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Pacific Lumber Co. files for bankruptcy

The timber giant on the North Coast says environmental limits have kept it from making a profit. A state official denies the claim.

January 20, 2007|Tim Reiterman | Times Staff Writer

SAN FRANCISCO — Pacific Lumber Co., a timber giant on California's North Coast for more than 140 years, has filed for bankruptcy, contending that environmental restrictions imposed by the state have made it impossible to log enough to make a profit.

After years of threatening bankruptcy, Pacific announced Friday that the company and its subsidiaries had filed for Chapter 11 protection a day earlier in U.S. District Court in Texas.

The companies seeking to reorganize are Pacific, Scotia Pacific Co., Britt Lumber Co. and Scotia Development, which harvest, grow, mill and sell redwood and Douglas fir. They have more than 500 employees.

A spokeswoman said Pacific did not have the money to make a $27-million interest payment due Friday. Its parent, Maxxam Inc., recently reported long-term debt of more than $800 million.

Pacific said it was facing the "liquidity crisis" because excessive environmental requirements were imposing high costs while restricting the amount of timber the company could cut on its land in Humboldt County.

Pacific contends that the state has violated the historic Headwaters Agreement of 1996 -- a $480-million deal under which the state and federal governments acquired 7,500 acres from Pacific, creating the Headwaters Preserve of ancient redwoods. The company agreed to limit logging on its remaining 200,000 acres.

The bankruptcy filing comes one month after Pacific sued the state, alleging that it breached the Headwaters accord, thus preventing the company from remaining economically viable without restructuring.

"The government restrictions above and beyond those agreed to in Headwaters made it impossible for the company to generate the kind of income it needed," said Edgar Washburn, a longtime attorney for Pacific, who filed the lawsuit.

Pacific has clashed repeatedly with environmentalists and the North Coast Regional Water Board, contending that the agency's environmental restrictions were putting too much land off-limits to logging.

Bill Rukeyser, state Water Resources Control Board spokesman, denied that environmental enforcement has brought the company to bankruptcy. "There are plenty of well-run companies in California in a variety of fields that are making a profit and are complying with regulations that protect water quality," he said.

Pacific, which has its own mill town of Scotia, was purchased in 1986 by Houston-based Maxxam, headed by financier Charles Hurwitz.

Officials said they hoped the Headwaters deal would end years of controversy and protests by environmentalists who contended that excessive cutting had rapidly depleted redwood forests, harmed wildlife habitat and filled streams with silt.

The company agreed in 1999 to a plan for conserving the habitat of 17 species on its remaining land.

U.S. Sen. Dianne Feinstein (D-Calif.) issued a statement Friday saying, "I believe that Pacific Lumber is required to meet the obligations of the ... plan whether or not they are in bankruptcy and to live up to the agreement they signed eight years ago."

Spokeswoman Andrea Arnot said the company has been following the habitat protection agreement and mitigating the environmental effects of its logging.

A longtime Pacific critic, Mark Lovelace of the Humboldt Watershed Council, said, "While sale and conversion of land is a concern, the highest and best use of this company's land ... remains timber production."

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tim.reiterman@latimes.com

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