Maxxam Extorts More Logging Plans from California Government
by Karen Pickett

Extortion, threats to public officials, spittin' in the eye of Mother Nature--it's all in a day's work for Maxxam.

Pacific Lumber (PL) is once again holding ancient redwoods hostage and threatening dire consequences for local communities and for protected ancient trees if it doesn't get what it wants. On top of that, it is delivering fairly unveiled threats to government officials.

We've seen this before. During Headwaters Deal negotiations in 1998-1999, PL's extortion efforts were for money (half a billion taxpayer dollars) and concessions on its Habitat Conservation Plan (HCP). This time, it is demanding the suspension of regulatory limits on its logging. Maxxam Chief Executive Officer Charles Hurwitz himself met in private with top aides of California "Governator" Arnold Schwarzenegger in January to issue PL's threats and demands. Hurwitz said that unless PL gets the green light on logging in flood-prone watersheds, where its previous logging has wreaked havoc for residents and endangered fish habitat, then the company would go belly up.

Why is bankruptcy a threat to the public trust and not just to the company's assets? Hurwitz maintains that bankruptcy would invalidate the terms of the 1999 Headwaters Deal, including stream protections and 50-year set-asides for the last substantial chunks of virgin old-growth redwoods on PL property. But that just isn't so. Negotiations for the Headwaters Deal were brutal, partly because some people were ensuring that it would be a long-term agreement.

PL has tried to squirm out of HCP restrictions on such things as logging too close to watercourses before. Last spring, it tried to "loosen" restrictions on steep-slope logging, tree felling close to streams and cutting in wet weather--even though it was already grossly violating 227 such provisions.

The company says that it wants to preserve jobs (PL employs about 820 people county-wide). But PL has laid off many of its mill workers (38 at the Fortuna mill in January) and now contracts out most of its logging so as not to be responsible for benefits and pensions. PL's new mill technology allows the company to increase production with fewer workers.

Which brings us to a burning question: If PL thought it was on the brink of bankruptcy, then why did it just invest millions in revamping its flagship mill to a high-tech operation, calling it "the foundation for the growing PL Company?" Is it because this new mill will take smaller trees (remember Louisiana Pacific in Mendocino County in the 1990s?) and will use fewer workers for greater production? Did PL just assume that its arm-twisting in Sacramento would work?

Let's be real. In the 19 years since the takeover of PL by Maxxam, the company has raked in huge profits by logging valuable, old-growth redwood, selling off PL assets and of course reaping the benefits of the Headwaters Deal, sending $100 million a year in profits to Houston. Maxxam could have paid off its junk bond debt, but instead it has kept PL fully in debt and on the verge of bankruptcy. Hurwitz could have re-instituted sustainable logging (like the pre-Maxxam PL) and ensured saw timber and jobs in perpetuity.

All told, Maxxam has made $3.6 billion off of PL in the last 20 years. It made $480 million from the Headwaters deal, $325 million by selling off the cutting and welding division, $60 million from gutting the employee pension fund, $250 million from the 1998 bond sale and $37 million in real estate, in addition to the $2.5 billion in profits that have been made off of PL's timber. Yet it still owes $760 million of the $870 million debt incurred in the takeover 20 years ago, and now it's crying bankruptcy.

PL's greedy overcutting has led to predictable results. It is fairly simple math. Contrary to the management style of the "old" PL, by 1999 the harvest had skyrocketed to 10 times PL's historic average and three times its previous maximum. Company officials had to know that down the line, the accelerated rate of harvest would lead to less logging and less employment, meaning mills would have to be shut down and employees laid off.

In 1993, Maxxam refinanced its debt, taking hundreds of millions of dollars out of the company, while returning the debt to its 1985 level. In 1998, Maxxam refinanced again, this time mortgaging all the company's timber-lands, leaving PL with as much debt as ever but without its greatest asset. Then the corporados lobbied the state forestry agency for a high rate of harvest to meet their "outstanding financial obligations."

Fast forward to the present stage, with water agency officials as major characters because of the devastating effect the increased logging has had on streams in Humboldt, and the increased power given the water board by recent legislation. The water board began looking at watersheds a few years ago and said that cumulative logging had caused increased sedimentation and flooding. The flooding can be traced back to when PL was first acquired by Maxxam, but things got much worse around 1996. The infamous Stafford slide, which buried several homes and inspired the Luna treesit, was in 1997.

Around this time, it became clear that it was not just the dreadlocked treesitters who were railing against PL's management style. The logging-caused flooding has damaged people's homes, vehicles, septic systems and wells. The Health Department has told people that any time it floods, they need to put on waders, rubber gloves and masks and scrub their whole house out because of septic contamination. PL was ordered to provide trucked-in drinking water for residents in one watershed because of well contamination. Flooding that used to happen about twice a decade is now happening four or five times a year.

At the end of February, the regional water quality agency's executive officer, Catherine Kuhlman, gave PL the 50 percent solution, allowing PL to clearcut more steep hillsides in the blighted Freshwater and Elk River watersheds. The decision flies in the face of independent scientific data, which shows that logging by PL is causing permanent damage to the two Northern California areas that the Clean Water Act lists as sediment-impaired.

Then on March 16, the board of the regional water agency caved to intense political pressure and overruled its own staff by approving even more logging--75 percent of what PL was demanding in the impaired watersheds.

"They didn't split the baby. They mutilated the baby," said Richard Geinger, a Humboldt County restoration activist, at the packed hearing. The company could gross an additional $20 million in revenue. On April 6, the first good news in this saga arrived, when the state water board issued a stay on logging in two watersheds in response to an appeal of the regional board's action. Naturally, PL is challenging the stay, so the decision will go to a hearing before the full state board.

At March's meeting, the regional water quality board chairwoman, Beverly Wasson, angrily chastised PL executives for threatening Kuhlman. Kuhlman said that she was in a meeting with two PL representatives and her attorney when she was told, "If we didn't give them the harvest plans they wanted, I would have no future, no career."

Meanwhile, we've got treesitters, we've got lawsuits, we've got legislation. Got bankruptcy? Stay tuned.

Karen Pickett has been an Earth First! devotee since her bio-centric epiphany in the early '80s. She has been on the tail and trail of Maxxam since it invaded California in the mid-'80s.

© Earth First! Journal Beltane 2005