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Drying Up 

Is the Klamath Settlement Agreement dying? Not yet, but the proposal to end years of one of the West's most vitriolic water wars isn't looking too healthy right now. For the last couple of years, fishermen and environmentalists and Indians and farmers sat around a table, trying to reach an agreement that would share Klamath water, and to improve the overall health of the river. They wanted to avoid the water shutdown of 2001, in which upstream farmers were deprived of the ability to irrigate their crops in order to save fish. And they wanted to avoid the fish kill of 2002, in which as many as 70,000 salmon died in the river in order to save the crops.

Given all the vitriol that preceded the settlement talks, it is remarkable that two of the major antagonists in the battle — the farmers and (most of) the Native Americans — were able to find common ground. The settlement they came to would institute an on-the-ground management team that would control river flows at any given moment, within certain bounds set up by the agreement. It seeks to account for nearly all of the species and interest groups that use the river — not only the coho and chinook salmon and the people who depend on them, but the upstream sturgeon, suckerfish and farmers as well. The agreement is supposed to go to Congress with the support of all the interest groups, who will be vigorously lobbying to make its provisions law.

Now, though, there are two hold-ups. For one, the agreement hinges on another agreement. The groups involved are petitioning investor Warren Buffett, the world's richest man, to agree to remove the four hydropower dams his PacifiCorp company owns on the Klamath. PacifiCorp is under a court order to provide for fish passage past the dams, and studies have shown that it would be cheaper in the long run to remove them altogether and return much of the Klamath to the wild. But PacifiCorp is nowhere to be seen. The settlement group has been waiting two months for a promised PacificCorp status report on the dams, and many are giving up hope that it will ever arrive.

Just as troubling, parts of the coalition that sat around the table, hammering out that agreement, are now crumbling. Unlike the Karuk, the Yurok and the upstream Klamath tribes, the Hoopa Valley Tribe has refused to sign on, concerned that the agreement does not offer enough guaranteed protection for salmon. Two Oregonian environmental groups departed company from the settlement coalition last year, saying that the Bush administration had hijacked the process and guaranteed farmers too much.

Now, the local Northcoast Environmental Center has dropped out, and with the stakes this high that's led to some immense frustration. "I just felt like the NEC has shot from the hip, and they became critical of the agreement before they did their homework," said Karuk Tribe spokesperson Craig Tucker last week.

After the agreement was published, the NEC hired two scientists to review it. The conclusion they came to was that it contained insufficient protections for salmon runs. After the group received the scientists' report, they pulled out of the agreement. But that seemed to fly in the face of the science that had gone into drafting the report, and earlier this month the parties to the agreement held a "science summit" to address the NEC scientists' concerns. One of the two scientists recanted, especially after Dr. Thomas Hardy, widely acknowledged as the most knowledgeable person on the Klamath system, endorsed the settlement. The other of the NEC's scientist had not yet changed his view, and the NEC is holding out for his follow-up report before reconsidering its position.

There's a lot of hard feelings right now. NEC Executive Director Greg King said last week that the stakes are too high not to be absolutely certain. "We can't have the fish on the brink of extinction year after year," he said. He said that his organization, like Hoopa Valley, would like to see guaranteed amounts of water for salmon, and also an end to farming in wildlife refuges in the upper basin.

But Tucker — while insisting that he still respects the NEC — said that the group had plenty of opportunities to bring any concerns to the table while the agreement was being hashed out, and failed to do so. Now time has run out, and the stakes on the river are too high for quibbling.

"I wouldn't say it's not their place to bring up a concern," Tucker said. "But, shit, they had two years."

And the news from Corpus Christi, Texas, is not that much better. A ruling in the massive Pacific Lumber bankruptcy case, a year and a half in the making, could be handed down at any moment. The field has been winnowed, and there are only a couple of possible outcomes now. A few weeks ago, we would have said that the faction led by Mendocino Redwood Company, a greenish outfit to our south, would be the sure winner — it has the support of nearly everyone here on the ground, as well as mighty politicos in Sacramento and Washington. It has a complete solution for the company. The judge overseeing the case, Richard S. Schmidt, indicated that he believed Mendo Redwoods would be the best option for everyone. The timber lands would be sustainably managed, the mill would stay operational, the town of Scotia would be privatized, the company pensioners would be taken care of, and it would all stay under one roof.

But now things aren't looking so ducky. The other faction left in the game — the bondholders, who together own $730 million worth of Pacific Lumber debt backed by Humboldt County acreage — are holding on fast, and people in the know are fearing that it is they who have the upper hand. Now led by Texas-based poker star/banker/billionaire Andy Beal, the noteholders have been making the case that the Mendo Redwoods plan is illegal and impossible because it doesn't give them enough cash. Bankruptcy law states that if secured creditors don't get their security — in this case, the Pacific Lumber timber lands — then they must at least be paid what that security is presently worth. What is it worth? That's a very tricky calculation, and it's now up to Schmidt to make the call. Mendo Redwoods' figure is significantly lower than the noteholders. Beal himself has made an offer for the land that exceeds Mendo Redwoods' proposed payout by several tens of millions.

Also, the noteholders' plans gained a bit of rhetorical weight when it was announced that Red Emmerson, the 78-year-old self-made billionaire out of Redding who helms the Sierra Pacific timber company, said that he would put money down to acquire the Pacific Lumber mill in Scotia. Previously, the noteholders' plans dealt only with the timber lands; they propose to sell them to the highest bidder. There was no provision made for the future of the company's other assets, such as the mill or the town of Scotia itself. With a mill operator waiting in the wings, at least one psychological barrier to the noteholders' plan has been removed.

What happens next? Either Schmidt sides with the noteholders or with Mendo Redwoods. But even then, it's not so simple. If he sides with the noteholders, there'll be an auction. The Texas businessman and the timber legend would certainly seem to have the inside track, but other parties — such as the do-gooding coalition helmed by the Nature Conservancy, which would preserve much of the most ecologically valuable land and keep the rest as a working "community forest" — might conceivably have some kind of play. They'd be betting against the big boys, though. If Schmidt sides with Mendo Redwoods, then there will almost certainly be an instant appeal, which could drag on for months or years, leaving the company in its present state of limbo.

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Hank Sims

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