Plan to Log Redwoods Hits a Buzz Saw of Opposition

FORTUNA, Calif. —  Towering redwoods, stately Douglas fir trees and six-foot ferns make the Headwaters Forest seem as far as one can get from bare-knuckles Sacramento politics and bottom-line Wall Street economics.

But the 3,000-acre forest--the largest privately owned redwood forest left on Earth--has become the center of a bitter battle as the Pacific Lumber Co. pursues state approval to log the ancient redwoods, and environmentalists try to save them.

Critics of the logging proposal--which the state is scheduled to rule on by early next month--say it would sacrifice valuable wildlife to pay off hundreds of millions of dollars in high-interest “junk bonds” used by a Los Angeles company to seize Pacific Lumber in a 1985 hostile takeover. That takeover figures prominently in the federal insider-trading case against Michael Milken, the Los Angeles-based former junk bond chief for the investment banking firm of Drexel Burnham Lambert.

Those opposing the logging plans include not only local and national environmental groups--such as the Sierra Club, Wilderness Society and Natural Resources Defense Council--but a legion of politicians, including 43 members of Congress and several state legislators.

The battle over the Headwaters Forest--and forest management in general--has turned so bitter that timber and preservation groups, frustrated by the Legislature’s refusal to deal with the problem, are now working to qualify four different statewide initiatives for the November ballot.

Each initiative attempts to reconcile property rights and society’s need for timber with environmental concerns. Two of them--including one backed by Atty. Gen. John K. Van de Kamp and Assemblyman Tom Hayden (D-Santa Monica)--seek to sell bonds to buy forests for more parks. Another would plant more trees, and a fourth would allow the state to lend money to Pacific Lumber employees who want to buy out their company, the largest private owner of redwoods.

John Campbell, president of Palco, as the company calls itself, has said he does not think his heavily indebted firm will survive without approval of the logging plans for the Headwaters Forest, which the company said may hold as much as $750 million in timber.

“That land--it is zoned for timber production,” he said. “I can’t drive to New York and say I want Trump Tower because I like it. . . . So why can people drive out in the forest and say, ‘I like this. I want it?’ ”

To him, state regulators must choose between a few thousand of California’s tallest trees or its biggest home-owned timber company, which employs 1,300 people.

But critics contend that Palco’s logging plans will result in many of the predicted layoffs anyway when the trees the company wants to cut are gone in a few years--at which point the state will have neither the jobs nor the trees.

“People of all ages are touched and awed by these redwoods,” said Charles Powell, a Fortuna business owner who actively works on forest issues. “They are a national treasure. In my opinion, we can’t save enough of them.”

The battle over the Headwaters Forest, so named because it is part of the headwaters of the Elk River and Salmon Creek, began as a regional debate over state-approved timber harvest practices. The forest is located about 10 miles southeast of Eureka, Calif.

Environmentalists assert that current state timber law unwisely allows the widespread harvest of “old-growth” trees--trees hundreds or even thousands of years old that provide uniquely valuable habitat to rare and endangered wildlife, recent scientific research shows.

Some preservationists fear that the industry is felling the ancient redwoods too quickly--22% faster than they can grow on the most productive lands, according to one state report.

The controversy ballooned into a statewide issue when Palco filed two harvest plans for a total of 564 acres in the heart of the Headwaters Forest. The plan to “selectively harvest” the area--that is, to take the largest trees, which have both the greatest commercial and ecological value--was immediately criticized as an attempt to gut the ecological value of the forest before the state had a chance to buy and preserve it.

If its plans are denied, Palco could appeal to the state Board of Forestry, a policy-making body appointed by Gov. George Deukmejian that often is sympathetic to loggers.

If the plans are approved, preservation groups have suggested that they might sue, if only to delay the logging long enough to put one or more of the tree-saving ballot measures before the voters.

Losing even part of the 3,000-acre Headwaters Forest is unthinkable to some activists, even as part of a compromise.

“Cutting down the old growth that is left is a crime,” said Kathy Bailey, a director of Forests Forever, a Ukiah-based coalition that is sponsoring one of the ballot measures. “It’s like the old practice of killing whales for dog food. These plants are too valuable to lose.”

Palco spokesman David Galitz said such rhapsodizing is misleading. He said “the beautiful redwoods we all think of” already are saved in parks, and those in the Headwaters Forest are relatively modest in comparison.

However, the company declined to open the contested area to public view. He said limited tours of the steep, rugged, remote valley may be conducted in the spring, after the rainy season.

Rep. Pete Stark (D-Oakland) has introduced a bill in Congress that also may delay logging in the Headwaters Forest. His bill, if acted upon in time, would add those parts of the Elk River and Salmon Creek in the forest to the federal Wild and Scenic River program, restricting the use of adjoining lands.

State foresters have recommended that Palco’s plans be approved only if first modified to reduce the “significant adverse impact” they would have on wildlife. Many animals, including several rare and endangered species, thrive only in the moss-lined cavities of old trees and the thick blanket of branches and other material found only on the floor of ancient forests.

Some birds, such as the northern spotted owl, already are believed to be on the path to extinction. Others, including a pudgy sea bird called the marbled murrelet, may face extirpation--that is, they could disappear from California while still living in great numbers elsewhere.

Palco’s concern for wildlife was rarely questioned until the Los Angeles-based Maxxam Corp. took over the company in 1985 and swiftly doubled the rate at which it cuts down trees. Harvests jumped from 175.7 million board feet just before the takeover to 326.3 million board feet in 1986, then to 368.9 million board feet in 1988, the latest year for which figures are available.

A board foot is a standard measure of volume containing 144 cubic inches.

As swiftly as the cutting grew, Palco’s reputation shrank. Despite continuing charitable works and innovation in tree-farm management, the company no longer is among the country’s most universally respected logging firms.

Criticism of Palco has been heightened by its decision to gather more and more of its increased harvest using a technique called clear-cutting. With clear-cutting, every tree in a particular stand is cut down and the bare earth is sometimes left to erode to the point where it clogs rivers and kills fish.

The company’s reputation was hurt further when its takeover was tied to the Wall Street insider-trading scandal. In its civil and criminal court filings against Milken, who became internationally known for his junk-bond financial deals, the Securities and Exchange Commission claims that Palco stock prices were illegally manipulated by him and convicted inside trader Ivan Boesky.

According to SEC complaints, Maxxam sought Drexel Burnham’s help in selling junk bonds to raise money to buy Palco. Drexel Burnham agreed, and assigned Milken to the case. On behalf of his company, Milken then allegedly began buying and selling hundreds of thousands of shares of Palco stock, apparently to take advantage of the stock price rise that occurred when Maxxam’s takeover was revealed. Milken allegedly continued to acquire Palco stock, feeding an increase in the stock’s price while Palco fought against Maxxam’s takeover.

According to the charges against Milken, the buying and selling of stock before and during Maxxam’s attempted takeover would be fraudulent, since Milken would enjoy a big profit by using confidential information from his client to raise the price of stock the client was planning to buy. So, the SEC charges, Milken attempted to hide the purchases of Palco shares by conspiring with Boesky to buy the stock under Boesky’s name--a violation of SEC regulations.

If the SEC’s allegations are true, the fraudulently inflated stock prices--and needlessly greater debt that resulted--also would have increased pressure on Maxxam to cut down more trees even faster to pay off the high-interest junk bonds it used to acquire Palco.

Former Palco stockholders have filed lawsuits in federal court in Los Angeles and state court in Eureka, seeking to overturn Maxxam’s takeover. The two groups claim in their suits--one for $2.25 billion, the other for $18 million--that they were cheated because of the stock manipulations alleged by the federal government.

Such arguments seem far indeed from the forests affected by them, and the debate over old-growth logging in the Pacific Northwest--the home of North America’s rain forests--is unlikely to end when these legal matters are finally resolved.

Cecelia Lanman of the Environmental Protection Information Center, a small Redway, Calif.-based group active in forest issues, said more than 95% of California’s original coast redwoods have been harvested in the last century--after taking as long as 1,200 years to grow.

New redwoods have been planted or have sprouted from the stumps or seeds of those harvested, but scientists now think that these “second-growth” forests are unable to support the same type or variety of wildlife as the original old growth.

Loggers resist the reverence for old growth because the ancient trees, with prettier grain patterns and fewer knots, are more valuable than second-growth. They also argue that saving old growth removes timberland from production when the demand for wood products is at an all-time high and growing.

Indeed, the volume of timber harvested in California in 1988--5.67 billion board feet--was the third-highest in state history, despite logger complaints that contentious environmentalists and overcautious bureaucrats were crippling their operations.

BACKGROUND

A new scientific appreciation of virgin, or “old-growth,” forests--their beauty, hospitality to rare animals and irreplaceable genetic makeup--has fueled a campaign to restrict logging. About 76,000 acres of California’s old-growth redwoods are saved in parks, while 16,000 acres are privately owned and may be cut down. Pacific Lumber Co. owns 12,000 acres, of which Headwaters Forest is the largest single piece.