growth trees.

Even under a friendlier Republican administration, Pacific Lumber twice had its license to cut trees temporarily suspended because of numerous violations of the Forest Practices Act.

State officials lifted the most recent suspension Friday, Campbell said, before Pacific Lumber voted down the agreement.

Times staff writer Dan Morain contributed to this story.