Pacific Lumber Co. Faces Financial Crisis

The Pacific Lumber Company in Northern California is on the brink of bankruptcy. The company blames its financial woes on environmental regulations. But some environmentalists say if Pacific Lumber shuts down, local protections may be in jeopardy. Jason Margolis of member station KQED reports on the company's financial woes and the effect on the community should it collapse.

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ALEX CHADWICK, host:

This is DAY to DAY from NPR News. I'm Alex Chadwick.

MADELEINE BRAND, host:

And I'm Madeleine Brand. On the rural coast of northern California, a company called Pacific Lumber is on the verge of bankruptcy. A lot of businesses go under, but this one may take the town it's located in with it. From member station KQED, Jason Margolis reports.

Mr. JASON MARGOLIS (Reporter, KQED): Pacific Lumber is located in the tiny time of Scotia, one of the nation's last true company towns. Pacific Lumber owns the homes, the movie theater and the school.

(Soundbite of whistle)

At noon, the town whistle still blows, telling the workers it's time for lunch. At the deli, Mel Birdy(ph), who runs the meat counter and sits on a nearby city council, says just a few years ago, he'd have a hundred customers for lunch. Now, he's lucky to get 20.

Mr. MEL BIRDY (Resident, Scotia): It's just so frustrating, being here all my life and seeing so many people lose their jobs. You know, when they come in the store and say goodbye to you, you know, there's tears in their eyes.

MARGOLIS: In the past five years, Pacific Lumber has cut its workforce in half, down to 600 people. Ask Birdy who's to blame, and he doesn't hesitate with his answer.

BIRDY: The environmentalists, they don't care. They just don't care.

MARGOLIS: Birdy is referring to environmental organizations who have battled Pacific Lumber over the past two decades in courts and through acts of civil disobedience. But Daryl Cherney, a local environmentalist with Earth First points to a different villain.

Mr. DARYL Cherney (Environmentalist, Earth First): Charles Herowitz, he's an out-of-towner. He's getting rid of people's jobs. He's ruined the local economy.

MARGOLIS: In 1985, Texas financier Charles Herowitz took over the Pacific Lumber Company, financing the deal with high-yield junk bonds. To many in the environmental movement, Herowitz is enemy number one, the Darth Vader of the redwoods.

Mr. Cherney: And in some ways I think he's a very sad character, somebody whose ego depends on the coming down of giant trees and the taking over of other people's lives.

MARGOLIS: For decades, the family run Pacific Lumber Company had cautiously managed their forest, and by the mid-80s, it had the largest supply of virgin redwoods in private hands remaining in the world. These trees represented a lot of potential profit. Pacific Lumber's new ownership doubled the rate of logging. Tom Herman managed Pacific Lumber's forest through much of the 1990s. He says the new owners took a sluggish company and did what every other California timber company had already done decades before.

Mr. TOM HERMAN (Former Employee, Pacific Lumber Company): You know, we were a corporation, and the corporation was set up to grow and harvest trees to make money. So I'm not ashamed to say, "Yeah, that's our motivation."

MARGOLIS: But environmentalists say clear-cutting large parcels of trees destroyed the delicate forest ecosystem. Mark Harris is an environmental lawyer who moved to Humboldt County in the late 80s.

(Soundbite of airplane engine)

MARGOLIS: He starts the engine for his Cessna propeller plane and takes me on a guided tour over Pacific Lumber's 211,000 acres, shouting over the roar of the engine.

Mr. MARK HARRIS (Environmental Lawyer): What I was seeing 1988, 1989 is this entire ridge were just giant swath of forest, an unbroken chain of large bark.

MARGOLIS: Harris says the company often violated California timber laws and the Endangered Species Act. In the late 90s, the California Department of Forestry briefly the company's logging license. As we fly over the landscape, there are vast bald patches of dirt and hill slopes packed with shrubbery.

HARRIS: Directly in front of us there may be some greenery, but on closer inspection, it's just a lot brush, baby trees and not much else.

MARGOLIS: In 1999, the company signed the well-publicized and controversial Headwaters agreement. This was supposed to stop all these problems. The government gave the company roughly 480 million dollars for a small grove of ancient redwoods. Pacific Lumber CEO Robert Manne says that this arrangement was supposed to streamline the approval process for logging trees.

Mr. ROBERT MANNE (CEO, Pacific Lumber): When we put the series of agreements together, it balanced the environmental protection with the social impacts and the economics of our company, and we were assured predictability and certainty going forward from that date. And that we did not get.

MARGOLIS: In fact, many of the company's logging plans have been held up by regulatory agencies and environmental lawsuits arguing that Pacific Lumber continues to hurt the environment. The company says this has pushed them to the brink of bankruptcy, a bankruptcy that will mean more job losses for this already depressed community. It could also raise a very big question for those who have struggled to save the redwoods. If ownership of the forest changes hands, it may place the hard-fought environmental protections in the Headwaters agreement in jeopardy. For NPR News, I'm Jason Margolis.

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