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HELENA — As conservationists and county officials await the outcome of a federal investigation into private negotiations between the Bush administration and Plum Creek Timber Co., the Great Falls Tribune has learned new details about road access agreements between the state's largest landowner and the Department of Natural Resources and Conservation.

As Plum Creek repositions itself from a timber company to a real estate corporation, it is working with the state to expand its logging road easements so that it can bring improved access and underground utilities to land that it can later subdivide into rural communities.

Some environmental watchdogs argue that the state is not doing enough to notify the public about the long-term fiscal and environmental implications of the agreements. They say the state and county governments could end up subsidizing services such as fire and police protection to far-off subdivisions at taxpayer expense.

According to DNRC director Mary Sexton, the state is in the midst of a multi-year, three-phase process of updating reciprocal access agreements with Plum Creek.

Phase I, which was completed in April 2007, upgraded Plum Creek's traditional 40-foot right-of-way deeds across state lands to 60-foot right of ways.

The agency is currently in phase II, Sexton said, whereby the state and Plum Creek are adding additional "all-lawful-purposes" rights to easements that were originally granted for natural resources uses such as logging, farming and ranching.

As part of phase III, DNRC officials are in negotiations with the Forest Service over cost-sharing agreements between the state and the Forest Service for the use and maintenance of roads that cross both state and federal lands.

According to Sexton, the changes to the easement came as a result of a new DNRC policy put in place after the 1999 Legislature passed a bill allowing the state to enter into reciprocal access agreements with landowners.

"Together (with Plum Creek) we wanted to make our access agreements more consistent, so it was a mutual effort that began in the late 1990s, although we've had access agreements with them for probably 20 or 30 years," Sexton said.

Sexton said the agreements allow the state to access isolated parcels of state land in exchange for allowing Plum Creek to access its land. In the process, she said, more state land is opened to public access.

Critics say the agreements make it possible for Plum Creek to develop isolated parcels of land, and that the DNRC has not done enough to notify residents or land planners about the negotiations. They contend that the DNRC ignored potential pitfalls of such agreements by not analyzing the likely outcome of widening the roads: more residential subdivisions in the forest at greater expense to taxpayers.

"The change of use isn't just the widening of the road. The change of use is anything goes," said Arlene Montgomery of Friends of the Wild Swan. "The state is not going to analyze the effects of each individual project beyond what happens on their land."

Critics say subdivision in the forest would harm air and water quality and wildlife habitat and dramatically increase wildfire protection costs for state and county governments, and that the state has turned a blind eye to those concerns.

Plum Creek, owns 1.2 million acres in Montana and more than 8 million acres nationwide, making it the largest private landowner in the state and the nation. In 1999 the company reorganized from a timber company to a real estate investment trust, and it is now increasingly relying on property sales to supplement the company's bottom line as timber prices fall. The company is considering selling up to 2 billion acres, though it hasn't disclosed where those lands are located.

In order to sell those lands for development, Plum Creek is seeking all-lawful-purposes rights on Forest Service road easements that were traditionally granted for timber and natural resources use.

Details of those negotiations have not been made public.

News of the negotiations between Plum Creek and the Forest Service first made headlines in April when Missoula County commissioners learned of the talks and demanded that the discussions be made public. Commissioners are concerned that the Forest Service is giving Plum Creek additional access rights that will pave the way for development deep in the woods and thereby greatly increase the burden on county government to maintain roads and protect homes from fire.

After hearing commissioners' concerns, Sen. Jon Tester asked the Government Accountability Office to investigate the matter. That investigation began last week and is still pending.

Sexton said that, unlike the Forest Service negotiations, the state's process of upgrading forest road easements has been an open and public process subject to the state's bedrock environmental law, the Montana Environmental Policy Act. That act requires an environmental review for any action that "may impact the human environment" and provides opportunities for public involvement. Also, the state Land Board — made up of the state's five top elected officials — must sign off on all state easements.

"We followed our process; it's got a two-step public process," Sexton said, noting that public scoping and environmental assessments were done in the late 1990s and early part of the 2000s on all 37 easements that were restated.

Montgomery said that for a program that deals with Plum Creek on hot-button issues like backcountry development, a more significant public process ought to be in place.

"I think people should be aware of it, and I think for the most part they probably are not," Montgomery said. "What newspaper do they notice it in? I've had them put notices in the Lake County Leader, but they don't deliver the Leader in this part of the county. Maybe people who (live near the affected area) are sent letters, but do other people know that this is going on around the state?"

Anne Hedges studies state land issues for the Montana Environmental Information Center, a Helena-based environmental watchdog group. She said the state didn't adequately notify the public that the environmental assessments that originally applied to 40-foot easements were used to upgrade the easements to 60-feet. She said at the time of the proposed upgrade the agency should have conducted a supplemental environmental analysis and notified the public again in 2006 or 2007.

Hedges said, "Clearly something changed, and now they're acting like this is just an administrative matter, that they're just making this consistent with their policies. This is absolutely not an administrative matter."

Sexton said the easements were originally scoped for both 40-foot and 60-foot right-of-ways, though the agency opted to go with 40-foot easements at the time. Sexton said no new environmental assessments were completed in 2006 when the agency was modifying the easement from 40-feet to 60-feet because the original assessments — some more than 10 years old — were still adequate.

Environmentalists contend that the DNRC is ignoring the potential impact that modifying the easements to 60-foot right-of-ways could have on state lands and county governments.

While the original right-of-way deeds allowed Plum Creek to use state-owned forest roads "for timber, land and resource management or utilization" and "for all lawful purposes," they were for 40-foot-wide easements. Historically, those roads were seasonal and used for activities such as logging, farming, ranching and mining.

But the new deeds allow Plum Creek to widen the roads to 60 feet and use them for virtually anything, including "the right to install and maintain utilities within the right-of-way."

That gives Plum Creek the legal authority they need to develop those lands, and the state did not adequately consider that possibility or analyze the potential environmental impact, environmentalists argue.

"There are at least three places in the (environmental assessment) where I think they could have analyzed the impact of subdivisions, and they didn't," said Bethanie Walder, executive director of WildlandsCPR, a Missoula-based environmental group that works on forest road issues.

Walder pointed out that the checklist the agency used to analyze the environmental impact asks questions about the potential effect on air and water quality. It also asks about demands on natural resources and government services, such as fire and police protection.

"They argue that there will be no impacts when there will clearly be impacts to air, water and land if they build subdivisions there," Walder said. "They say the project as proposed will have few if any adverse impacts to wildlife. But again, they know this project will involve subdivisions, which could have significant impacts on wildlife."

Sexton said the agency isn't required to analyze off-site effects under MEPA.

A provision of the 1999 reciprocal access law states that "the department is not required to analyze or consider the potential impacts of activities that may occur on private or federal lands in conjunction with or as a result of granting access."

"We are following what is our requirement under MEPA and we have not been required to scope ... for whatever the private entity or the federal entity may be doing on their property," Sexton said.

But Hedges said that the DNRC has known for years that Plum Creek wanted to upgrade the roads was so that it could legally subdivide its land, and the agency should have taken that into account.

For example, according to the 1999 environmental assessment for the McGregor Lake Reciprocal Access Agreement in Flathead County, the agency stated that the reason for granting the 60-foot right-of-way was "because (Plum Creek) plans to sell their lands that are adjacent to McGregor Lake," and, "if this land were to be developed in any way, county regulations would require a 60-foot-wide right-of-way."

The assessment also says, "Plum Creek has stated their intent to sell all of their lands that front on McGregor Lake," and that, "it is highly probable that the lands they sell would ultimately be subdivided into some type of home site or recreational lots."

Hedges said the agency had an ethical obligation to inform the public and the Land Board that the result of widening the roads would probably mean the development of residential subdivisions.

"Never once did they tell the Land Board why this was important. They just said it was to make it consistent with DNRC policies and goals," Hedges said. "I do not believe this Land Board was properly informed about the impacts of the decision it was making when it made that decision. It was made to sound like it was a clerical error that was being fixed instead of what it really is, which is allowing Plum Creek to open up countless acres to subdivisions."

Residential subdivisions had nothing to do with widening the road, Sexton said, because all of the state's reciprocal access agreements are being standardized to 60-foot widths.

While the exact details of the negotiations between the Forest Service and Plum Creek are unknown, a letter sent by Plum Creek CEO Rick Holley to Tester indicates that the Forest Service easements may contain more restrictive language than the state easements when it comes to wildfire issues.

Holley sent the letter to Tester in April after Tester criticized the company's "closed-door negotiations" with the Forest Service. Holley stated that Plum Creek consulted officials with the Forest Service's Wildland Urban Interface Program and the National Fire Protection Alliance on fire-protection measures. As a result, Holley said, the Forest Service easements impose covenants regarding compliance with firewise procedures. In the letter, Holley insisted that the Forest Service "will have no increased financial obligation ... to provide fire protection."

Observers point out that no such language exists in the new easements granted to Plum Creek by the state. They said that means the costs of protecting new backcountry homes from wildfire could be shifted to state and local governments.

"On the state renegotiations, the state is giving away development rights without analyzing development costs, firefighting costs, and other environmental costs," Walder said. "If there are going to be subdivisions, there will be increased demand for services, especially fire protection. This environmental assessment has not analyzed those costs at all."

But Sexton said the covenants Holley refers to are difficult to enforce.

"If you look at those firewise so-called covenants, they have no enforcement ability, they have no authority, and again, for our legal authority, we are concerned on activities on state land," Sexton said. "Adding those firewise statements were certainly a nice thing to do. They have no authority, have no enforcement. That does come down to local jurisdictions."

Sexton said that, in the end, the state followed through on all of the necessary laws and required public processes when completing these easements.

"We have an EA process; we scoped through the EA process; it goes to the Land Board; it's fully noticed at the Land Board; those meetings are public; the agenda's public; the discussions are public," she said.

Reach Tribune Capitol Bureau Chief John S. Adams at 442-9493, or jadams@greatfallstribune.com

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Pacific Northwest corporate history began with timber, and with the demise of Weyerhaeuser it's a fast-fading cultural heritage.

"Weyerhaeuser cuts take a painful toll," screamed the banner headline this week in The Seattle Times. That splash was accompanied by a large photo of a now-former employee of what used to be a forest products giant loading boxes of personal items into his car after receiving his pink slip.

While nothing can compare to the pain of getting fired from a job — in my years as an executive search consultant, I called it the "Royal Order of the Boot" — there is yet pain in watching the company's current machinations. Like the fellow in the photograph, one of 1,500 in this current go around, I'm also a member of the Weyerhaeuser chapter of the Royal Order.

In 1981, I was called into my boss's office at the company's massive Longview, Wash., manufacturing complex for a little talking-to. It was about my attitude and all the trouble I seemed to keep causing with the unions representing company employees.

"Kid, you're nice, but not here," my boss said. "Frankly, you scare the hell out of us." Harshly put, perhaps, but the labor relations office where I worked wasn't known for compassion. Nor, in my then relative youth, did I particularly care, which was my bad, not the company's. It was then I realized that I wasn't cut out to be a corporate guy.

Since then, it's been onward and upward — well, sideways at least. But that's another story.

This story, and it's a sad one, is about watching one more giant figure of the Pacific Northwest shrink into a shadow of its former self.

Decades before there was a Microsoft or a Starbucks, Boeing and Weyerhaeuser represented the business of Seattle and Washington. When Boeing beat feet to Chicago a few years ago, the big "W" was left as perhaps the only game in metro Puget Sound with deep and multi-generational roots — not just fathers and sons, but grand and great grandfathers who had handed jobs down from one to the other.

Founded in 1900 by German immigrant Friedrich Weyerhaeuser, the company grew from holdings of nearly a million acres of Washington Douglas fir timberlands to become an international player in solid wood production, the pulp and paper industry, real estate, rail and freighter transportation (two company vessels were torpedoed and sunk during World War II), and a myriad of industries.

Nothing beats the romance of the woods, and Weyerhaeuser was a huge part of that. Grainy photos of loggers with two-man crosscut saws standing next to old growth timber can be seen in every museum in town. The colorful and descriptive nomenclature of logging resonates with unique symbolism: Bull of the woods, choker setter, whistlepunk, and a term first coined in Seattle, but soon to be part of the national vocabulary, Skid Row or Skid Road.

Somehow, "techie" or "barista" lack the same cultural or emotional impact. And I suspect that neither wear black woolen long johns that go days or even weeks without a wash.

Trees growing on the land and the products made from them are, as much as anything can be, what the Bible calls in Psalm 24 "the fullness of the earth." For more than 100 years out of that fullness, Weyerhaeuser and kindred forest products companies literally built scores of communities, paid for schools from the proceeds of logging on state-owned land, and created thousands of good paying jobs. They left an indelible cultural stamp on the Pacific Northwest, affecting even those who don't know the difference between a couch (pronounced "cooch") from a dandy on a papermachine, or what it means to work the hoot-owl shift.

Only in a company like Weyerhaeuser could you see executives in $1,000 suits all sitting around a conference table spitting snoose into Styrofoam cups. Old habits born in the woods don't die hard — they don't die at all.

Over the years, Weyerhaeuser was in the fish-farming and grass-seed businesses, manufactured private label baby diapers and adult incontinent products, and became a major national player in real estate, home construction, and residential mortgages. Of these, only its interests in Puget Sound-area residential developer Quadrant remain.

During the late 1980s, throughout the 1990s, and into the new millennium, Weyerhaeuser, like its competitors Georgia-Pacific (once Portland-based, now headquartered in Atlanta) and International Paper, had to make a choice: aggressively grow or be taken over by an aggressively growing company. By choosing the former, Weyerhaeuser embarked upon an acquisition and construction program that was impressive by any standard.

The company acquired familiar names such as Vancouver, B.C.-based MacMillan Bloedel and Portland-based Willamette Industries, two Northwest iconic companies in their own right. It also built new facilities such as a then state-of-the art paper mill in Cedar Rapids, Iowa, that, for a time, operated as a quasi-independent entity called Cedar River Paper.

The Cedar River operation was looked at as a model for the future. Manufacturing packaging products out of recycled paper, it featured a mill design and concept — referred to in the industry as a "mini-mill" — tailor made to a raw material not of trees but trash. The mill's paper machine was precision crafted to turn out exactly the amount of product needed, not an ounce more nor an ounce less. Minimal waste, the least amount of energy necessary to get the job done, and a product that was the product of recycling — the only thing lacking were Birkenstock safety shoes.

How green was that valley?

Small, non-union, and team concept-based, it cherry-picked the industry for the best and brightest technical and operations people, salaried and hourly, it could find.

Now, once-crown jewel Cedar River is just another paper mill, owned not by Weyerhaeuser but by industry behemoth International Paper.

And the properties acquired from MacBlo, Willamette, and others? In large measure, gone, sold off, or shut down, never to be seen again.

Starting a few years ago, Weyerhaeuser began spinning off assets. Always committed to focusing only on businesses in which it could be a major player, it now shifted to getting out of many of those businesses altogether. Its printing and writing-grade paper operations became, in a complex trade, part of Canadian-based Domtar Industries.

And just last week, in perhaps the biggest blow of all, Weyerhaeuser closed on the sale of its packaging business to IP. Some 114 facilities, including paper mills, carton plants, and recycling centers, were sold for $6 billion. Besides Cedar River, included among them was another mill Weyerhaeuser built from scratch decades ago, a large complex in Valliant, Okla. Was that part of the Sonics deal?

It's a little like selling off members of your own family. And that ticket to out here just got voided.

With the I-P sale, of the company's approximately 38,000 world-wide employees, some 14,000 or 37 percent of them are now gone in one fell swoop. This cut was used in large measure to justify the cuts at Weyerhaeuser's Federal Way, Wash., headquarters — the hanging garden of Babylon you see driving southbound on Interstate 5 — and other company locations.

What's left of the company represents more of what old Friedrich Weyerhaeuser founded over a century ago: land and trees.

Wall Street effectively made the decision that it will no longer measure the value of Weyerhaeuser by what it makes but, rather, by what it owns. After all, God's not making any more land, and those trees do take a while to grow.

Still, the fact decisions now are made by MBAs who've never set foot off a carpet and on to the forest duff — not by forestry or paper science and engineering grads or old bulls from the woods or mills, most of whom are missing one or more fingers popped off in papermachine nips or sawmill accidents — is sad.

Of course, it's a business we're talking about, and businesses do need to make money to survive. But Weyerhaeuser is also a part of the culture.

As a Weyerhaeuser alum, that culture means a lot to me. I mark the changes both for what is lost in terms of necessary connections to our roots but also what they mean for today and tomorrow. It's no secret that additional change is in the offing at Weyerhaeuser, so the only question is, what's next to go? I sure hope it's not the name — it took me a long time to learn to spell it correctly.

I still have my Weyerhaeuser hardhat and the battered old briefcase all salaried employees used to receive when they were hired. In the garage, up with the transmission fluid and motor oil, there's an old Folgers' can filled with Mount St. Helens ash dumped on my first-ever brand new car down in Longview during the second eruption of the volcano in 1980. And rolled up somewhere are schematic drawings of Weyerhaeuser's Longview complex, purportedly once the largest manufacturing facility in the U.S. in terms of surface area.

So it's not like I don't have some souvenirs and mementos. But there are those who have nothing, or don't even realize the significance of what seems like the passing of the Weyerhaeuser Co. from the giant it was to the vestige it is now. Too bad — it's their loss too.

Maybe it's not a literal death, but wholesale change like this from what once was to what is now, in John Donne's words, "diminishes me."

Another bit of why this place was special is gone. Bummer!

Scott St. Clair is a freelance writer and activist who plays his bagpipe and looks at the world from his home in Kirkland, Wash. He recently became affiliated with the Evergreen Freedom Foundation as an investigative journalist, which frees him to become a former executive search consultant - even in late middle-age, we get second chances. He can be reached at scottstc@comcast.net.

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Struggling wood-products giant Weyerhaeuser said this morning it will cut 1,500 jobs at its Federal Way headquarters, as it moves toward being a smaller, more focused — and eventually, it hopes, more profitable — company.

The cuts will take place between now and the end of 2009, chief executive Dan Fulton said in a conference call with analysts.

His comments came as Weyerhaeuser reported a $96 million net loss for the second quarter, or 45 cents per share — wider than the Wall Street consensus of 23 cents per share.

About 2,500 people work at Weyerhaeuser's sleek, tree-ringed headquarters off I-5.

The U.S. housing slump has hit the company hard, both in its lumber and other building materials business and in its real-estate development segment. Weyerhaeuser took a $311 million pretax charge in the quarter to write down the value of its homebuilding and land-related charges, on top of a $56 million charge in the first quarter.

However, Fulton indicated that he plans to hold onto both those segments in anticipation of an eventual recovery, though he said one likely won't begin until late 2009 at the earliest.

Instead, Weyerhaeuser has spent the past two years unloading businesses deemed "noncore." Just Monday it closed the $6 billion sale of its containerboard and packaging business to International Paper; after taxes, that sale should generate proceeds of $4 billion to $4.5 billion, much of which will go to pay down Weyerhaeuser's $7 billion-plus in debt.

The company sold off its Australian operations last month, and has put its shipping and rail lines on the market. It also dissolved its Uruguayan joint venture, leading to a one-time after-tax gain of $101 million.

But Fulton characterized those sales, and other moves that might be down the road, as "fine-tuning the portfolio," and indicated that the company's plan now is to get as much out of its current businesses as possible.

He also hinted that the eventual conversion of Weyerhaeuser into a real estate investment trust, while not imminent, was still on the table. He told analysts on the conference call that, with the company smaller and more focused on its land-based businesses, it could choose "the right structure, for the right reasons, at the right time."

One bright spot in today's report was the pulp and liquid packaging board business, which saw higher market prices. Although those were more than offset by higher maintenance expenses and shipping and energy costs, the completion of most of the planned maintenance closures should mean "significantly higher" earnings from that segment going forward.

Weyerhaeuser also disclosed that it had earned $22 million in the first half of the year from leases and royalties on its mineral rights — largely due to oil and natural gas exploration on a tract of land it owns in Louisiana.

Weyerhaeuser shares closed down 60 cents, or 1.1 percent, at $53.96 today.

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Weyerhaeuser under pressure for more change:
Weyerhaeuser faces intensifying pressure to shed more businesses and become a pared-down cash cow.
By Kyung M. Song. Seattle Times, August 3, 2008

In less than two years, Weyerhaeuser has jettisoned under pressure more than $7 billion worth of businesses — vanished revenues that taken together would rank as Washington's 9th largest corporation, just behind Nordstrom.

But Weyerhaeuser's mammoth contraction is hardly over. Wall Street is demanding changes that could turn the Federal Way timber giant from a diversified manufacturer into a pared-down cash cow for investors hunting for more lucrative returns on timber and real-estate assets.

That would mark a radical turnabout for a 108-year-old company that historically has embraced risks about as quickly as a Douglas fir grows. And it would emphatically repudiate Weyerhaeuser's expansion strategy, capped by its 2002 takeover of rival Willamette Industries after a lengthy hostile pursuit.

The clamor for change from big investors could intensify Tuesday, when Weyerhaeuser is expected to report its third straight quarterly loss. The company likely will finish the year without a profit for the first time since 1991.

Already, Chief Executive Dan Fulton has warned that the downsized Weyerhaeuser still has surplus workers and that it will require "action of a magnitude we've never seen before."

Weyerhaeuser's unprecedented retrenchment amid a slumping economy raises the specter of further drastic changes at yet another major employer in the Northwest. Weyerhaeuser is one of the region's oldest and most iconic corporations, a global player with nearly 38,000 employees, including 7,000 in Washington.

The pace of home construction around the nation has fallen by half since 2006, a staggering falloff unseen in generations. That has hit hard both Weyerhaeuser's wood-products business as well as its real-estate operation, which includes Bellevue-based Quadrant Homes, Washington's largest homebuilder.

"I see a shrinking company that is a fragment of itself," said Leonard Guss, a veteran forest-products industry analyst in Woodinville who headed Weyerhaeuser's corporate marketing research in the late 1960s. "They are self-destructing."

Others disagree. Joshua Zaret, a forest- and paper-industry analyst with Longbow Research in New York, said Weyerhaeuser is undergoing a necessary reinvention.

The basic problem, as Zaret sees it, is that Weyerhaeuser's structure has fallen out of favor on Wall Street. Weyerhaeuser is among the disappearing ranks of vertically integrated timber behemoths; it is involved in virtually every step in the life cycle of a tree, from planting the seedlings to owning the railroads over which its products journey to customers.

Weyerhaeuser largely skipped the transformation that swept through the timber industry during the past decade. Competitors such as International Paper and Louisiana-Pacific sold off their land holdings to focus on manufacturing timber products from purchased logs.

Other timberland owners, including Seattle's Plum Creek, converted to real-estate investment trusts (REIT, pronounced "reet"), which do not have to pay corporate taxes and which are favored by pension funds and other investors looking for reliable returns.

"The last timber company of any meaningful size is Weyerhaeuser," Zaret said. "There is more institutional money chasing limited resources. They see timberlands as great assets."

Weyerhaeuser's management has fended off impatient investors for now, precluding a REIT conversion at least until 2010. Shares in the company have been pummeled this year, falling from $78 apiece in December to $55.78 Friday, above its recent $47 low.

Some analysts say only the hope of an eventual conversion has kept the stock from sliding further.

Weyerhaeuser spokesman Frank Mendizabal said a conversion would be a complex undertaking, and it isn't yet clear "how, whether and if" it would be good for the company.

Under federal tax laws, a REIT must generate almost all its income from real-estate-related businesses, including timberlands, and is required to distribute at least 90 percent of annual profits to shareholders. (See related story above.)

Switching from a corporation to a REIT would be a seismic transformation for any company. But for Weyerhaeuser — whose philosophy of long-term outlook has been as rooted as its trees — becoming a REIT would require a profound cultural shift, too.

That prospect dismays Thomas Power, emeritus professor of economics at the University of Montana. Power worries that as a REIT, Weyerhaeuser would face greater pressure to increase logging or otherwise extract quicker payoffs from its vast timberlands.

"Weyerhaeuser was satisfied with making returns over generations. But Wall Street won't put up with it," Power said. "It is one of the last of the old-fashioned holdouts."

In Montana, Plum Creek, the Seattle-based timber REIT, is about to forge ahead with a controversial plan to build a subdivision on a swath of mountain forestland. Plum Creek, the nation's largest private landowner, has identified a quarter of its 8 million acres of U.S. timberlands as more valuable if sold for development, recreation or other uses.

Because REITs must generate cash for investors, they are more likely than traditional timber corporations to sell land that won't produce near-term income, said Joe Taggart, a director with LandVest, a real-estate and timberland-consulting firm based in Boston.

Taggart said that all landowners, regardless of their makeup, face pressure to extract the highest prices out of their holdings. But corporations arguably can withstand it better, Taggart said, especially those with diversified businesses that can buffer them from cash-flow demands.

"If there is value to be tapped, it will be tapped," Taggart said. Still, "Weyerhaeuser can hold on for longer periods."

Even without a REIT conversion, Weyerhaeuser is already changing vastly. By fall, it will have shed at least 24,000 employees in two years by unloading a host of businesses. It spun off its fine-paper division last year, shuttered unproductive mills and agreed to sell its containerboard, packaging and recycling unit for $6 billion to International Paper.

Also up for sale is its four-vessel Westwood Shipping Line and four small railroads used to deliver newsprint, lumber and other Weyerhaeuser products as well as other companies' cargo.

Yet at the same time, Weyerhaeuser is embarking on ventures that would seem to fall decidedly outside the realm of a REIT.

For instance, it agreed to create a joint company with Chevron in February to develop biofuels from nonfood plants. More recently, Weyerhaeuser said it will work with a group of Austrian companies to create a new kind of nonwoven fabric from wood fiber.

It all adds up to uncertainty for Weyerhaeuser's remaining workers, including 2,500 at its Federal Way headquarters. The company has adopted a corporate mantra: "Trees define us." But no one yet seems sure of the exact definition.

Guss, the timber analyst and former Weyerhaeuser employee, is vexed that the implosion in the real-estate market seems to have shaken the company's belief in its core structure.

"Housing cycles are absolutely the norm in the U.S.," he said. "Weyerhaeuser survived each and every one of them."

Guss fears that selling off pieces of Weyerhaeuser is nothing less than selling off a century's worth of heritage.

Weyerhaeuser has always been all about the trees. But that world once stretched far beyond the edges of Weyerhaeuser forests, into businesses from mortgage banks to shipping lines.

Weyerhaeuser was "a company that was a grand example in many ways," he said. "But eventually, they will become nothing but timber sellers."

GROWING, SHRINKING

1999:

Buys MacMillan Bloedel for $2.8 billion in stock, acquiring 6.9 million acres of owned and licensed timber, and 72 facilities.

2000:

Buys TJ International for $874 million in cash.

2001:

Buys 68,000 acres of timber in Uruguay.

2002:

Buys Williamette Industries for $8.1 billion in cash, getting 1.7 million acres of U.S. timberlands and 106 facilities.

During this period Weyerhaeuser also sold more than 829,000 acres of U.S. timberlands and its U.S composite panels business.

2005:

Sells five softwood mills in British Columbia, 3.8 million acres of owned or licensed timberlands in Canada

2006:

Plans spinoff of fine-paper division in $3.3 billion stock deal to combine with Domtar. Includes eight fine-paper mills, 16 paper-converting mills and five other facilities.

Closes five box plants, three plywood facilities and a dozen other manufacturing plants.

2007:

Sells all 16 building-materials distribution centers in Canada, another 10 in U.S. to unidentified buyer; will keep another 40.

Sells stakes in New Zealand JV and New Zealand management company.

2008:

Closes several Canadian mills and sells timber harvesting rights to West Fraser Timber.

Sells 114 containerboard, packaging and recycling operations to International Paper for $6 billion.

Plans to sell Weyerhaeuser Australia and related operations to Carter Holt Harvey.

Plans to sell Westwood Shipping Line and four regional railroads.

During this period Weyerhaeuser also acquired homebuilder Maracay Homes, of Arizona; purchased 78,000 acres and opened a plywood mill in Uruguay; and launched a biofuels joint venture with Chevron.

Source: Weyerhaeuser; Seattle Times

WEYERHAEUSER AT A GLANCE

Worldwide: 37,900, in 13 countries

Washington state: 7,000

Federal Way headquarters: 2,500

Worldwide total includes 14,000 at the containerboard, packaging and recycling business, whose sale will close this fall.

Grows and harvests trees: $2.24 billion in sales (2007)

Manufactures and sells forest products: $13.48 billion

Builds homes and finances real-estate projects: $2.36 billion

Segment totals include $2.27 billion in intra-company sales and discontinued operations.

Source: Company reports

###

Seattle-based Plum Creek Timber restructured itself as a real-estate investment trust in 1999. Since then it has become a giant of the forest.

President and CEO Rick Holley says that growth wouldn't have happened if Plum Creek hadn't become a REIT.

The company now is the country's largest private landowner, with 8 million acres of timberland in 18 states. Since 1999 its revenues and assets have more than tripled. Its stock price has climbed 56 percent since it first announced its planned REIT conversion 10 years ago, far outpacing the major indexes.

Plum Creek's profits have shrunk lately, a consequence of the housing downturn. Still, in a bear market, its share price is up nearly 6 percent so far this year.

No wonder Wall Street is pressuring slip-sliding Weyerhaeuser to follow Plum Creek into REIT-dom.

REITs are companies that own, and usually manage, income-producing real-estate. Congress authorized them in 1960 to open commercial real-estate investing to those without the wherewithal to buy a big property by themselves or invest in a limited partnership.

REITS have restrictions. At least 75 percent of their assets must be in real estate, and that property must produce at least 75 percent of their gross income. They must pay at least 90 percent of their profits to shareholders as dividends.

But REITs can deduct those dividends from corporate taxable income. That means they pay little or no tax, which in turn means more money to reinvest, or return to shareholders. And REITs generally pay sizable dividends, making them attractive to investors.

Timber REITs have another advantage. While the bulk of most other REITs' dividends is taxed as ordinary income, timber REITs' dividends qualify for the lower capital-gains rate.

"The tax implications are pretty big, and pretty appealing," said Daniel Rohr, an analyst at research firm Morningstar who covers Plum Creek and other timber companies.

Most of the 200 or so REITs traded on the major stock exchanges own apartments or shopping malls or office buildings. Timber REITs are rare: There are just three.

Plum Creek was the first. It had been organized as an publicly traded "master limited partnership" (MLP), which, like a REIT, is largely exempt from corporate income taxes. But big, tax-exempt institutional investors couldn't own Plum Creek then; for them, the MLP's distributions would have been taxable income.

In the 1990s, Holley said, Plum Creek concluded that acquiring more timberland was key to the company's growth. To do that it needed to generate more capital. To generate more capital it needed those big institutional investors.

The REIT structure appealed because REIT dividends don't trigger the adverse tax consequences for institutional investors that MLP distributions do. But the concept of a timber REIT was so novel at the time that, before it converted, Plum Creek obtained a ruling from the Internal Revenue Service that timber would qualify as a real-estate asset for REIT purposes.

The REIT conversion helped Plum Creek by focusing Wall Street's attention on the company's millions of acres of trees — "an asset that gets more valuable over the long run even if the entire management team takes a vacation and the economy takes a flier," said Brooks Mendell of Forisk Consulting, a timber-economics firm in Athens, Ga.

Wall Street analysts like timber, he said, but it tends to be undervalued when they review the assets of a vertically integrated timber company, including high-cost, low-margin mills.

"It gets mixed up like a big salad or a big stew," Mendell said. Plum Creek's REIT conversion made the value of its timberlands more transparent.

In 2001 Plum Creek merged with The Timber Co., a Georgia-Pacific spinoff, more than doubling its timberland holdings to 7.8 million acres. Holley calls the transaction "the transforming event in our company's history ... If we hadn't converted to a REIT, we could never have done that merger."

Most of The Timber Co.'s owners were institutional investors. They couldn't have owned units in an MLP.

The Timber Co. merger put Plum Creek in the big leagues, says D.A. Davidson analyst Steve Chercover: "It went from being a pipsqueak that no one paid attention to, to being a component of the S&P 500 that people can't ignore."

Plum Creek paid for the transaction by issuing 113 million shares of new stock to Timber Co. shareholders. It also has borrowed to buy other timberlands; Holley said the company's size and health — both indirect consequences of the REIT conversion — have helped it get that money on more favorable terms.

Plum Creek owns taxable subsidiaries that engage in lines of business off-limits to the REIT itself: cutting trees, selling logs, manufacturing lumber and plywood, and developing some real estate.

But, in keeping with REIT restrictions, those subsidiaries account for less than 20 percent of the parent company's assets. And Plum Creek's overall tax bill is negligible.

Institutional investors now own 65 percent of its shares.

There are some important differences between Weyerhaeuser's situation today and Plum Creek's at the time of its REIT conversion. Weyerhaeuser, structured as a conventional corporation, has no barriers to institutional investors — they own more than 80 percent of the company.

And Weyerhaeuser's mills, real-estate arm and other nontimberland segments account for a much larger share of the company's assets than was the case with Plum Creek in 1999.

###

PLUM CREEK - MAINE

The company agrees to shrink the development zone there but still insists on 404 building lots.

Plum Creek Timber Co. has agreed to scale back some of its proposed development zones around Moosehead Lake, but is holding its ground on plans to put 404 homes and resort units next to Lily Bay.

The Maine Land Use Regulation Commission had recommended that the company phase in construction on Lily Bay peninsula to make sure the activity and traffic do not harm Canada lynx or other wildlife in the area.

Conservation groups, meanwhile, have appealed for little or no development there because of the area's value for wildlife and remote recreation. The proposed development is across a cove from Lily Bay State Park.

But in a new round of filings on its historic development plans, the company made clear that the resort and homes at Lily Bay are critical to the overall plan and that even a phased-in approach is "economically unworkable."

More than three years after the landowner first unveiled the largest subdivision proposal in Maine history, the project appears to be heading for a final rezoning decision later this year. Plum Creek, several interest groups and about 1,500 individuals filed written comments before the deadline Friday, and the state's land use commission is expected to meet in September to review the feedback and decide the next move.

Plum Creek wants the commission to rezone forestlands scattered around the lake to make room for 975 house lots and two resorts. The resorts could include as many as 1,050 units, ranging from single-family homes to hotel rooms.

The plan also includes more than 400,000 acres of land to be conserved through sales and easements that limit future development.

The latest volley of comments focuses on a list of recommendations from the land use commission to reduce the project's impacts on the region's character and wildlife, two of the top concerns raised by Mainers during public hearings statewide.

Plum Creek submitted an extensive response Friday and agreed to go along with most of the changes.

It said it will remove proposed development from the north shore of Long Pond, although the home lots would be moved elsewhere.

It agreed to accelerate the sale of conservation easements to permanently protect more than 300,000 acres of working forest as a way of balancing out the impact of the plan. It also said it would reduce the area of the proposed Lily Bay resort by 2,600 acres. The land use commission recommended a reduction of 2,997 acres.

But the company also said there were some things it could not, or would not, change.

Luke Muzzy, the project manager, said Monday that Plum Creek needs a minimum of 1,800 acres of development area near Lily Bay, and it would need assurance upfront that all 404 proposed units can be built.

"We need to get predictability that we can do the 404 units, because you'd still have to build the infrastructure as though it were 404 units," he said.

The company argued in its filing that the proposed amount of development there won't hurt the lynx population on a regional level.

And, instead of studying impacts on lynx halfway through the development there, Plum Creek is proposing a longer-term monitoring program and, if necessary, lynx conservation projects.

"We just feel that we can adequately study for them and mitigate" any impacts, Muzzy said.

The development of Lily Bay has been a concern of conservation groups statewide. Groups such as the Appalachian Mountain Club have called for reducing the development there, while the Natural Resources Council of Maine and Maine Audubon have appealed to eliminate it entirely, even if it means opening up the possibility for future development elsewhere in the region.

Jim Glavine, president of the Moosehead Region Futures Committee, said Plum Creek's entire project is still too large and should be scaled back in such places as Brassua Lake and Indian Pond.

"Plum Creek has never been willing to reduce the number of their development lots," he said. "There's no demonstration that the area needs that many."

Lily Bay is a special concern because it is an important habitat area for Canada lynx, a species classified as threatened by the federal government.

"Having a resort there sets a dangerous precedent," Glavine said.

RECOMMENDATIONS

Plum Creek Timber Co. accepted these recommended changes to its Moosehead Lake region development plan:

Eliminate proposed development on the north shore of Long Pond and move half of the 110 house lots elsewhere.

Complete private land conservation agreements covering roughly 300,000 acres within 45 days of final state approval of the plan.

Remove a number of wetlands, wildlife habitat areas and one important view shed from development zones.

Remove nearly 2,600 acres from the 4,358-acre development zone on Lily Bay, although the Maine Land Use Regulation Commission staff recommended a 2,997-acre reduction.

The Company Did Not accept these recommendations:

Move forward with the Lily Bay resort and subdivision in two phases to make sure the activity and traffic do not harm Canada lynx.

Transfer primary enforcement of private conservation easements to the state.

Set tighter controls on water and gravel extraction, as well as the development of wind farms, in the conservation areas.

DISCLOSURE

Plum Creek's president and chief executive officer, Rick Holley, serves on the boards of directors of two companies affiliated with the Portland Press Herald/Maine Sunday Telegram: the Blethen Corp. and The Seattle Times Co.

Blethen Corp. is the majority owner of The Seattle Times Co., which consists of The Seattle Times newspaper, three other Washington newspapers and Blethen Maine Newspapers. Holley joined the Blethen Corp. board of directors in April 2006 and joined The Seattle Times Co. board in January 2007.

Blethen Maine Newspapers includes the Press Herald/Telegram, the Kennebec Journal, the Morning Sentinel and the Coastal Journal. It has a separate board of directors, and Holley does not serve on that board.

Sources: The Seattle Times Co., Plum Creek Timber Co. and the state of Washington's Office of the Secretary of State

### 

May, I sat in an Augusta conference room and listened as Maine's Land Use Regulation commissioners questioned their hired consultants on their recommendations for Plum Creek's Moosehead Lake area concept plan. It was a dismaying experience.

The two consultants (professional planners hired by LURC with money provided by Plum Creek) had a detailed list of recommended changes to the plan.

But they did not question the scope of proposed development: more than 2,000 residential and resort "units" and 400 units of that development on Lily Bay across from Lily Bay State Park. As conservation to "balance" all that development, land would be bought from Plum Creek (potentially with public money), rather than donated.

The consultants made it clear up front that they wanted "objective criteria," or, as they said, appropriate "metrics," to evaluate Plum Creek's plan for 500,000 acres under LURC jurisdiction. They wanted to rule out "subjective" or "emotional" considerations. This is no doubt why the all-important "natural character" values were absent from the May discussion.

The consultants, in effect, belittled these values -- and all who brought them up -- poisoning them as respectable topics for LURC consideration. But although there are fewer "metrics" for measuring character, it is still meaningful, and it has effects in the "real" world.

The commissioners themselves seemed to buy this approach. They praised the consultants and their work. They limited most questions to the nuts and bolts: subdivision layout, siding materials, dock placement, worker housing. Focusing on these worthwhile but secondary details let everyone avoid the larger, and controversial, "character" aspects.

LURC commissioners are citizen volunteers, but they should know better. They shouldn't hide behind their consultants, however well-qualified. All along, the greatest public concerns have revolved around exactly the area's "natural character" -- not easily reduced to numbers and statistics -- and the immense effects this immense development would have on it.

LURC's own Comprehensive Plan calls these aspects a major -- perhaps the major -- public value LURC oversees and protects: "Remoteness and the relative absence of development are perhaps the most distinctive of the jurisdiction's principal values due mainly to their increasing rarity in the Eastern United States."

Mainers have a strong attachment to the expansive, rustic and wild character of the Moosehead region, and rightly so. This attachment is partly emotional and subjective, but that is appropriate and justified: It measures the depth of public feeling and affection.

Several thousand Mainers testified eloquently at LURC hearings or wrote heartfelt letters, describing the importance of Moosehead Lake's natural character to them. If the decision in the end was going to come down to hired planners' "objective" considerations, then the hearings were just a cruel waste of citizens' time.

It appears the experts understand the "costs" but not the "values." The public's concerns may sometimes seem vague; they may have intuitive or spiritual dimensions; they may even be difficult to speak of at all. Likewise, "Life, liberty, and the pursuit of happiness" are unquantifiable. But they're real nonetheless -- they can be lost and gained -- and the words have inspired American citizens (and many others) for 200 years.

The large-scale, wildland context of the LURC jurisdiction has largely vanished from the Eastern United States. In Maine, we're lucky to have one of the few remaining large pieces.

However you measure it -- or even if you don't -- that wildland character will leach away, will disappear here too, proportionate to the number of golf courses, resorts, subdivisions, roads, marinas, boutiques and mini-malls we allow within it. How much we care about this, how much we want to preserve that part of our character, is no small matter; LURC shouldn't sweep it under the rug.

The Plum Creek development proposal is far too large; it would set a disastrous precedent. Certainly, the east shore of Lily Bay should be protected. The LURC commissioners, citizens like the rest of us, represent the rest of us. They must retrieve the Plum Creek decision from the experts and put "natural character" back in the center of the table where it belongs.

Jon Luoma is an Alna resident.

###

For its 108 years of existence, the kingdom and the power that is Weyerhaeuser has survived the Great Depression, world wars, booms and busts, environmental critics. But now it is facing a much more potent adversary: Wall Street.

Big investors are pressuring Weyerhaeuser to fundamentally restructure its business. The company is already shrinking, and more radical downsizing is likely. At risk are hundreds of high-paid corporate jobs at its Federal Way headquarters, as well as those in its real-estate units and the blue-collar work that is among the best-paid in small communities around the Northwest.

Weyerhaeuser will have nearly 50 percent fewer employees worldwide compared with early 2007 when it completes a deal to sell its container-board and packaging subsidiaries. It employed about 37,900 at the end of last year. But Chief Executive Dan Fulton has promised investors further "curtailments, shutdowns," and moves to "dramatically reduce overhead."

Weyerhaeuser's immediate troubles come from the same poisoned well that choked Safeco and still menaces Washington Mutual: the housing bust. Weyerhaeuser's first-quarter revenues declined nearly 24 percent, and last month it announced a write-off of up to $325 million, largely because of real-estate troubles. Impatient investors caused Weyerhaeuser shares to touch a five-year low on Thursday to close at $49.60.

A Weyerhaeuser spokesman declined to make Fulton available for comment, citing a "quiet period" ahead of the Aug. 5 earnings announcement. But in a May conference call with securities analysts, Fulton said the housing downturn has had "a devastating impact" on the company.

Its Weyerhaeuser Real Estate Co. unit has been hammered, especially by the cratering market for single-family suburban houses in California and Arizona. Quadrant Homes, one of six Weyerhaeuser subsidiaries nationally and the largest homebuilder in Washington state, has scaled back operations to building five houses a day instead of seven as home-deal cancellations hit 50 percent.

The housing recession also flattened demand for Weyerhaeuser products, and yet another challenge is higher fuel costs. A cheaper dollar that makes American exports more competitive is one of Weyerhaeuser's few consolations.

But investors are little consoled. They've been agitating for major changes, including transforming Weyerhaeuser from a public company into a real-estate investment trust, or REIT. A REIT manages a portfolio of property, which in this case would be timberland.

New direction for company?

At first glance the idea might seem a little loopy. Weyerhaeuser a REIT? It's one of the last true integrated forest-products companies, until lately doing everything from cutting the trees to making wood products to building houses — even owning small railroads in the United States and a shipping line to transport logs to Asia. It operates in 44 states and 13 other countries, and has scores of subsidiaries. Why not make General Motors a REIT, too?

REITs typically distribute most of the earnings directly to their shareholders, avoiding some corporate taxes. That tax advantage is a big draw for investors, and it was successfully used by Seattle-based Plum Creek Timber, which became a REIT in 1999.

Wall Street sees Plum Creek's experience as the way to best realize the value of timberlands.

Weyerhaeuser management has said it couldn't immediately convert to a REIT even if it chose to — the conversion costs would be too high. Still, Joshua Zaret, senior research analyst at Longbow Research in New York, said eventually "a REIT is likely." The move would have to be approved by shareholders.

Tellingly, last year Debra Cafaro, a top executive of several REITs and the treasurer of the National Association of REITs, joined the board.

The company may receive some tax relief in the controversial new farm bill, which might save it up to $100 million. But that break appears to run for only a year. So far, Weyerhaeuser stock "is propped up by the belief it will convert to a REIT," Zaret said.

The company could even be a takeover target for a private equity firm or go private itself, he said, adding that those are less-likely outcomes. What isn't negotiable is business as usual.

Deutsche Bank analysts recently criticized Weyerhaeuser as a "tortoise" compared with nimble Plum Creek.

Speculation and rumors

Fulton became president in January and CEO in April, moving over from the top job at Weyerhaeuser Real Estate Co. The company had already spun off its fine-paper business and agreed to sell its container-board, packaging and recycling businesses to International Paper. It soon put its Westwood Shipping Line and four small railroads on the block.

Fulton made the direction clear at the annual shareholders' meeting in May. "Trees define us," he said. "We will have other businesses, but we will only manufacture products where we have the technology, a unique skill or opportunity, and the ability to do so in a capital-efficient manner."

Zaret credits management with responding to investors. "It's unfair to say they're doing nothing," he said. "Their hands are tied by the economic environment." He said the asset sales should help earnings and that Weyerhaeuser's balance sheet is strong.

(He owns no Weyerhaeuser shares, and Longbow has no business relationship with the company.)

What happens next is a source of speculation and dire rumors in Seattle.

Two outcomes seem most likely. A return to its roots means Weyerhaeuser might shed its real-estate unit when the housing market recovers. And the already announced sale of subsidiaries, pressure to cut overhead costs and an eventual conversion to a REIT would mean far fewer headquarters jobs. Some of these moves might be announced this summer.

Future projects will be close to the core business, to judge from the remarks of Fulton and other executives, including its alternative-energy and carbon-offset projects.

In an area far removed from its own roots of sliding logs down the hill into Elliott Bay, one might ask: Does Weyerhaeuser even matter anymore?

It does. First, as a company that ranks 147th on the Fortune 500, it is a hub of talent, capital and decision-makers — a major asset for any metro area. Weyerhaeuser has made generations of Washingtonians rich, and some of that money arguably powered Seattle's rise into a global capital of technology and ideas. In addition, the company's forest holdings are so extensive that its future is of great consequence in a 21st-century world of climate change and rising energy prices.

To get a sense of those holdings, check out any detailed atlas. For example, on page 81 of Benchmark's Washington Road and Recreation Atlas, a huge part of the land around Grays Harbor is identified as "Weyerhaeuser Twin Harbors Tree Farm." Weyerhaeuser owns or manages 22 million acres of timberlands.

It's in those forests that Wall Street sees green.

###

HOQUIAM, Wash. - A key step has been taken toward reopening the old Weyerhaeuser Co. pulp mill in Cosmopolis.

On Thursday evening commissioners of the Grays Harbor Public Utility District approved deal to buy the mill's power house.

Evergreen Pulp Cosmopolis would get $17 million for the two 7.5-megawatt turbines fueled largely by wood waste, and PUD General manager Rick Lovely and Commission President James Eddy say the utility is setting aside another $10 million for repairs.

Evergreen Pulp is negotiating with Weyerhaeuser to buy and reopen the mill, which was closed in October 2006. Evergreen would operate the mill and the PUD would handle power operations. PUD officials estimate the potential profit at more than $1 million a year.

###

PLUM CREEK - MAINE

New Forest Service rules could let largest private owner convert land

MISSOULA, Mont. - The Bush administration is preparing to ease the way for the nation's largest private landowner to convert hundreds of thousands of acres of mountain forestland to residential subdivisions.

The deal was struck behind closed doors between Mark E. Rey, the former timber lobbyist who oversees the U.S. Forest Service, and Plum Creek Timber Co., a former logging company turned real estate investment trust that is building homes. Plum Creek owns more than 8 million acres nationwide, including 1.2 million acres in the mountains of western Montana, where local officials were stunned and outraged at the deal.

"We have 40 years of Forest Service history that has been reversed in the last three months," said Pat O'Herren, an official in Missoula County, which is threatening to sue the Forest Service for forgoing environmental assessments and other procedures that would have given the public a voice in the matter.

The deal, which Rey said he expects to formalize next month, threatens to dramatically accelerate trends already transforming the region. Plum Creek's shift from logging to real estate reflects a broader shift in the Western economy, from one long grounded in the industrial-scale extraction of natural resources to one based on accommodating the new residents who have made the region the fastest-growing in the nation.

Environmentalists, to their surprise, found that timber and mining were easier on the countryside.

"Now that Plum Creek is getting out of the timber business, we're kind of missing the loggers," said Ray Rasker, executive director of Headwaters Economics, a nonprofit that studies land management in the West. "A clear-cut will grow back, but a subdivision of trophy homes, that's going to be that way forever.

"It's kind of the ugly face of the new economy."

Rey said he, too, laments the ascension of "McMansions" over working forest, but he insisted that the law obliged him to accommodate Plum Creek's request for clarification of its rights to cross public land. Rey emphasized that during the private negotiations, Forest Service lawyers leveraged promises from Plum Creek to moderate the impact, including mandating "fire-wise" measures to reduce the danger from summer wildfires.

Under the new agreement, logging roads running into areas controlled by Plum Creek could be paved — and would thrum with the traffic of eight to 12 vehicle trips per day to and from each home, according to O'Herren. Critics say that will further imperil grizzly bears, lynxes and other endangered species in the Crown of the Continent ecosystem, a region of rugged peaks, glacier-carved valleys, and sparkling rivers and lakes that straddles the border between Montana and Canada — and that in parts remains as Lewis and Clark found it.

"For us, this is kind of an arterial bleed, and we're either going to get a handle on it or not," said Melanie Parker, executive director of Northwest Connections, an environmental group in the Swan Valley, 60 miles northeast of Missoula.

Parker recently eased an SUV through Glacier Ridge, a nascent subdivision marked by freshly scraped lots and sumptuous views of the Mission Range on one side, the Swan Range on the other and the still-sparsely populated valley in between. The spring-fed bottomland is prime bear habitat where her husband, Tom, a hunting guide, saw his first grizzly.

"Look at that, Tom!" Parker yelped, after a climb up a knoll revealed a three-story log home, still wrapped in Tyvek HomeWrap insulation. "They're like mushrooms. You get a few sunny days and they pop right up."

Most are the second, third or even fourth homes of wealthy newcomers who have transformed the local economy — 40 percent of income in Missoula County is now "unearned," from, say, dividends — and typically visit only in the summer. In Antler Ridge, across Highway 93, Web cameras installed over bird nests and a bear den beam photos to a hedge fund partner who visits his 200 acres just a few times a year.

"He was actually in France when the bear left the den," said "remote wildlife viewing" contractor Ryan Alter, on his way to install a camera at an owl's nest. "So I sent him pictures on his BlackBerry."

"I wanted to own land out there because I was always very interested in the concept of restoration, conservation," Paul Gurinas, the hedge fund partner, said by phone from Chicago. "The fact that it's almost become kind of a housing subdivision, that isn't what I was looking for. I guess I wish I had bought the whole thing up, and then I wouldn't have to worry about it."

That same impulse drives a different kind of land deal in the area: The buyers are the Nature Conservancy and other organizations that purchase desirable private land to preserve it. Since 2000, the groups have paid Plum Creek market rates to secure 280,000 sensitive acres in Montana alone.

Another 320,000 acres are being preserved under a provision that Sen. Max Baucus (D-Mont.) forced into the farm bill, which survived President Bush's veto. The measure includes $250 million to back bonds to buy Plum Creek lands that otherwise might be developed.

"This is like the last big, wild, intact landscape in the Lower 48," said Eric Love of the Trust for Public Land, a conservation group that with the Nature Conservancy announced the $510 million purchase on Monday. "If these lands are going to be sold, someone is going to buy them. The question is, who?"

Plum Creek said it has sold only 3,000 of its Montana acres to developers in the past five years, and it expects to sell even less in the next five, the company's president, Rick Holley, wrote in a recent op-ed in the Missoulian newspaper. But critics point out that its calculations may shift with the real estate market.

A decade ago, while repairing an image as the "Darth Vader of the timber industry," as one congressman put it, the company showcased good-forestry practices on a hillside above Flathead Lake.

That parcel is now Eagle's Crest, a gated subdivision with its own airstrip and lots on offer for $100,000 an acre. Remote corners of Swan Valley are selling for $11,000 an acre, with broker inquiries arriving from Europe. By comparison, the "net present value per acre of forest" runs at most $500, said Larry Swanson, director of the O'Connor Center for the Rocky Mountain West at the University of Montana.

"It's a pretty straightforward proposition: The region's economy is moving from extraction to amenities, and you would expect the same thing to happen with its largest landowner," Swanson said.

"It's a tough deal. Change is hard, and this is pretty fundamental change. But what's happening here is perfectly understandable."

Missoula County officials say their objection is not to change, which traditionally rural jurisdictions have struggled to manage, but to being blindsided by Rey's announcement of a far-reaching change negotiated in secret.

Plum Creek owns 57 percent of Missoula County's private land, a posture that under state law gives it veto power over any zoning. Over the decades that the Forest Service enforced limits on logging roads, the county came to regard federal policy as a firebreak against development.

"All these years, we've been told those roads are not for residential use," said Jean Curtiss, who chairs the county commission. "These are logging roads. They're for timber management."

If the deal goes into effect, the county stands to lose money in providing services such as snow plowing and ambulances to remote new developments. "You're looking at a real nightmare scenario in managing wildfires," Rasker said. "And you're going to have access issues: If these now become gated subdivisions, it's going to be harder for people to go hunt and fish, and that's pretty important to people in Montana."

###

Two leading opponents of Plum Creek Timber Co.'s development plan for the Moosehead Lake region made an appeal Thursday to scrap a proposed resort and subdivision near Lily Bay State Park, even if it means allowing development on land now targeted for conservation.

Maine Audubon and the Natural Resources Council of Maine said the Lily Bay peninsula is too valuable for recreation and as wildlife habitat. And they vowed to fight the overall plan, in court if necessary, if the area isn't made off-limits to development.

"We think this is far and away the biggest stumbling block," said Brownie Carson, the council's executive director.

Lily Bay, however, has been a centerpiece of Plum Creek's development plan since it was unveiled more than three years ago. And while the acreage of the proposed resort has been scaled back, once by the company and once by state planners, the bay clearly remains a core piece of the project.

"Lily Bay is extremely important to the viability of this plan, and has been since Day One," said Luke Muzzy, project manager for Plum Creek.

The company's overall plan for the region calls for 975 house lots and two resorts, which could include another 1,050 hotel rooms, condos or homes. The plan also includes more than 400,000 acres of land to be conserved through sales and easements that limit future development.

The land that generates the most intense opposition sits on the eastern side of Moosehead Lake about 10 miles north of Greenville, and just across Lily Bay from the state park.

The quiet, wooded peninsula that slopes down to the lake shore is home to Canada lynx, a federally threatened species, and native brook trout, as well as logging roads and more than 100 camps, or rustic cottages.

Plum Creek's final proposal called for developing as much as 4,358 acres, including some shore land on Lily Bay and some of the highlands overlooking the bay and the state park.

The area would include 154 house lots and a resort with 250 units, as well as a golf course, marina and other facilities.

The Maine Land Use Regulation Commission has recommended that the Lily Bay development area be scaled back to about 1,350 acres because of concerns about wildlife and damage to the area's recreational value. Although LURC wants the company to monitor the effects on wildlife, it is not pushing Plum Creek to reduce the number of homes or resort units.

LURC is accepting written comments on its recommended changes until July 11. A final decision on the Plum Creek plan is expected this summer or fall.

"It's not too late for Lily Bay or Maine," said Kevin Carley, executive director of Maine Audubon. "Plum Creek development does not belong on Lily Bay peninsula. That's a message that LURC has heard from hundreds of Maine people and visitors."

Carley and Carson, of the nature council, said Plum Creek or LURC should eliminate development there and, in return, remove 33,500 acres on the west side of the lake from the conservation package. "The Lily Bay peninsula is far more ecologically important," Carson said.

Plum Creek will continue logging the land to the west whether or not it is part of the conservation area, but taking it out of the easement would effectively allow the company to propose development there later.

The groups clearly suggested that conserving Lily Bay would spare the company a drawn-out battle, including possible legal appeals down the road. They also hinted at using the Endangered Species Act to save Lily Bay, if necessary.

"The Lily Bay peninsula is really a very key place for the Canada lynx," said Jody Jones, a biologist with Maine Audubon.

Muzzy, the Plum Creek project manager, said he had no direct response to the idea.

"We're so busy analyzing LURC's (recommended changes) and, really, it's their game now," he said.

The company, in fact, has not yet decided whether all the changes recommended by LURC are feasible, Muzzy said.

"Lily Bay's a big issue," he said.

"They're proposing that we reduce the acreage by somewhere in the 70 percent range, and we have to take that and do an analysis to see whether we can site the units there and make the project viable."

Catherine Carroll, staff director of LURC, said the commission's members will consider feedback, including any suggestions floated by conservation groups. But she also said members want to avoid protracted negotiations.

The debate over Lily Bay is not new, and the agency's recommendation -- move forward with scaled-back development -- took the recreation and wildlife issues into account, Carroll said.

"Obviously, what I'm hearing from the applicant and the parties is that Lily Bay is very important to them," she said.

DISCLOSURE

PLUM CREEK'S president and chief executive officer, Rick Holley, serves on the boards of directors of two companies affiliated with the Portland Press Herald/Maine Sunday Telegram: the Blethen Corp. and The Seattle Times Co.

THE BLETHEN CORP. is the majority owner of The Seattle Times Co., which consists of The Seattle Times newspaper, three other Washington newspapers and Blethen Maine Newspapers. Holley joined the Blethen Corp. board of directors in April 2006 and joined The Seattle Times Co. board in January 2007.

BLETHEN MAINE Newspapers includes the Press Herald/Telegram, the Kennebec Journal, the Morning Sentinel and the Coastal Journal.

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BANGOR, Maine - Two influential conservation groups pleaded Thursday with state regulators to alter Plum Creek Timber Co.’s ambitious plans for the Moosehead Lake region and keep the Lily Bay peninsula free from development.

Click here to view a larger image of the Plum Creek concept plan

The Natural Resources Council of Maine and Maine Audubon called on the Land Use Regulation Commission to block development of about 400 houses on the eastern and more wild side of Moosehead Lake. In return, the two groups said they would give back 33,500 acres on the lake’s western side that originally had been slated for conservation.

"It’s clear that the people of Maine don’t want 400 houses on Lily Bay," NRCM Executive Director Brownie Carson said Thursday afternoon at an announcement in Bangor. The groups also held a similar event in Falmouth earlier in the day. "LURC holds the future of this region in their hands."

Maine Audubon Executive Director Kevin Carley added, "The message is simple: Plum Creek does not belong on the Lily Bay peninsula."

Both environmental leaders indicated they are not opposed to development on the western side of Moosehead Lake, but stressed that Lily Bay should be off limits.

Thursday’s announcement came as LURC nears the end of its three-year review of an ambitious project that hopes to revive the Moosehead Lake region through a combination of economic development and conservation. Seattle-based Plum Creek, the nation’s largest landowner, is seeking to rezone about 20,000 acres for the development of nearly 1,000 houses and two resorts. The plans also would permanently protect more than 400,000 acres through easements and land transfers.

Last month, LURC sent back recommendations to Plum Creek that called for a scaled-back version of its plans, but those recommendations did not include blocking development on Lily Bay. In reality, LURC does not have the authority to modify Plum Creek’s proposal, only to make suggestions, which means Thursday’s announcement was largely symbolic.

"It’s not up to the commission to eliminate or not eliminate development. That’s entirely up to Plum Creek," said Catherine Carroll, LURC’s staff director. "The commission can only decide on what’s in front of them. We can only approve or reject the entire plan, not parts of it."

Luke Muzzy, Plum Creek’s project manager, said Thursday that he hadn’t seen the latest proposal from NRCM and Maine Audubon. He said the only group the developer is dealing with now is LURC.

"It’s in their court. We’re not really responding to any other groups," he said Thursday by telephone. "But Lily Bay has always been a critical piece of the development plan. Without it, it’s not viable."

Muzzy also pointed out that Lily Bay, which is home to a state park and about 150 seasonal homes, has never been exempt from development.

In addition to representatives from NRCM and Maine Audubon, two Moosehead Lake region residents attended Thursday’s announcement in Bangor.

Sheila Kelley, who lives in Beaver Cove to the south of Lily Bay, spoke about preserving the natural habitat of the region, particularly for wildlife such as the endangered Canada lynx.

"I implore our state agency not to allow development on this habitat," she said.

Ruth McLaughlin, who with her husband owns the Blair Hill Inn in Greenville, said Plum Creek’s proposal might provide an economic lift to the region, but "even they admit it’s short-term. Bigger is not always better."

Once Lily Bay is developed, McLaughlin said, there’s no going back.

"I believe that modifying [Plum Creek’s] development is essential to preserving the Moosehead region," she said.

Plum Creek and its opponents have until July 11 to submit comments to LURC, and Carroll said she expects a fair amount of public response. Those comments will then be reviewed by the staff in advance of a commission decision that’s likely to come sometime later this year.

READER COMMENTS

steve of orono, ME - 06/13/08 - Starting in the 1920s, my family benefited from the Greenville area. My grandfather operated woods camps in the Greenville area and eventually worked for one of the largest paper companies in the Greenville area into the 1950s. His stories, told by his daughter, my mother, were of thriving economy, which allowed him to raise 10 children and paid good wages so that his workers? families? could raise their families. It was a sustained economy of abundance and opportunity. Looking forward we need only look back; ?Before the Civil War, a few travelers -- notably Henry David Thoreau and James Russell Lowell -- sought the wilderness experience of northern Maine. The trickle became a flood after 1870 as entrepreneurs began to promote the Moosehead Lake region for hunting and fishing. Their market constituted middle and upper classes from Portland, Boston, and New York, who sought both recreation and relief from urban pollution. The new house represented a significant increase in the scale of tourism at Mt. Kineo, supported by the extension of the North American and European Railway (later Bangor & Aroostook) to Guilford. Way seems to have based his map largely on Charles Haven's ca.1870 map of Moosehead Lake [40]. ? This was a good ?creative economy? and can become again a positive creative, economy. See the Greenville area always used to be a working forest as well as a tourist destination, but some want to re-write history and make false claims about it's sustainibility. The only thing 'endangered' in the Greenville area will it's average everyday resident forced to leave with with no economic future. Let them eat blueberry pie say the opposition to PC plane.

Jay of cumberland, me - 06/13/08 - Whenever asked, the people of the state of Maine have been overwhelmingly against the Plum Creek plan to McMansionize Moosehead. Looks like it may soon be time to put this on a referendum where Plum Creek's game of smoke and mirrors will be frozen in its tracks by the voters.

Joan of Bath, me - 06/13/08 - please evryone read and comment on the portland press herald. southern maine does not get it. we need your voices!

Jay of cumberland, me - 06/13/08 -Rick Holley, Plum Creek?s president and CEO, told the Portland Press Herald on Oct. 7, 1998, that the company had no plans to sell land for vacation homes, camps or other types of development. In the Maine Sunday Telegram four days later, Bill Brown, Plum Creek?s vice president of business development, reiterated that Plum Creek wasn?t really in the development business. http://www.meepi.org/files05/pa021005.htm Holley and Plum Creek didn't make good on that pledge. Now did they? But Holley DID get himself a seat on the board of Blethen Corporation that just happens to have more newspaper and website audience in Maine than any other news reporting source. Where is the inquiry into that most bizarre coincidence? Does anybody believe in keeping promises and playing fair? Or is it all about lawyer lobbyists lining their pockets and legislators falling into step?

MaineCommenter of Portland, ME - 06/13/08 - The last gasp of failed confrontation-style environmentalism. One would have thought that the compromise on Sears Island would have alerted them that times have changed. As the saying goes if you're not part of the solution, you're part of the problem. Goodbye, NRCM/Audubon/RESTORE.

frank of Greenville, me - 06/13/08 - The recent response from LURC to Plum Creek to pre-approve 3 massive commercial zones, 2 of which are located in previously remote and undeveloped territory, largely ignored the written comments of the public, the testimony of those who spoke at the public hearings, the testimony from the workshops, and state laws. Written comments from the public were 20 to 1 to either reduce or deny the development. Public testimony was almost exactly equal at the hearing I went to in Greenville, but the plan had much less support at hearings in other parts of Maine. Many federal and state wildlife and conservation professionals testified at the workshops that a scaled back version with all of the development zones located between the two existing towns would be much more appropriate for this region and protect valuable and sensitive wildlife areas in the wilderness that lies to the north. Maine laws state that development of unorganized territory should be located adjacent to existing development unless a need to develop wilderness areas can be demonstrated. There really is a genuine economic need in the area for a large commercial and resort zone with an additional 500 to 700 residential units between the towns, and I am happy that one is appropriately proposed near Moose Mountain. However, for LURC to believe that the Moosehead region should sacrifice its most valuable wildlife resources to the north because of some incredible economic need in the area for 2 MORE additional, competing, mega-resorts is raw deal for everyone. So why did LURC allow this to happen? The answer is sad. Think about it like this. Option 1 for the LURC board is to call for a few minor changes, give the pubic another chance to vent through an ignored letter writing period (as if 20 to 1 left any doubt about what the public thought), approve the thing in the fall, and finally be done with a 4-year headache. Option 2, incorporate the comments from residents, wildlife professionals and conservationists and demand a reduction in the scale of the development and a relocation to appropriate areas between Greenville and Rockwood. If the company agreed, we would be a model of how planned development, balanced by the conservation of key wildlife areas, can provide a region with a diverse and sustainable economy and create a world class destination. Plum Creek has stated, even prior to the public’s first chance to formally comment on the proposed plan at the state wide hearings, that they have made three revisions, there will not be a fourth. This stance not only insults and degrades the thousands that participated in the process since then, but shows a blatant disregard for the permitting procedure. The public was falsely led to believe that the whole idea of the hearings was so that comments and concerns from life long local residents and concerned Maine citizens could be incorporated into the final draft of the plan. The company rhetoric left no doubt in LURC?s mind that if they called for the major revisions that were brought out in the hearings and workshops, the applicant would use what I call the nuclear option. Plum Creek would threaten to withdraw the application completely, which would bring unbearable pressure on the LURC board, or submit it as is. The applicant may be counting on the fact that if LURC denies it in the fall, Plum Creek would then have to revise the plan and resubmit it in the spring and the whole 4-year migraine starts again for LURC since public comment periods, state wide hearings, and workshops would be required all over again for the LURC board. After 4 years of hard work, this would not be realistic or practical for the already overworked LURC board members as other pressing issues like the CLUP and wind power demand increasing amounts of their focus for the coming years. Several members of the LURC board?s term will be up this year and understandably they want to get this resolved. So, if you were on the overwhelmed LURC board which option would you take? Option 1, get rid of this 4 year migraine now by approving the plan. Option 2, start years of unbearable headaches, criticism, and work for the LURC board in the future by demanding revisions that would protect the wilderness while still allowing the applicant to realize the economic gain from the rezoning and development of tens of thousands of acres of timberland for which they paid $200 an acre. Unless we can convince LURC that we need this wilderness that we all love, more than they need the temporary relief of aspirin, it sounds like they will take two and hope that this Plum Creek headache is gone ASAP.

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ORONO, Maine — State regulators agreed Wednesday to reopen the public record on the latest proposed changes to Plum Creek’s controversial development plan for the Moosehead Lake region.

Last week, the Maine Land Use Regulation Commission floated a series of changes to Plum Creek’s proposal that, if implemented, could help the company win regulatory approval for its historic housing and resort plan.

Beginning June 11, the public will have an opportunity to weigh in on those changes. The public comment period is expected to extend through July 11.

Plum Creek is seeking LURC authorization for a 30-year development plan that includes 975 house lots and two large resorts in the Moosehead region. Although the largest development proposal in state history, the plan put forward by the company also would protect more than 400,000 acres of forestland in the region through easements or land sales to conservation groups.

During deliberative sessions held last week, the commission and LURC staff did not propose reducing the number of house lots or the 1,050 resort accommodations proposed for Big Moose Mountain or Lily Bay.

The commission and staff did, however, recommend several significant changes to Plum Creek’s proposal. They include:

• Requiring the company and its conservation partners to complete several privately negotiated land preservation deals encompassing roughly 300,000 acres within 45 days of final LURC approval of the concept plan. This would supplement the 91,000 acres of conservation land Plum Creek has offered to donate to offset the impact of development, as required for concept plan approval.
• Cutting in half — from 110 to 55 — the number of house lots proposed for Long Lake, located between Rockwood and Jackman. Those house lots would be shifted to other areas proposed for development.
• Removing nearly 3,000 acres from the 4,358-acre development zone on Lily Bay, adding that land to the acreage slated for conservation. The total number of house lots and resort accommodations at Lily Bay would remain the same.

Representatives of several groups opposed to Plum Creek’s original plan have criticized the commission's proposed changes as continuing to allow too much development. They have urged the commission to separate out the privately negotiated conservation deals, which are expected to generate $35 million for Plum Creek.

Plum Creek representatives, meanwhile, have been mostly tight-lipped about the recommended changes to their plan other than to say they have concerns. As the applicant, Plum Creek could reject the key changes but in the process would risk a LURC denial of the concept plan.

"We want to make sure it’s viable from both a forestry standpoint and a development standpoint," said Luke Muzzy, senior land asset manager for Plum Creek and an architect of the plan.

The commission will take into consideration comments from the public and intervening parties, as well as Plum Creek, before deciding whether to amend the plan further later this summer. A final vote on Plum Creek’s application could come in late summer or early fall.

To read the list of recommended changes to Plum Creek’s plan, go to http://www.maine.gov/doc/lurc

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Weyerhaeuser doused speculation that the lumber producer will convert to a real-estate investment trust next year, sending the shares down the most in more than five years.

Chief Financial Officer Patricia Bedient, speaking Friday to investors in New York, said converting to a REIT next year wouldn't be "tax-efficient." But, she added, "That does not preclude the REIT option for Weyerhaeuser in 2010."

Weyerhaeuser's spinoff of its fine-papers business and the planned $6 billion sale of recycling and corrugated-packaging units has spurred speculation that the Federal Way company would convert to a REIT structure to reduce taxes on profit from timberlands.

Some investors hoped Chief Executive Officer Daniel Fulton, who took the helm in April, would expedite the 108-year-old company's conversion to a REIT.

But Weyerhaeuser's comments Friday pushed its stock down $5.11, or 7.6 percent, to $62.33. The stock is off 15 percent this year.

"It's the REIT," Longbow Research Analyst Joshua Zaret said, referring to the Friday stock plunge. "It's delayed, relative to people's expectations, by at least a year.

"There's a realization that conversion is a complex move and that the company's businesses need to come back to life before it can happen," said Zaret, who is based in New York and rates the shares "buy." He doesn't own the shares.

As a corporation, Weyerhaeuser's profit from tree harvesting and the sale of timberlands has been taxed at a corporate rate of as much as 35 percent. U.S. legislation recently passed as part of the farm bill will reduce that rate to about 17 percent, according to congressional aides, giving Weyerhaeuser a $182 million tax break.

As a REIT, however, the company could eliminate most or all income taxes by distributing profit to investors, as do REITs such as Seattle-based Plum Creek Timber and Spokane-based Potlatch, according to Robert Willens, a New York-based tax adviser. He said investors in REITS pay taxes of as much as 15 percent on those distributions.

"Weyerhaeuser has always said they couldn't become a REIT because of the requirement to show the IRS that conversion was for business purposes and not tax avoidance," he said. "That probably wouldn't be any easier in 2010 than in 2009."

Weyerhaeuser, which has slashed capital spending amid declines in U.S. lumber demand and housing construction, is weighing the benefits of a REIT structure, Bedient said.

By law, Weyerhaeuser must distribute its retained earnings and profit to shareholders by the end of the year in which it converts to a REIT, a figure it estimates will be about $6.5 billion and will be taxable, she said.

One option is to use stock for 80 percent of the value and borrow about $1.3 billion to pay the rest, bringing the company's debt to more than $5 billion, she said. Another method is to spin off the timber business, and then create the REIT, Bedient said.

Given "challenging market conditions" that Weyerhaeuser expects next year, nontimber businesses may be unable to manage the debt burden that a conversion would create, Bedient said.

"For these reasons, REIT conversion in 2009 would not be tax-efficient," she said, citing the debt issue.

In addition to lumber, Weyerhaeuser has investments in residential real-estate development and the production of wood pulp used to make disposable diapers and other consumer products.

Russell Croft, who helps manage $725 million at Croft-Leominster, said he was encouraged by comments from Weyerhaeuser executives Friday that the company will continue to sell noncore assets and trim head-office expenses. Conversion to a REIT will require that most of the company's profit is generated from investments in forests.

"They'd be jumping the gun if they said today they were converting to a REIT in six months," Croft said. "They need to continue to get rid of assets."

Weyerhaeuser said Thursday that it was seeking strategic alternatives for its Westwood Shipping Line and four regional railroads.

It agreed in March to sell its corrugated packaging and recycling businesses to Memphis, Tenn.-based International Paper for $6 billion. The transaction is expected to close in the third quarter. Last year, Weyerhaeuser spun off its fine-paper business in a transaction that created Montreal-based Domtar.

Decreasing home construction and losses at Weyerhaeuser's homebuilding unit led the company to report a worse-than-expected first-quarter loss of $148 million.

###

You would think the Plum Creek Timber Company would be doing all it could to avoid negative publicity right now.

The Seattle-based company’s proposal to build nearly 1000 homes and major resort destinations in the Moosehead Lake region has generated enormous controversy across the state, and still hasn’t been approved by the Maine Land Use Regulation Commission (LURC). Plum Creek has worked hard to put a green face on the plan, most notably by touting the benefits of the plan’s "conservation framework," which would protect more than 400,000 acres from development, though the framework would not prevent logging, mining, or water extraction on much of the land. (For more on the project, see "Up Plum Creek Without a Paddle," by Yanni Peary, November 28, 2007.)

But now Roger Merchant, a forester and educator at the University of Maine Cooperative Extension in Dover-Foxcroft, has blown the whistle on Plum Creek’s plans to log more than 250 acres of what may be old-growth forest between Monson and Greenville this summer.

Merchant approached Plum Creek with his concerns about the proposed cut last fall, but the company didn’t change its plans. So, last week Merchant sent a letter and photographs to LURC and a handful of state environmental agencies, calling for the site’s conservation and suggesting it as a potential eco-tourism spot.

Merchant is hardly your stereotypical tree-hugger — he supports Plum Creek’s plan for the North Woods and managed 100,000 acres of forest for the Dead River Company’s timber division in the 1960s — but he says this site is special. It shows no sign of ever having been logged and is home to many trees that are well over 200 years old.

"I’ve been walking through those woods for 15 years, and this is different," he says.

Merchant’s letter caught the attention of the Maine Natural Areas Program, which requested permission from Plum Creek to visit the land last week, and are waiting to hear when they might be allowed to do so. The Native Forest Network is also investigating the situation, and, on Friday, Plum Creek asked a forest ecologist from the independent Manomet Center for Conservation Sciences, based in Brunswick, to visit the site and make recommendations on how to proceed.

Plum Creek’s forester, Mark Doty, confirmed that Plum Creek plans to cut the parcel in the next few months. The trees there are certainly old, he says, but he says he couldn’t say whether or not they are technically old-growth until a company forester formally evaluates the site and makes a plan for how to proceed with the cut. Doty says the company always follows Manomet’s guidelines — which are designed to protect biodiversity during forestry — when logging.

Andy Whitman, the Manomet forest ecologist who will visit the site next month, defines old-growth stands as being made up of mostly 200- to 300-year-old trees. He says Manomet recommends protecting old-growth forest because it contains unique biodiversity, is socially and spiritually important to many people, and is a point of reference that shows what a forest looks like without human intervention.

Whitman says he thinks it is unlikely that the land in question is truly old-growth forest. "I’d be surprised, but I’m not ruling it out," he says. If it is, he’ll recommend leaving it untouched. If it’s simply older forest, he may advise Plum Creek to leave patches intact and cut half of the rest of the trees now and half in 10 years.

But Merchant says he’s seen other older-growth forest logged in this way, and that cutting even part of the forest will destroy both the integrity of the forest and its potential as an eco-tourism site.

Emily Posner, a volunteer with the Native Forest Network, says this situation only casts more doubt on Plum Creek’s plan for the North Woods. Even if the conservation easement were in place today, its guidelines would still allow Plum Creek to log this parcel. Calling the conservation easement "greenwashing," Posner says that Plum Creek is trying to profit three times from this land. First, she says, the company will cut and sell the existing timber, then sell the proposed conservation easement to the Nature Conservancy for $35 million, and still, even under conservation, retain the rights to continue to log the land. "This is the exact opposite of the direction we should be going in," she says.

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AUGUSTA, Maine - Members of Maine’s Land Use Regulation Commission indicated Wednesday that they could stomach an unprecedented amount of development in the Moosehead Lake region as long as it comes with land conservation on an equally historic scale.

It wasn’t an official vote, but the commissioners directed staff to fine-tune a proposal that would allow Plum Creek Timber Co. to create 975 house lots and two large resorts near Maine’s largest lake.

Several of the seven commission members expressed concerns about the scope of the development, particularly at Lily Bay. But those concerns were tempered in large part by the prospect of permanently protecting nearly 400,000 acres of forestland in the Moosehead region, commissioners said.

"That is extremely important," commissioner Rebecca Kurtz said. "In my mind, nobody is going to get everything that they want. But this proposal seems to offer the most benefit for every entity."

LURC’s review of the largest development proposal in Maine history is far from complete.

The commission will open the issue back up to public comment next week before potentially making more revisions. A final vote is expected sometime later this summer or fall.

Of course, that’s assuming Plum Creek will agree to the current compromise.

"We’ve got a lot to consider," said Luke Muzzy, a key architect of the plan with Plum Creek. "We’ll spend the next few days really digesting this ... But we’re concerned. There are a lot of changes here."

Plum Creek’s critics, on the other hand, contend that LURC hasn’t made enough changes to a plan they say contains too much development in the wrong places. And they are accusing both LURC staff and commission members of being so wooed by the conservation plan that they overlooked the potential harm caused by the development.

"It’s like they’ve given Plum Creek all of the development and everything they want with very little restrictions," said Bob Guethlen, a resident of Tomhegan Township on Moosehead Lake.

Plum Creek’s proposal has deeply divided Mainers in all corners of the state.

Supporters argue that Plum Creek’s plan for 975 house lots, two resorts and more than 400,000 acres of conservation will create jobs and promote tourism while permanently protecting the region’s natural beauty.

Opponents, meanwhile, predict that outlying vacation homes for the wealthy will not create jobs, funnel tax dollars into local economies or help fill shrinking schools. At the same time, critics say the resulting traffic, pollution and "wilderness sprawl" will spoil the very qualities that draw tourists to the region.

The LURC staff recommendations loosely endorsed by the commission Wednesday do not change the number of house lots or reduce the 1,050 resort "accommodations" proposed for Big Moose Mountain and Lily Bay. A resort accommodation could be a hotel room, rental condominium or a single-family house.

Muzzy said the company is concerned about the staff recommendation to relocate 55 house lots away from Long Pond and a proposal to remove nearly 3,000 acres from the Lily Bay development.

Perhaps the most significant changes dealt with the conservation lands.

Plum Creek has offered to permanently protect more than 430,000 acres, with one giant catch: The conservation deal is contingent on LURC approval of a development plan.

But LURC’s draft proposal turns the tables on Plum Creek by requiring that the company complete the conservation deals before it receives any permits for houses or resorts.

"This is a package," commissioner Gwen Hilton said in explaining why she could support the plan despite concerns about impacts on Lily Bay. "There is a potential for getting a lot of conservation land out of this."

Several groups opposed to Plum Creek’s application see that as a bad trade-off, however.

Critics pointed out that Plum Creek is donating only 91,000 acres for permanent protection. The company would receive $35 million from conservation groups for easements or land sales on the remaining 340,000 acres.

Those groups, which include The Nature Conservancy, have said they plan to seek grants from the state and federal governments to help pay the $35 million price tag. And that prospect of taxpayer dollars going into Plum Creek pockets angers critics.

"There is a public policy issue of a corporation benefiting twice, first from an extraordinary amount of development ... and then through mitigation being paid for by the public," said Jody Jones with Maine Audubon.

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Losses in scenic value would be offset by economic gains, LURC staffers say.

AUGUSTA — The Moosehead Lake region can absorb the impact of 2,000 new housing units that a Plum Creek development proposal could bring, Land Use Regulation Commission staff said Tuesday.

LURC commissioners met Tuesday for the first of two days of deliberations on the development proposal some fear would change the character surrounding Maine's largest lake.

Commission Chairman E. Bart Harvey said commissioners won't issue a final decision whether to approve the proposal until later this summer.

But staff members said they don't feel the estimated 975 homes and the resort accommodations for 1,050 people would have an overly damaging impact on the area.

They acknowledged that some areas, such as the now relatively undeveloped Indian Pond, could suffer from reduced scenic value.

But they said losses in scenic and recreational opportunities would be offset by Plum Creek's plans to put large parcels of land under conservation easements to protect them from future development.

Commissioner Edward Laverty, who early in Tuesday's meeting expressed concerns about the environmental and scenic impact of several specific parts of the proposal, said it is important to also consider potential positive impacts on the area's struggling economy.

"I'm also looking at the impact on what is becoming a rare, unique, endangered species: people who live and work there," Laverty said. "I think the area can absorb a substantial amount of economic development. I'm prepared to at least consider this, especially in light of the gains in conservation easements."

In the largest subdivision plan ever in Maine's North Woods, Plum Creek wants to rezone about 20,000 acres in the Moosehead region to accommodate development.

Plum Creek officials pledged, if their proposal is approved, to permanently protect more than 400,000 acres in the region through easements and land sales.

Environmental groups have criticized the proposal as too big and disruptive for such a rural area.

Although the commission did not allow public comment, many of the approximately 60 spectators at Tuesday's session wore stickers stating "Too much development: Save Moosehead."

LURC staff member Agnieszka "Aga" Pinette said numerous changes to Plum Creek's proposal recommended by staff are " a set of recommendations, if accepted, we believe would result in a concept plan that meets the review criteria."

LURC staff recommended that a large parcel of land near Moosehead's Lily Bay marked for housing development by Plum Creek be removed from the plan, though the resort there would be allowed to remain.

Commissioners expressed concern that development in that area would result in legal action by those concerned about Canada lynx habitat.

"The removal of that zone is a huge step toward making this development acceptable," said Commissioner Steve Schaefer.

DISCLOSURE

PLUM CREEK'S president and chief executive officer, Rick Holley, serves on the boards of directors of two companies affiliated with the Portland Press Herald/Maine Sunday Telegram: the Blethen Corp. and The Seattle Times Co.

THE BLETHEN CORP. is the majority owner of The Seattle Times Co., which consists of The Seattle Times newspaper, three other Washington state newspapers and Blethen Maine Newspapers. Holley joined the Blethen Corp. board of directors in April 2006 and joined The Seattle Times board in January 2007.

BLETHEN MAINE Newspapers includes the Portland Press Herald/Maine Sunday Telegram, the Kennebec Journal, the Morning Sentinel and the Coastal Journal. It has a separate board of directors, and Holley does not serve on that board.

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AUGUSTA, Maine — The Moosehead Lake area could absorb the 2,000-plus houses and resort accommodations proposed by Plum Creek through a combination of careful planning, strong oversight and large-scale land conservation, state regulators were told Tuesday.

After three years of heated public debate on the matter, the fate of Plum Creek’s historic development proposal for the Moosehead region is finally in the hands of state regulators. Maine’s Land Use Regulation Commission took another slow, steady step toward a potential vote on the proposal later this year when they held the first of two days of deliberative sessions on the massive rezoning application on Tuesday.

LURC staff and consultants did most of the talking as they laid out their rationale for a long list of recommended changes they argue would allow much-needed economic growth while protecting the natural character of the region.

Arguably the most important moment Tuesday came when the staff and consultants explained why they were not recommending a reduction in the total number of lots that would be developed.

Plum Creek is seeking LURC authorization for 975 house lots and 1,050 accommodations in two resorts, one located on Big Moose Mountain and the other at Lily Bay. One resort accommodation could be anything from a hotel room to a single-family house located on resort grounds.

Evan Richert, a former director of the State Planning Office working as a LURC consultant, said the development will undoubtedly change aspects of the region. New subdivisions will diminish scenic views in some areas and traffic will increase in key communities, he said. Richert also predicted that outdoor recreation may shift to other areas in the region as some spots get developed.

But he said the 400,000-plus acres of conservation proposed as part of the plan, when combined with strict LURC oversight of the development, should help mitigate the impacts from 2,025 development "units," he told the commission.

"We could not find evidence that the cumulative impact of the proposed units would exceed the carrying capacity of this region as a whole," Richert said. "We think there will be some shifts ... but that is why we think the conservation [package] is so important to absorbing those shifts."

Plum Creek officials and the plan supporters insist the conservation component will help ensure the region retains the natural beauty that has made Moosehead a tourist destination for well over a century.

Plum Creek has offered to donate conservation easements on 91,000 acres of forestland in the region to offset the impacts of development, as required under LURC rules.

But the company also has put forward a series of conservation deals — contingent on LURC approval of a development plan — that would permanently protect another 340,000 acres. Those deals, which were negotiated with nonprofit conservation groups, would generate $35 million for the company.

At least two of the seven commissioners — Bart Harvey and Ed Laverty — indicated they could support allowing that amount of development as long as the conservation deals went through. LURC staff have recommended requiring Plum Creek to complete most of the conservation package before the agency processes any development applications.

"It’s an essential piece of the whole package," said Harvey, a Greenville native who now lives in Millinocket. "If we are going to say 2,000 units are okay, that’s a lot to swallow. So there has to be something on the other side of the equation."

The other commissioners present either did not speak on the issue or were noncommittal.

Critics of Plum Creek’s plan say the proposal is a bad trade-off for the state.

Cathy Johnson, North Woods project director for the Natural Resources Council of Maine, said she believes LURC staff and some commissioners are willing to "sacrifice" the beauty of Lily Bay and similar areas in order to protect other lands.

"It’s really horse trading that we’ll put up with all of these numbers [of units] if we get this conservation," Johnson said after the meeting. NRCM and Maine Audubon are partner organizations in the regulatory review.

Wendy Weiger of the citizens group Moosehead Region Futures Committee said she was disappointed the commissioners did not spend more time discussing whether this amount of development was needed in the region.

The commissioners will resume their discussions today at 8:30 a.m. Among other topics, the group will take up Plum Creek’s proposal for a resort and large subdivision on Lily Bay, which has consistently generated the most opposition.

The deliberative sessions, which are open to the public, are being held at the St. Paul Center located at 136 State St. in Augusta. The sessions are also being broadcast live online at www.maine.gov/doc/lurc.

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A $182 million federal tax break might not be enough to prevent a major restructuring of a longtime Northwest fixture and the nation's last integrated timber company still standing, which has Wall Street analysts asking . . .

A $182 million tax break for Weyerhaeuser, tucked inside the farm bill, was expected to help the century-old timber company fend off a major restructuring sought by Wall Street that could have forced the firm to sell off its mills and increase logging on its forests.

But Weyerhaeuser officials cautioned there are no guarantees the restructuring still won't happen.

Analysts believe the tax relief might not be enough to protect Weyerhaeuser. Its days as the nation's last, major integrated timber company -- growing its own trees and milling them into lumber and other forest products -- could be numbered.

Like Boeing, Microsoft, Nordstrom and Starbucks, the Federal Way, Wash.-based Weyerhaeuser is a quintessential Northwest company whose roots run deep in a region where logging and mill work for decades were a way of life.

The company owns 1.1 million acres of prime timberland in Washington and roughly the same amount in Oregon.

Nationwide, the company owns 6.4 million acres, much of it across the Deep South, from east Texas to North Carolina. The company also owns or manages vast forest acreages in Canada and South America.

Weyerhaeuser already has slimmed down. In 2007, it sold off its fine-paper business and is now selling its containerboard-packaging operations in a deal that could be worth $6 billion. Its work force has dropped from 50,000 to 25,000.

Besides the timberland, the company still owns 28 softwood lumber mills in the United States and Canada, where it produces lumber, plywood and other manufactured products; five pulp mills, with a worldwide buyers' list; and a real estate division operating in 10 states.

But continued pressure from Wall Street could force even more changes.

"They are the last of a breed," said Steven Chercover, an analyst with D.A. Davidson & Co., in Portland. "The world has changed, and Weyerhaeuser has to change with it."

Most of the nation's major timber companies have converted their timberlands into real estate investment trusts, or REITs. Wall Street loves REITs because they sharply cut a company's tax bill, with the bulk of a company's profits passed directly to stockholders, who have to pay the taxes.

Weyerhaeuser so far has been reluctant to form a REIT, because under complicated federal laws it might have to divest itself of all its operations not connected with actually growing and harvesting trees. The company has prided itself on being integrated.

Weyerhaeuser is taxed at a 35 percent corporate rate. Companies that have formed REITs, such as Seattle's Plum Creek Timber Co., have reduced their tax bills to virtually zero, though stockholders still have a 15 percent capital gains tax.

For more than a year, Weyerhaeuser lobbied for a change in the tax code to level the playing field and allow it to remain a fully integrated company. Initially a separate bill was introduced, the Timber Revitalization and Economic Enhancement Act. The act came close to being attached to energy legislation that passed Congress in December, but was dropped during last-minute negotiations.

Weyerhaeuser officials, including Chairman Steve Rogel, continued to lobby lawmakers face to face, telling them the company's survival was at stake.

On the House side, Rep. Norm Dicks, D-Wash., lobbied Ways and Means Committee Chairman Charles Rangel, D-N.Y., and the Democratic leadership. In the Senate, Washington's two Democratic senators, Patty Murray and Maria Cantwell, worked with the chairman of the Senate Finance Committee, Montana Sen. Max Baucus.

According to some reports, Baucus' support was cemented when the tax burden for Plum Creek and other timber companies with REITs was also eased. Plum Creek has major holdings in Montana.

"With the housing slowdown and global competition taking a toll, this provision will protect thousands of family-wage jobs in Washington state," said Murray.

In the end, the timber revitalization act was included in the farm bill. Weyerhaeuser and some small timber companies will see their tax rate reduced from 35 percent to about 17 percent, congressional aides said.

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The developer wants to rezone 20,000 acres in the Moosehead Lake region for 975 homes and two resorts.

The state agency reviewing Plum Creek Timber Co.'s plan for homes and resorts around Moosehead Lake wants development areas scaled back and conservation lands protected by tougher restrictions.

The Maine Land Use Regulation Commission's staff recommendations, detailed in a 127-page document released Tuesday evening, do not take a stand on whether the project should ultimately be approved. But they include a long list of changes that the agency's planners and consultants believe are needed before the project moves forward.

Major recommendations include scaling back the proposed Lily Bay Resort area by nearly 3,000 acres to protect sensitive highlands and wildlife habitat, and scaling back a residential development around Long Pond from 110 units to 55 units.

The document is the first public feedback from the state agency that has been gathering information and testimony on the rezoning plan for three years, and it marks the beginning of the formal review process that could lead to a final decision later this year.

Members of the commission, a panel appointed by the governor, will take up the staff's recommendations during a two-day meeting next Tuesday and Wednesday in Augusta.

It's unclear whether Plum Creek will be willing to make the changes. A company official said Tuesday that it will need time to review them.

Plum Creek wants to rezone about 20,000 acres in the Moosehead region for 975 house lots and two resorts, which could include an additional 1,000 condos, homes or other accommodations. It has also pledged to permanently protect more than 400,000 acres in the region through easements and land sales.

It is the largest subdivision plan ever in Maine's North Woods and its fate could either speed up or slow down other development throughout the region.

Plum Creek officials, as well as a long list of critics and supporters of the plan, were eager to read the recommendations, which were posted on the land use commission's Web site. Here are some examples:

Remove nearly 3,000 acres from the 4,358-acre proposed Lily Bay resort and add it to conservation lands.

Reduce the residential development plan for Long Pond from 110 units to 55, and shift nearly 600 of the 1,500 acres of development area to conservation lands.

Take more than 100 acres from the proposed development zone near Big Moose Mountain and add it toconservation lands to protect wildlife habitat, including waterfowl habitat and deer wintering areas.

Reduce the maximum height of commercial structures from 100 feet to 60 feet.

Limit the number of docks and boat launches at variouslakes, such as a limit of one on Upper Wilson Pond.

Strengthen the role of a state-run management advisory team to monitor conservation lands.

Rewrite conservation easements to increase and clarify protections for ecologically valuable lands.

Require that a separate $10 million conservation deal to protect 266,000 acres be completed before construction.

Plum Creek's project manager, Luke Muzzy, did not return a message left after the document was posted, but said earlier on Tuesday that it will take time to sort through the details. The company also is eager to hear from the commissioners themselves about the need for any changes, he said.

"I'm just waiting to see what they have to say before we make any decisions," Muzzy said.

Critics of the plan also were reviewing the recommendations late Tuesday and are expected to issue statements and responses later this week. And despite the call for significant changes, at least some opponents are sure to object to the process.

"We've said there can be meaningful development in the Moosehead region, but that Plum Creek's proposal doesn't come close," said Jym St. Pierre, Maine director of RESTORE: The North Woods.

St. Pierre, a former member of the land use commission's staff, said the agency has never before given a landowner a list of what it needs to do to get a rezoning application approved.

"What LURC should do now is say to Plum Creek, 'The law only allows us to give a yes or no answer,'" he said. "LURC should say 'No' to Plum Creek and allow them to go back to the drawing board if they choose to."

Commission members are expected at some point to provide clear guidance to the staff -- as well as Plum Creek -- about which changes they believe are necessary.

Those recommendations are likely to be published early this summer, when the commission will accept another round of public comments.

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Montana could purchase vast forested swaths of Plum Creek Timber Co. land, valued at hundreds of millions of dollars, under a little-known provision tucked into the nation's farm bill.

That $307 billion piece of legislation passed through the Senate on Thursday, after clearing the House a day before.

Congressional critics called the provision "green pork," and complained the program's narrow criteria were met only in Montana, where Plum Creek owns 1.2 million acres.

The provision, pushed by Sen. Max Baucus, D-Mont., would allow states or nonprofit groups to issue $500 million in federal tax-credit bonds. Money raised would buy up critical forestland now being eyed for real estate development.

"Max doesn't want to see these prime hunting and fishing lands turned into golf courses, condos and strip malls," said Baucus spokesman Barrett Kaiser. "Private timberland is being gobbled up for development, and this provision gives states the tools they need for land conservation."

Local governments like that idea, worried as they are about the public costs of servicing new residential neighborhoods in the woods, and conservationists like it, too, as it ensures recreational access and wildlife security.

Under the provision, the state or a nonprofit would sell up to $500 million in tax-credit bonds to an investo