From the Publisher

June 16, 2005

Line in the sand?

by JUDY HODGSON

Long-time Journal readers may have recognized the byline of Tom Abate on two lengthy articles regarding Pacific Lumber Co. in Sunday's San Francisco Chronicle.

Tom and his wife, Mia Ousley, actually founded the North Coast Journal in January 1990. They published just six monthly editions (single subject issues in a quarterfold format). Six months was enough. Tom was thoroughly bitten by the newspapering bug and decided to go to graduate school in journalism, which he did after selling the paper to us. (We immediately changed the format to a tabloid and launched many of the sections and features you see today.)

Tom has been a rising star since grad school. After a postgraduate fellowship overseas, he joined the staff of the San Francisco Examiner and later moved over to the Chronicle.

In Sunday's paper, Tom gave a recap of Palco's controversial history since ownership changed hands in 1986, preparing readers for Thursday's state Water Resources Control Board hearing in Sacramento. He calls that hearing "a pivotal point in the nearly 20 years of disputes that have pitted loggers against environmentalists, profits against wildlife protection -- even neighbor against neighbor." (Read the article on-line.)

The Journal has covered the story developments over the years, several times on the cover. Following the 1986 buyout by Maxxam Corp. of Houston, owned by financier Charles Hurwitz, the timber harvests were dramatically increased. The income was used partially to pay interest -- but very little principal -- on the $750 million debt incurred in the buyout. Despite refinancing twice in the 1990s, the debt in May 2005 remained at $692 million.

In 1999 Maxxam sold 10,000 acres of old growth known as the Headwaters Forest to the state and federal government -- a $480 million deal brokered by Sen. Dianne Feinstein. As part of the deal, Palco officials agreed to a new habitat conservation plan for its remaining 220,000 acres. They thought they'd secured the right to harvest 178 million board feet a year. But about the same time, neighbors began pressuring the regional water board to slow or curtail Palco's logging and they have had some success in two critical watersheds, Elk River and Freshwater Creek.

Because the company has not been able to harvest at anticipated levels and because of the heavy debt load, Palco is in financial trouble. Not Palco, actually, but Scopac. One financial source told me Palco, which owns the mill and other property, is actually in pretty good shape. Scopac, a separate company created by Maxxam, actually owns the timberlands and the huge debt load secured by bonds backed by the timber. And Scopac is in trouble.

Now Palco officials are pleading poverty before the state Water Board Thursday hoping to get 100 percent of Scopac's timber harvest plans released from the clutches of the regional water board. (The staff of the North Coast Regional Water Quality Control Board had approved 50 percent of the harvest plans Palco is seeking. Then the regional board OK'd 75 percent on a controversial 5-3 vote, an action that was stayed by one member of the state board until it could be heard by the full panel.)

Some say the state water board could back the original staff decision and draw a line in the sand at 50 percent, an action that may nudge Scopac into bankruptcy.

Also on-line at www.sfgate.com is Tom's story on Charles Hurwitz. He reports that a decision is expected soon on Hurwitz' lawsuit against federal regulators who unsuccessfully tried to prosecute him for the failure of a Texas savings and loan. The article warns that Hurwitz may in fact prevail.

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Clarification: In last week's column, it was reported that businessman Harvey Harper contributed $14,000 to the effort to defeat Measure L in last fall's election. That figures represents all political contributions by Harper last year, including $8,000 to fight Measure L, according to a major donor report on file with the county. Of the $8,000, Harper contributed only $1,600 directly to the Taxpayers League and paid other No on L advertising costs directly. According to a report by the Taxpayers League, its members paid $22,800 to defeat Measure L, a proposed sales tax increase.

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