Railroads & Clearcuts

Railroad Land Grant
Corporations in the News: 2007

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PLUM CREEK - WISCONSIN

The Forestland Group LLC and Plum Creek Timber announce the purchase and sale of 100,000 acres of Wisconsin land

Company news release, December 21, 2007

TOMAHAWK, Wis. - The Forestland Group, LLC (TFG) and Plum Creek Timber Company, Inc. today announced the purchase and sale of approximately 100,000 acres of Wisconsin land. Through the purchase, an investment vehicle managed by TFG, a long-term timberland investment management organization, will take ownership of approximately 100,000 acres of Plum Creek’s land primarily in Rusk, Sawyer and Oneida counties with small amounts of the acreage also spreading into Price, Langlade and Forest counties. The land is being sold in large-size timberland tracts.

With the purchase TFG will obtain its first Wisconsin timberlands. The organization currently owns timberland in 18 states, with its properties closest to Wisconsin being in Michigan. Once the sale is complete, Plum Creek will remain the largest private landowner in the state of Wisconsin, owning approximately 400,000 acres of timberland in the northern part of the state.

"These lands are valuable timberlands that have been well-managed by Plum Creek, and this purchase gives us the opportunity to enter Wisconsin and participate in the state’s forest products industry," said Chris Zinkhan, Managing Director of TFG. "We look forward to helping grow and contribute to Wisconsin’s economy and to serving Wisconsin customers in the coming years."

"We welcome Forestland Group as the newest member of a diverse, active and committed group of companies and individuals who make up Wisconsin’s historic and important forest products industry," said Lynn Wilson, General Manager of Plum Creek’s Lake States Region.

The Forestland Group is the largest private owner of hardwood timberlands in the United States. The company controls 2.7 million acres of timberlands in the United States and Latin America. Prior to this acquisition, the company controlled approximately 500,000 acres in the Great Lakes States. The Forestland Group was the first TIMO in the world to have its entire portfolio Forest Stewardship Council certified.

Plum Creek is the largest and most geographically diverse private landowner in the nation, with 8.2 million acres of timberlands in major timber producing regions of the United States and 10 wood products manufacturing facilities in the Northwest. In Wisconsin, Plum Creek practices sustainable forestry on forestland in 28 counties throughout the state and has offices in Tomahawk, Hayward and Wisconsin Rapids. The company is active in Wisconsin’s biomass industry, supports the Plum Creek Foundation and its Wisconsin grants, and is in active partnership with many conservation groups in the state.

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Seattle Business Leaders Join SF Fed's Economic Advisory Council. Business Wire, Dec 20, 2007

The San Francisco Federal Reserve Bank announced today that Rick R. Holley, president and CEO of Seattle-based Plum Creek Timber Company [has]... joined the San Francisco Fed's Economic Advisory Council...

The Federal Reserve Bank of San Francisco, with branch offices in Los Angeles, Seattle, Salt Lake City, and Portland, and a cash processing office in Phoenix, provides wholesale banking services to financial institutions throughout the nine western states. As the nation's central bank, the Federal Reserve System formulates monetary policy, serves as a bank regulator, administers consumer protection laws, and is fiscal agent for the U.S. government...

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A Little Late: The Blethen Maine Newspapers wait months to disclose a potential conflict of interest. By Al Diamon. Down East.com, Dec 17, 2007

You’d have to be a careful reader to have caught it. Near the end of a Dec. 16 newspaper story on PlumCreek Timber Co.’s plans to build a resort and housing near Moosehead Lake was some information that should have been publicized a long time ago. The story appeared in the Maine Sunday Telegram, Kennebec Journal and Morning Sentinel – three publications owned by the Blethen Maine Newspapers.

For nearly two years, the papers have been reporting and editorializing about Plum Creek’s proposal. The plan has been controversial since its introduction in April 2005, eliciting strong responses from supporters and opponents and even instances of vandalism. But it wasn’t until environmental reporter John Richardson’s story on a Dec. 15 public hearing in Portland by the Land Use Regulation Commission that readers learned Blethen has an apparent conflict of interest involving Plum Creek.

Incongruously attached to the end of the public-hearing piece was a long paragraph detailing the role of a top Plum Creek official in the papers’ management. According to Richardson, "Plum Creek’s president and chief executive officer, Rick Holley, serves on the boards of directors of two companies affiliated with [the Maine newspapers]." Richardson said Holley is a director of both the Blethen Corp. and the Seattle Times Co. STC owns the Blethen Maine Newspapers. Blethen Corp. owns a majority share of STC. The story notes that the Maine papers have their own board of directors, but Holley isn’t a member.

A Google search turned up only one other reference to Holley’s connection to Blethen, a brief mention as part of Holley’s biography on Plum Creek’s Web site. This appears to be the first time a newspaper in Maine has published this information.

It seems unlikely that one member of its parent company’s board could have a significant influence on Blethen’s local coverage on the other side of the continent. But the Maine papers’ tardiness in alerting their readers to Holley’s involvement in their business and the lack of prominence of that notification calls into question their credibility.

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Plum Creek foes plentiful in Portland: Backers of Moosehead-area development outnumbered as hearing draws hundreds. By John Richardson. Portland [Maine] Press Herald, Dec 16, 2007

Hundreds of southern Mainers packed an all-day public hearing Saturday in Portland to get their first official say on Plum Creek Timber Co.'s controversial development plan for the Moosehead Lake region.

The crowd included more opponents of the plan than the one that gathered two weeks ago in Greenville, the gateway to the Moosehead region. Still, opinions were as sharply divided as they have been across the state since the proposal was unveiled three years ago.

"That`s just too much development," said Walter Simmons of Portland, one of many who spoke about rustic family camps in the woods around Moosehead. "I think it's going to restrict the wilderness that I`ve known since 1959."

Terry Walters of Hollis said the plan would develop only 5 percent of the land while preserving about 400,000 acres of working forest for logging and recreational access.

"I believe we can get it all, and I believe it`s a windfall for the state of Maine," Walters said.

Plum Creek wants state permission to rezone timberland to make way for two resorts and 975 house lots scattered around Moosehead. The plan also calls for the company to donate or sell conservation easements restricting development on about 400,000 acres around the lake.

About 500 people attended Saturday's hearing at the Holiday Inn by the Bay, according to police. More than 300 of them registered to speak, including 180 opponents and 124 supporters, according to organizers. In Greenville, supporters outnumbers opponents by about a 2-to-1 margin.

Time did not permit all of them to speak Saturday.

It was the third -- and so far the largest -- of four public hearings before the Maine Land Use Regulation Commission, the zoning and planning agency for the unorganized territories of northern Maine. The final hearing is scheduled for Jan. 19 in Greenville.

Separately, the commission is hearing testimony from Plum Creek and official stakeholder groups, both for and against the plan.

Some northern Mainers have criticized the commission for even coming to Portland to gather feedback about a proposal to rezone land more than 150 miles away.

"Maybe the folks down here don`t want that area to prosper," John Holmes of Dixfield said Saturday. "Maybe they go up once or twice a year, and they want to decide what`s best for people (who) are up there ... 365 days a year."

That didn`t stop a long line of southern Mainers from describing strong connections to the land and wildlife of the Mooshead region, or from urging the commission to protect what they called a resource of statewide, and even national, importance.

'Like No Other'

Christine Slader of Yarmouth said her great-great-grandfather built her family's camp there more than 100 years ago. "Moosehead Lake has an unusual and unique character. It is like no other," she said.

Chloe Maxmin, a high school sophomore from Nobleboro, said that because of her experiences around Moosehead, she has decided to become an environmental scientist, and she has written letters to the commission, the governor and newspapers, opposing Plum Creek's plan.

"You have the power to protect the most beautiful ... part of this state," she told the commission.

Judy Wentzell of Portland said she and her family camp at Lily Bay State Park, a peaceful campground on the eastern shore of Moosehead Lake, near where Plum Creek wants to put a resort and a subdivision.

The park "wouldn`t really be remote, abutted by a resort, a golf course and a marina," Wentzell said. "The experience at Lily Bay State park won`t be the same."

Supporters See Balance

Many southern Mainers, however, said the plan offers the best hope for restoring the region`s tourism economy and for controlling development pressures.

"To me, the Plum Creek plan replicates in a modern setting much of which existed in Moosehead years ago," said Gregory Sweetser of Cumberland, director of the Ski Maine program.

Sherry Huber, a land conservation supporter from Falmouth, said the plan would bring stability and predictability to the region`s forests.

"There is piecemeal, unplanned development (happening) all around Moosehead today. ... Approval of the Plum Creek plan preserves an area twice the size of Baxter State Park," she said.

Rob Gardiner, a longtime environmental activist from Cumberland, also said the plan would prevent gradual, sprawling development.

"Environmentalists have long said what we need is long-range planning to balance development with conservation," he said.

Parke Burmeister, a law student in Portland, called the balance of development and conservation "a dream come true. ... I hope that it will not pass us by."

Seattle-based Plum Creek is the largest private timberland owner in the country, and one of the largest in Maine.

Plum Creek's president and CEO, 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. -- according to Corey Digiacinto, communications manager for The Seattle Times Co.

The Blethen Corp. is the majority owner of The Seattle Times Co., which consists of The Seattle Times, three other Washington state newspapers, and the Blethen Maine Newspapers.

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

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An earmark runs through it. Seattle Times, Dec 16, 2007

There's nothing quite like the Montana trout-fishing land owned by Seattle-based Plum Creek Timber and celebrated in "A River Runs Through It."

That, at least, is the figuring in Congress. Deep in the thousand-plus pages of the energy bill now pending in D.C. there's a special provision that could only affect more than 40,000 acres owned by Plum Creek in that area, Bloomberg News reported.

The U.S. Fish and Wildlife Service has been working with Plum Creek since 2000 to try to protect the threatened bull trout in the Bull River area in the state near the setting of Norman Maclean's novella, "A River Runs Through It," later a movie directed by Robert Redford.

Bloomberg News reports the energy bill contains language to make U.S. taxpayers pay the interest on as much as $500 million of state-issued "forestry conservation bonds" to be used for the potential purchase of prime bull trout habitat that otherwise is in danger of development.

U.S. taxpayers would pay as much as $161 million to help the state of Montana finance the deal.

The property is unnamed, but the specifications make clear it belongs to Plum Creek, the biggest private landowner in Montana.

The provision "aims to protect pristine lands from ever being flipped by developers into condos and strip malls," Carol Guthrie, a spokeswoman for the Senate Finance Committee, told Bloomberg News. That panel's chairman, Democrat Max Baucus, is from Montana and helped write the energy bill.

House Republicans called the provision a special-interest clause, or earmark, which Democrats said they would limit when they took control of Congress in January.

The legislation "can only possibly benefit one landowner in the U.S.," Republican Rep. Jim McCrery of Louisiana told reporters. "These are the kinds of things that are hatched in secrecy."

Kathy Budinick, a spokeswoman for Plum Creek, and Guthrie told Bloomberg News the company didn't lobby to have the provision added to the energy bill.

"This is not something Plum Creek is doing, it is something Senator Baucus is doing," Budinick said.

Plum Creek's political action committee contributed $9,000 to Baucus in 2005 and 2006, more than it gave to any other federal candidate, according to the Washington-based Center for Responsive Politics.

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Mudslide photo spurs look at logging practices. By Hal Bernton. Seattle Times, Dec 16, 2007

Nearly 3-1/2 years ago, Weyerhaeuser asked state officials for approval to clear-cut 106 acres on a steep mountain slope fronting on Stillman Creek in Lewis County.

This was a slide-prone drainage. But a Weyerhaeuser geologist found "no potentially unstable areas" in the area to be harvested and the state approved the logging.

Earlier this month, the huge storm that enveloped Southwest Washington triggered numerous slides on this slope. Slides crashed into Stillman Creek, a major tributary of the South Fork of Chehalis River, adding to the destructive mix of mud, wood debris and floodwaters that inundated homes and farms in the Boistfort Valley west of Chehalis.

This slope captured the eye of Seattle Times photojournalist Steve Ringman as he made a helicopter flight over dozens of slides in the Stillman Creek drainage. His photograph, first published last Sunday, offered a stark view of the storm's effects on a tract of heavily logged lands.

The photo raised concerns at Weyerhaeuser, the timber giant that has sought to cultivate an image of solid environmental stewardship. In recent days, corporate officials did their own flyover, scouting landslides there and elsewhere in the Northwest, where Weyerhaeuser owns more than 2 million acres.

"This storm was a catastrophic event, a natural disaster," said Frank Mendizabal, a Weyerhaeuser spokesman, noting that a Stillman Creek gauge recorded nearly 20 inches of rainfall in a 24-hour period. "That said, what I can tell you is that we are going to look at this particular unit and others, and see what effects the storm had, and see if we need to make any changes in our practices."

The damage also will be investigated by the state Department of Natural Resources, which regulates logging practices.

"We're going to look at how the storm tracked across the landscape," said Eric Schroff, southwest region manager for the department. "It's very much in our interest to see if there is anything that we can learn from this."

Others questioned why that slope was clear-cut in the first place.

"Weyerhaeuser has spent millions of dollars advertising how green they are," said Peter Goldman, founder of the Washington Forest Law Center. "But the public has to have a debate. Is this the kind of industrial forestry we want?"

Increased slide risk?

The Pacific Northwest has plenty of unstable slopes that even when thick with trees may slide as winter rains saturate the ground. Numerous studies have concluded that clear-cutting may increase slide risks by from two to five times, and building roads on those hillsides poses a still-higher risk.

"These big storms are the true test of our watershed management," said Fred Swanson, a Forest Service geologist in Oregon.

A 2001 overhaul of the Washington Forest Practices Act beefed up rules that regulate logging on steep, slide-prone land. When logging would likely trigger slides that put public resources or public safety at risk, the rules enable state officials to restrict the harvest.

The Stillman Creek tract proposed for logging in 2004 had slopes of up to 50 degrees, well above the threshold regulators used to define steepness.

So Weyerhaeuser asked a geologist to review the harvest area. That geologist walked the harvest area with a forester engineer and made field notes, according to Mendizabal, the Weyerhaeuser spokesman.

The geologist also consulted a detailed 1994 watershed analysis compiled under a Weyerhaeuser contract that designated this area as suitable for logging. That analysis mapped that hillside as part of a larger "moderate risk" landslide-zone area of more than 3,000 acres. Within that zone, there had been more than 80 landslides and debris torrents.

Nearly three-quarters of those slides had reached the streams, the analysis noted.

Weyerhaeuser officials say slide risks prompted them to trim the original harvest unit and leave some additional area of uncut trees.

But within the 106-acre site, the geologist found "no potentially unstable slopes."

State officials did their own review. In an office summary, they checked off boxes that indicated the larger Stillman Creek drainage contained highly erodible soils, unstable slopes and unstable soils.

But they still approved the clear-cut.

State officials say the Weyerhaeuser geologist's assessment was key to that approval.

"It was a very important thing. Without that, we would have potentially had to bring in one of our own geologists," said Schroff, of the Department of Natural Resources.

Focus on recovery

It will be weeks before Weyerhaeuser and other forest landowners tally the damage from the December storm. In an initial review of the mountain depicted in the photography, Weyerhaeuser officials found one area spared from logging is still standing. Another uncut area slid.

Meanwhile, in Lewis County, the focus is on recovery. For those who live along the South Fork of the Chehalis, there are difficult decisions to make about whether to boost up foundations and rebuild, or move to higher ground.

Many do not want to get into a blame game about what, apart from the rain, might have contributed to their misfortune.

But there are flashes of anger.

Rod Rector, a Weyerhaeuser employee whose home was flooded, attacked state rules that require standing trees to be left alongside streams and some logs to be left in them. The slides and floods then carried some of that wood downstream.

Others find fault elsewhere. A few days after the floodwaters receded, Paul Richied, a 37-year resident of the Boistfort Valley, parked his truck beside a farm field full of silt and debris.

"When you log off the whole damn hillside, you get into trouble," said Richied. "You got to leave some trees behind."

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Union Pacific Railroad Land Grant Still Alive

In December 2007, the U.S. House of Representatives passed H.R. 2246 to release any reversionary interest of the United States in and to certain lands in Reno, Nevada. The bill validated conveyances made by the Union Pacific Railroad Company of lands located in Reno, NV, that were originally conveyed by the United States to facilitate construction of transcontinental railroads.

The bill validates the conveyance made by: (1) the Union Pacific Railroad Company pursuant to the Memorandum of Understanding for Reno Rail Corridor, entered into on December 1, 1998, to the City of Reno, Nevada, of land... originally granted by the United States to the predecessor of the Union Pacific Railroad Company to facilitate construction of transcontinental railroads; and (2) CTB Inc., a Nevada Corporation, to the City of Reno, Nevada, of certain land deeded dated October 22, 2002. Releases all right, title, and interest of the United States in and to such lands to the City of Reno, Nevada, without consideration.

From the proceedings of the US House of representatives on December 4, 2007:

Del. Madeleine Bordallo [D-GU]:
Mr. Speaker, the Union Pacific Railroad operates a rail line through downtown Reno, Nevada. Like similar corridors across the West, the rail line was created on Federal land in the 19th century to facilitate development of a transcontinental rail system. The grant to the railroad includes a requirement that the land revert back to Federal ownership should it ever be abandoned by the railroad.
The City of Reno has undertaken a massive project to move approximately two miles of the rail line into a concrete trench constructed alongside the existing track to improve safety and traffic flow through downtown. As part of the project, the railroad apparently conveyed portions of the right-of-way to the city for construction of the trench. It is not clear whether Union Pacific had authority to make such a conveyance given the Federal reversionary interest. H.R. 2246, as amended, would simply release any Federal reversionary interest in the specific parcels involved in the project. So given the City's enormous investment in this project and that the parcels in question will continue to be used for purposes related to the operation of the rail line, clearing title to these parcels is appropriate. So I urge all of our colleagues to support H.R. 2246.

Rep. Dean Heller [R-NV]:
Mr. Speaker, I rise today in support of H.R. 2246, which will resolve outdated Federal reversionary interests in land important to the City of Reno, Nevada, which I represent.
The reversionary interest concerns a rail line that goes through downtown Reno. The City of Reno and the Union Pacific/Southern Pacific join together to submerge a portion of the track below street level as a result of merger between the two railroads.
As part of the project, known as RETRAC, the railroad agreed to grant the City of Reno title to the land immediately surrounding the right-of-way for the project within the city. This bill assists in the revitalization and economic development in this community.
Title for these lands was originally granted to the railroad in 1866 to facilitate construction of a transcontinental rail system. However, when the United States granted the right-of-way to the railroad, it retained a reversionary interest in the land to ensure that it was, in fact, used to facilitate the building of the railroad. This purpose obviously was satisfied many years ago.
This reversionary interest is an obsolete restriction on the title of the land granted to the City of Reno, and H.R. 2246 instructs the Secretary of the Interior to release the reversionary interest originally created in 1866.

Chair: The question is on the motion offered by the gentlewoman from Guam (Ms. Bordallo) that the House suspend the rules and pass the bill, H.R. 2246, as amended.

Chair: The question was taken; and (two-thirds being in the affirmative) the rules were suspended and the bill, as amended, was passed.

Chair: The title was amended so as to read: "A bill to provide for the release of any reversionary interest of the United States in and to certain lands in Reno, Nevada.".

Chair: A motion to reconsider was laid on the table.

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Port commits to buying Eastside rail line. By Keith Ervin. Seattle Times, Dec 11, 2007.

The Seattle Port Commission today committed itself to buying BNSF Railway's Eastside rail line for possible future use as a recreational trail and a passenger rail line.

The commission's unanimous vote authorizes Port CEO Tay Yoshitani to sign final documents to buy the 42-mile, Renton-to-Snohomish rail corridor for $103 million. Yoshitani was given authority to spend an additional $4 million on overhead, professional services and a contingency for keeping the existing track in place.

The commission's action didn't resolve a conflict over whether the rails should be removed to make way for a trail — a debate that has strained relations between Yoshitani, who favors further study, and King County Executive Ron Sims, who wants to pull up the rails to make way for a trail between Renton and Woodinville.

"We do have some time to determine its ultimate use for the full 42 miles," Commissioner Lloyd Hara said.

The county and the Port are continuing to discuss how best to accommodate "dual use" of the corridor for both trail and rail use.

"I think what's gotten lost in that whole debate," said Port Commission President John Creighton, "is the common vision I think shared by many stakeholders in the region including the Port and the county that we protect the corridor for public use and that we get that corridor into public ownership."

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Plum Creek's Risky Businesses. By Myers Reece, Flathead Beacon, Nov 1, 2007.

As the Plum Creek Timber Company becomes increasingly prominent in the real estate game, the nation's biggest private landowner is learning to deal with the ebbs and flows of those two unpopular headline grabbers of late: the weak housing market and its associated credit worries.

Less than a week after the timber giant reported that third quarter profits were down 36 percent from last year, the company's director of land asset management in Montana, Jerry Sorensen, spoke to a room of about 300 – including prominent developers, Realtors, planners and economists from around the Northwest – about Plum Creek's transition into the real estate market at the second annual NewWest.Net Real Estate and Development of the Northern Rockies Conference. Sorensen opened up his presentation with a Bob Dylan quote: "You don't need a weatherman to know which way the wind blows."

"The timber industry," Sorensen said, "is certainly in transition – everybody knows that."

Though Sorensen was booked to speak at the conference long before Plum Creek's third quarter's earnings were released, his appearance came at an appropriate time and in an appropriate place: western Montana. That region's fire season had much to do with the low profits, according to statements from Plum Creek President and CEO Rick Holley. In both a press release and a conference call with various analysts, Holley explained that because of Montana's active fire season, a national credit crunch and dips in the housing market, he wasn't surprised by the quarter's low earnings. But he is optimistic for the fourth quarter, as is Sorensen.

"Much of the shortfall is the result of certain land sales moving from the third quarter to the fourth quarter," Holley said in a statement. "We continue to expect to report very good results for this segment in 2007."

Holley described the main reasons for Plum Creek's slow quarter: Land deals were delayed or cancelled because of wildfires; new homes weren't built for the same reason; a national credit crunch and lulls in the housing market exacerbated those problems; portions of the timber harvest were burned up and work was stopped due to the fires. Holley believes fourth quarter profit stimulation will come from the revival of land deals that were postponed in the third quarter and salvage logging.

Plum Creek has grown substantially since it converted into a real estate investment trust (REIT) in 1999. Today, with 8.2 million acres nationwide, it is the largest private landowner in the U.S. It was real estate, however, that was hit hardest in the third quarter, as profits from both the timber and manufacturing/milling sectors were nearly on par with those of 2006. Of the company's $407 million third quarter revenue – $59 million of which was profit – only $94 million of it came from real estate, down from $129 million last year. But officials estimate this quarter's real estate revenue will be high.

"Our fourth sales are expected to be quite strong in excess of a $125 million," said David Lambert, Plum Creek's chief financial officer, in the conference call.

Sorensen said several factors place greater importance on real estate than ever before, including the continued decrease of domestic timber supply, a growing trend of buyers looking to foreign timber markets like British Columbia and of course the higher value of rural real estate land over timberland. One unfortunate result of Plum Creek's growth, Sorensen said, is that the company hasn't kept the public engaged and aware of its activities as well as it did when it was smaller.

"When I started with the company, I think we were a lot more open," Sorensen said. "As we grew, we kind of stepped back … In terms of broader public exposure, we're trying to engage more of that."

One part of public communication Sorensen believes Plum Creek has done a good job at, though, is working with counties – Missoula, Lake and Flathead in particular – to help decide land-use issues and help draft growth policies.

"This is very hard work, but we take it very seriously," he said of the growth policy work.

Sorensen said in an interview that Plum Creek's lost assets and affected real estate numbers in the Flathead were consistent with the overall earnings statistics. Fires like the Chippy Creek took their toll on Plum Creek's landholdings, but nothing like the Jocko Lakes Fire, which took out 20,000 of the 41,000 total timberland acres the company lost.

Sorensen pointed to the Township 110 Land Company as an example of Plum Creek's efforts to remain a force in the real estate market. Township 110, a property development company, is a subsidiary of Plum Creek that is active in Montana. Its office for its Midwestern and Northwestern lands is in Columbia Falls. Plum Creek owns 1.2 million acres in the state and it also employs 1,446 Montanans, while operating nine in-state manufacturing facilities and employing eight full-time wildlife biologists and hydrologists.

"Rest assured, Montana is definitely a very important part of our business," Sorensen said.

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Deal would save Eastside rail corridor for trails: Under plan, port buys land, leases part to county.
By Gregory Roberts, Seattle Post-Intelligencer, November 1, 2007

The Port of Seattle would buy a little-used railroad corridor on the Eastside and lease most of it to King County to develop a hiking and biking trail from Renton to Woodinville, in the latest version of a complicated deal involving the two public agencies and the BNSF Railway.

Neither county nor port administrators would comment on the proposal Thursday, but the port included an outline of the agreement in an online posting for a Port Commission meeting Friday, when the commission is scheduled to vote on the plan. The proposal also would require the approval of the County Council.

Here's the deal:

-- The port will pay BNSF $103 million for the corridor, which stretches 33 miles from Renton to Snohomish and includes a seven-mile spur from Woodinville to Redmond. The corridor's single railroad track would continue to provide freight service to businesses between Woodinville and Snohomish; the rest of the corridor, between Renton and Woodinville, would be leased to the county for the recreational trail.

-- The county will give the port 12 acres on Harbor Island, which the county bought for $8.5 million in 2003 as a potential site for a truck-to-rail garbage transfer station.

-- The county will consult with the port, which operates Sea-Tac Airport, on any major developments at Boeing Field, the county-owned airport in South Seattle.

The county holds an option to buy the corridor, but it expires at the end of the year, and BNSF has said it will look for other buyers after that, county officials have said. In that case, the corridor could be sold off piecemeal to private buyers.

The long-term lease of the corridor that is part of the latest deal has yet to be negotiated, but County Councilman Larry Phillips, D-Seattle, said Thursday that the charge to the county would be "nominal." The cost of developing the recreational trail also is unknown; under the original version of the plan, which called for conversion of the full length of the corridor into a trail, that amount was estimated at $66 million.

The initial version was detailed in February by County Executive Ron Sims, BNSF Chief Executive Matt Rose and Mic Dinsmore, who has since left his job as port executive director. It called for the port to put up the $103 million to buy the corridor and the $66 million to develop it as a trail, with the county giving the port Boeing Field and selling the Harbor Island property to the port if the three parties succeeded in identifying a site for a major truck/train transfer yard that would include garbage handling.

But opposition to that plan on the County Council and the Port Commission led to its revision.

Phillips, the most outspoken council opponent of the original agreement, endorsed the latest version.

"I'm very pleased," he said. "The best way I can characterize it is turning lemons into lemonade."

Phillips strongly objected to giving the port Boeing Field, which he regards as a valuable county asset. And despite Sims' assurances, Phillips also thought the original proposal did not go far enough to allow for potential future use of the corridor for light rail or other high-capacity transit. The new agreement addresses both of those concerns, he said.

As for the giveaway of the 12 acres that cost the county $8.5 million four years ago, Phillips said, "They extracted a little blood from this turnip."

The county acquired the 12 acres to prepare for the closing of the county-owned Cedar Hills Regional Landfill in Maple Valley, which is expected to reach capacity in the next decade. But Phillips said new approaches may take care of the county's future waste-disposal needs, including extending the life of the landfill.

The search for a truck/train transfer yard is more of a state/port concern, Phillips said, while another element in the original plan -- support for enlarging the railroad tunnel at Stampede Pass -- primarily involves the state, the port and BNSF.

Port commission opposition to the original deal focused on the $169 million price tag and the financial liability associated with taking over a 77-year-old county airport that could become entangled in costly efforts to clean up contaminants leaking into the nearby Duwamish River. But the port does have in interest in what happens at Boeing Field: Worries about protecting its investment at Sea-Tac prompted the port to help lead the successful opposition to Sims' 2005 proposal to lure Southwest Airlines from Sea-Tac to Boeing Field.

Port Commissioner Alex Fisken, who was skeptical of the initial plan, said Thursday that the new proposal sounds good to him.

Although the revised plan truncates the originally proposed recreational trail, David Hiller of the Cascade Bicycle Club applauded the agreement.

"Our main concern was keeping as much of the corridor as possible intact, and in public hands," he said

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Weyerhaeuser Sees Money Growing on Trees. By Ron Vlieger. Motley Fool, Nov 1, 2007.

As a lumber and homebuilding operation, Weyerhaeuser (NYSE: WY) has been hit with a double whammy of falling home sales and slumping demand for construction materials. But a company makeover, combined with timber-related tax relief anticipated in 2008, might entice investors to put down some green on the stock.

Weyerhaeuser's third-quarter results show that sales were off 9% overall, with double-digit drops in three of five business segments. For wood products, the biggest group, sales dropped 24%, while revenue from the real estate and homebuilding segment was down 20%. Small gains in the packaging segment and timber division weren't enough to offset those losses.

So the weakness from earlier in the year continued. Overall, year-to-date sales are off 11%, with some segments putting in an even worse showing. Earnings for the quarter came to $0.47 per share, down from $0.91 per share a year earlier, and would have been worse without a share buyback.

Here comes the sun?

But Weyerhaeuser remains optimistic, and it may have a trick up its sleeve. Earlier this year, the stock jumped to greater than $85 on rumors that the company would turn itself into a real estate investment trust. REITs enjoy tax advantages over corporations. Timber companies organized as REITs pay no corporate income tax, as long as they pay out at least 90% of their income to shareholders. That would help Weyerhaeuser against its international rivals, which already receive better tax treatment for their timber operations. Weyerhaeuser has named a REIT executive to its board, according to BusinessWeek, which suggests that the makeover may be coming soon.

Weyerhaeuser is also pushing something called the TREE Act (Timber Revitalization and Economic Enhancement -- aren't you glad you asked?), which management says should pass Congress in 2008. The TREE Act would make tax treatment more favorable for all timber companies, and make rules for choosing REIT status more compatible with timber operations.

Weyerhaeuser would not be the industry's first company to choose the REIT option. Potlatch (NYSE: PCH) reorganized in 2006 after being pressured by Franklin Resources (NYSE: BEN), a major shareholder. Others, like International Paper (NYSE: IP), have sold off their timberlands to existing REITs such as Plum Creek Timber (NYSE: PCL) and Rayonier (NYSE: RYN).

Better tax treatment, which would put more green into the hands of investors, would certainly brighten Weyerhaeuser's outlook -- and it could make the stock more attractive, too.

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A Tribute to Timber. By Christopher C. Williams. Barrons, Oct 29, 2007.

After years of growth through acquisitions, North American paper companies are turning over a new leaf. With foreign competition, a weak housing market and high costs pushing the paper sector to depressed levels, companies are selling off assets and refocusing their businesses to enhance shareholder returns.

Forest-products giant Weyerhaeuser (ticker: WY), one of the most acquisitive companies during the industry's heyday, grudgingly has fallen in line. The Federal Way, Wash.-based company, which arguably has the richest collection of assets in the industry, sold off its fine-paper business earlier this year, and bulls are betting the transaction is but the start of an intensive restructuring that could lift its shares above 100 from their current price of 68.

Under what may be the most appealing scenario, Weyerhaeuser would convert into a timberland real-estate investment trust, or REIT, by 2009, significantly lowering its taxes and presumably boosting its shares. Management, led by industry veteran Steven Rogel, also could pull other levers to unlock value, among them selling the company's valuable containerboard business, perhaps as soon as year end. Weyerhaeuser has significant real-estate and recycling operations that could fetch a nifty price, as well, while its vast timber holdings -- the company owns and manages more than 21 million acres of forest worldwide -- could be monetized, in part, amid growing investment interest in such "alternative" assets.

Investors want the company to convert to a timberland REIT.

Talk late last year that Weyerhaeuser was mulling REIT status sent its stock to an all-time high of 87 in February. The subsequent selloff has left the shares "at an attractive entry point for long-term investors," says Kent Croft, chief investment officer for Croft Funds, which holds more than 200,000 shares. "It's a good value today."

To be sure, Weyerhaeuser's fundamentals offer little to cheer. With much of the company's business in a cyclical downturn, third-quarter earnings, scheduled for release Wednesday, are expected to drop 48%, while profit for the year could come in at $1.69 a share, well below the peak of $5.43 three years ago. Analysts look for revenue to fall by 22% to $17 billion. Weyerhaeuser officials declined to speak with Barron's, citing the "quiet period" ahead of the earnings release.

Trading at 40 times this year's depressed estimates, Weyerhaeuser appears pricey. Yet focusing on its price-to-earnings ratio misses the forest -- and the trees. Conglomerates often sell at significant discounts to their estimated break-up value, and Weyerhaeuser may be one of the most enticing asset plays around.

"We think it's worth between 90 and 100 a share based on the parts of the business," says Michael Embler, chief investment officer for Franklin Mutual Advisers, which holds 17 million shares. "With different engines under the hood, there's a huge amount of value there."

Franklin Mutual, Weyerhaeuser's second-largest holder behind Capital Research and Management, is pushing the company to accelerate its restructuring. The main engine is Weyerhaeuser's timber, including some six million acres spread across most of the South. That, along with the company's four other business segments -- containerboard, wood products, cellulose fiber and real estate -- has led observers to invoke superlatives in describing Weyerhaeuser, whose history spans more than a century. One Wall Street analyst calls it "a national treasure," while Joshua Zaret of Longbow Research says Weyerhaeuser has "the best industrial-timberland base in the world."

Based on recent private-market transactions, Zaret, a former forester, values Weyerhaeuser's timber assets at $13 billion, or $59 a share -- just a bit under the company's stock-market value of $14.6 billion. At current prices, that means investors are getting Weyerhaeuser's other assets for a relative pittance. The timber business generated just 5% of last year's sales of $22 billion, but accounted for 64%, or $762 million, of total operating income.

Wood products, which chipped in almost $8 billion of revenue, is Weyerhaeuser's second-most-valuable business, according to Zaret, who estimates it's worth $3.2 billion, or $15 a share. The real-estate business, whose income Zaret expects to slump 58% in '07, comes in at around $10 a share. In all, the analyst values Weyerhaeuser's parts at $103 a share, some 51% above its current price.

Why the fuss over timber? It not only grows in value as trees grow, but tends to be a stable business that generates tons of cash. Big investors such as university endowments and pension funds have increased their investments in timber, and privately run timber investment-management organizations, or TIMOs, pay upwards of 20 times Ebitda, or earnings before interest, taxes, depreciation and amortization, for timberland. "It's among the best-performing asset classes over the past 100 years," says Franklin Mutual's Embler.

Paper companies, driven in part by shareholder pressure and potential tax benefits, are moving to monetize the value of their timber assets as they cut and paste their portfolios in an anxious game of survival. Seattle-based Plum Creek Timber (PCL), for example, converted to a timberland REIT in 1999, while International Paper (IP) sold six million acres of forest last year for $6.6 billion. Timber harvests by REITs are effectively taxed at 15%, while C-corporation timber concerns like Weyerhaeuser pay 35%.

This tax disadvantage prompts the market to value timber held by publicly traded C corporations at a discount to land held by REITs or private owners. Plum Creek, the largest REIT with more than eight million acres of timberland, trades for 18 times Ebitda, well above the multiple of 10 or 11 for the average paper company. Weyerhaeuser fetches eight times Ebitda.

If Weyerhaeuser were taxed as a REIT, notes Citigroup analyst Chip Dillon, the company and its shareholders would pay several hundred million dollars less in taxes. Alternatively, it could sell its land for top dollar. "Weyerhaeuser finds itself in a very inefficient state," he says. "That's why they have to do something."

Dillon, who has a Buy rating on the stock, puts 50/50 odds on a REIT conversion, while Mark Wilde of Deutsche Bank puts the chance at 70%. Wilde suggests it's no coincidence that Weyerhaeuser named Debra Cafaro, a well-regarded REIT executive, to its board of directors in January.

Meanwhile, Weyerhaeuser has said it is looking at options for its containerboard, packaging and recycling operations, which contribute 22% both of sales and operating income. Potential suitors for that business include rivals such as Smurfit-Stone Container (SSCC), IP and privately held Koch Industries.

A divestiture could be a stepping stone toward REITdom, as a timber REIT must get 75% of its operating income from timber-related assets. The assets of the corrugated business, combined with those of the divested fine-paper unit, accounted for roughly 45% of Weyerhaeuser's non-timber assets in 2006, notes Longbow. Analysts say a conversion could take two to three years.

REITdom couldn't come soon enough for Franklin Advisers, which sent a letter to Weyerhaeuser late last year urging the company to consider converting to a REIT. Embler tells Barron's he's "agnostic" as to how Weyerhaeuser enhances value, but he and other investors want action. "If they don't do anything, then we'd ratchet up our dissent," he says.

Franklin's agitation spurred Potlatch (PCH), another forest-products concern, to convert to a REIT last year. "Weyerhaeuser understands and the market understands that the company is operating under a significant disadvantage," Embler says.

To date, Rogel & Co. have been mum, at least publicly, which probably is wise. The Internal Revenue Service, by some estimates, could hit Weyerhaeuser with a tax bill as high as $4 billion if it deems the company is switching to a REIT simply to avoid taxes.

Timber companies could get some relief this year from Congress, which is mulling passage of the Timber Revitalization and Economic Enhancement Act. Aimed at enhancing the industry's global competitiveness, it would cut the timber-harvest tax for C corporations by 60%, to 14%.

Weyerhaeuser has downplayed talk it might sell its timber assets, insisting it intends to keep timberland at the core of its operations. "Unlike its timberland-divesting peers, Weyerhaeuser believes it can create the greatest value for its shareholders by managing its timberlands over the longer term, using advanced silvicultural practices and expanding its earnings streams beyond the timber harvest," says Zaret of Longbow.

The Bottom Line:

Weyerhaeuser's asset value may exceed more than $100 a share, some 50% above its current stock price of 68.

At some point, too, the company's fundamentals are likely to improve. The weaker dollar is slowing imports, and market segments such as pulp and containerboard are enjoying pricing gains. Even wood products could recover a bit in 2008. At the peak of the next cycle, probably in 2010, Weyerhaeuser could earn $8.70 a share, Citigroup's Dillon estimates.

Chances are investors who stick around will be richly rewarded.

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Vote For Me, Please: Score one for the corporate governance crowd, or for the power of shareholder resolutions. Seattle Post-Intelligencer, Oct 28, 2007

Weyerhaeuser announced last week that its board of directors has approved an amendment to corporate bylaws to require that in order to be elected, unopposed nominees for the board of directors need a majority of the votes cast.

Under normal circumstances, a company's board nominates a slate of candidates for directors; almost always (the notable exception being takeover fights) those candidates run unopposed. The only way shareholders have of voicing disapproval of any or all nominees is to withhold their votes on their proxy ballots.

But that's largely an empty gesture. Under the plurality rule, a nominee could in theory be elected to the board with a single vote.

Under the new rules at Weyerhaeuser, a nominee who doesn't get a majority of the votes cast must submit his or her resignation.

"Majority vote" proposals have been on proxy ballots at multiple Northwest companies; at Weyerhaeuser it was most recently on the ballot in 2006, and received 55 percent of the votes cast.

Weyerhaeuser isn't alone in making the change, says Doug Kilgore, executive director of the Worker Owner Council of Washington State, a labor group that has lobbied companies to adopt corporate-governance reforms.

Others with majority voting include: Microsoft, Puget Energy, Potlatch, Intermec and Plum Creek.

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Weyerhaeuser stock may top $100/shr. Reuters, Oct 28, 2007

The asset value of timber company Weyerhaeuser may exceed $100 a share, some 50 percent above its current stock price of about $68, Barron's reported in its October 29 edition.

The company sold its fine-paper business earlier this year, and bulls are betting on more restructuring that could lift its shares above $100, the magazine said.

Under one scenario, Weyerhaeuser could convert into a timberland real-estate investment trust by 2009, lowering its taxes and presumably boosting its shares, the magazine said.

Management could also unlock value by taking other steps, including selling the company's container board business, perhaps as soon as year's end, the magazine reported.

"We think it's worth between 90 and 100 (dollars) a share based on the parts of the business," Barron's quoted Michael Embler, chief investment officer for Franklin Mutual Advisers, as saying.

Franklin Mutual, which holds 17 million shares, is pushing the company to accelerate its restructuring, Barron's said.

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Weyerhaeuser Closures to Cost Up to $63M. AP, Oct 24, 2007

Weyerhaeuser Co., one of the world's largest lumber and paper producers, expects that mothballing three of its North American plants will cost between $47 million and $63 million, the company said Wednesday.

Weyerhaeuser said last week it would indefinitely close Canadian oriented strand board plants in Drayton Valley, Alberta, and Wawa, Ontario, plus a laminated strand lumber plant in Deerwood, Minn., before the end of 2007 because of weak customer demand amid the ongoing slump in the North American housing market.

Oriented strand boards, or layers of wood chips glued together, are used for floors, roofs and walls in home construction.

In a Securities and Exchange Commission filing Wednesday, Weyerhaeuser said the curtailments would lead to net pretax charges ranging from $30 million to $40 million for asset impairments, $15 million to $19 million for termination benefits for the roughly 420 employees who work at the plants, and between $2 million and $4 million for other closure costs.

Weyerhaeuser said it expects to record the charges from asset impairments and termination benefits in its fourth quarter, which ends Dec. 30.

Weyerhaeuser shares rose 49 cents to close at $68.44 Wednesday.

The company reports third-quarter earnings next Wednesday.

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Weyerhaeuser Adopts Majority Voting Standard for Directors in Uncontested Elections. AP, Oct 23, 2007

Lumber and paper producer Weyerhaeuser Co. said Tuesday it has amended its bylaws to elect directors by majority vote in uncontested elections.

The company said under the new amendment, a nominee who doesn't receive a majority of the votes cast in an election must submit his or her resignation to the board.

The new rule is effective immediately, Weyerhaeuser said.

Weyerhaeuser shares fell 66 cents to $67.09 in late morning trading.

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Potlatch CEO: Make us an offer for mill. At NYC gathering, Covey says company would part with Lewiston operation - if price is right. By Elaine Williams, Lewiston [Idaho] Tribune, September 19, 2007

A question dogging Potlatch executives since the company's conversion to a real estate investment trust surfaced again Tuesday at a New York City conference.

How likely is it that Potlatch will divest itself of any of its manufacturing assets?

The response of the company's chief executive officer, Mike Covey, was the same it has been every other time the issue has been raised in public.

The company would consider an offer if another party were to assign a higher value to one of its factories than Potlatch, Covey said.

But for now, the company is maintaining, not growing, its manufacturing base, said Covey, who was speaking to investors attending the UBS Global Paper and Forest Products Conference sponsored by an investment bank. The presentation was broadcast live on the Internet.

The precedent of selling even high-performing segments started even before Potlatch became a real estate investment trust. Covey reminded the audience of how his company sold its oriented strand board plants in Minnesota in 2004 when the prices for the commodity were near record highs. The buyer paid $457.5 million for the plants with an estimated book value of $180 million.

Now Potlatch has less interest in its industrial holdings. Potlatch is the largest private land owner in Idaho, Arkansas and Minnesota.

As a wood products manufacturer, Potlatch values its property only in terms of how it could feed the mills that carried out the company's primary mission of making lumber, tissue and paperboard, Covey said.

As a real estate investment trust, the company views land as its primary money maker, the CEO said.

The new strategy plays out in a variety of ways, according to Covey.

Georgia Pacific, for example, has a plant in Arkansas that makes a high grade of plywood for Home Depot, Covey said.

Potlatch will sell to Georgia Pacific regardless of the impact that decision has on its ability to supply its own factories as long as Potlatch profits more from the sales to Georgia Pacific than by using the logs internally, Covey said.

The company examines every new acquisition in terms of how much value it has for timber and recreational property, eliminating potential purchases that lack the recreational component, Covey said.

Poltatch can sell the recreational land for a premium and reinvest it in ground that produces timber where the real estate investment trust is taxed at a lower rate than for manufacturing, said Matt Van Vleet, Potlatch's Lewiston spokesman. "We want to expand our tree-growing base. That is our growth strategy."

More than 20 percent of the 179,000 acres near McCall that Potlatch recently purchased will likely eventually be developed for second homes or other vacation uses, Covey said.

It is unlikely any of the trees there will supply Potlatch's mills since there are other plants in places like Grangeville and northeastern Oregon that are closer and have traditionally used the logs, Van Vleet said.

Part of what makes the parcels so appealing to Potlatch is their close proximity to Boise, McCall and the Tamarack Resort where Andre Agassi and his wife, Steffi Graf, are building the Fairmont Tamarack, Covey said.

Studios with 650 square feet start at about $780,000 at the condominium complex, according to a Web site promoting the development.

"Our land is situated where the population is increasing," Covey said.

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Potlatch announces land purchase of 179,000 acres near McCall. Some of the property not suitable for trees to be sold. By Eric Barker. Lewiston Tribune, September 13, 2007

Potlatch Corp. is purchasing a chunk of prime timber and recreation land in the McCall area.

The company announced Wednesday it will buy 179,000 acres from Western Pacific Timber LLC for $215 million.

According to a news release from the real estate investment trust, the land is "in the heart of central Idaho's premier outdoor recreational corridor, contains stocked forests of ponderosa pine and mixed fir."

Most of the land is less than two hours from Boise, Idaho's largest city, and adjacent to McCall, New Meadows, Donnelly and the new Tamarack Resort. The company plans to take a hard look at the property and determine which parts will be kept as timberland and which have the potential to be sold as recreational property.

"We will look at the land and do this stratification study and decipher what is too valuable to grow trees, what won't grow trees very well and what is good tree-growing core land," said Potlatch spokesman Matt Van Vleet at Lewiston. "We will basically consider selling off the higher- and better-use land and sell off the stuff that doesn't grow trees very well."

Potlatch officials recently completed a similar analysis for each of its 660,000 acres in Idaho. Most of the land is being kept as core timberland but much of it was identified as more valuable in the real estate market.

The transaction will be completed in two phases. The first phase will close this month and the second phase will close in January. Once complete, the transaction will grow the company's Idaho land base to 839,000 acres. Potlatch is the largest private landowner in Idaho.

Van Vleet said company officials and employees are excited about the purchase and it illustrates the company's commitment to growing its base of timberland in places like Idaho, Arkansas and the Great Lake states.

"It's good for Potlatch. We think its good for Idaho," he said. We are growing here and continuing to establish our land ownership here."

Van Vleet said the new land is in several blocks. One portion is west and northwest of McCall and New Meadows, another small block is west of Cascade Lake, another large section is east of Donnelly, one is North of Cascade and extends south along U.S. Highway 55 and yet another is south of that block.

All of the land was once owned by Boise Cascade before being purchased by Tim Blixseth, who owns Western Pacific Timber. Blixseth has extensive timber holdings and last year purchased 38,000 acres of timberland near Powell from Plum Creek Timber Company.

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Potlatch to Acquire 179,000 Acres of Idaho Forestland. Business Wire, Sept. 12, 2007.
Potlatch Corporation (NYSE:PCH) today announced an agreement to acquire approximately 179,000 acres of timberland in Idaho for approximately $215 million from Western Pacific Timber, LLC, representing $1200 per acre. The transaction will occur in two phases, with the majority of timberlands to be acquired in the first phase, which is expected to close in September 2007, and the remaining timberlands to be acquired in the second phase, which is expected to close in January of 2008. The transaction will be financed through the company's existing bank credit facility and cash on hand.

The timberland, located in the heart of central Idaho's premier outdoor recreational corridor, contains stocked forests of ponderosa pine and mixed fir. The majority of the ownership is less than a two-hour drive from Boise, Idaho, and is adjacent to the mountain communities of McCall, New Meadows and Donnelly. Tamarack Resort, the newest four-season ski and golf resort in the West, is in close proximity to the property.

"In addition to increasing our overall core timberland base, the lands offer exceptional recreation amenities and real estate value to those interested in active outdoor recreation in the heart of Idaho," said Vice President of Real Estate William R. DeReu.

As it does with its other properties, the company will stratify these central Idaho forestlands into core timberland for growing merchantable timber, and non-core and higher and better use (HBU) lands for real estate sales.

Potlatch will manage the lands for timber production, real estate development and recreational amenities. With this acquisition, Potlatch will own approximately 1.7 million acres of timberland in the United States, with a total of 840,000 acres in Idaho.

"The central Idaho acquisition illustrates our commitment to grow our ownership in regions where we have experience as a leading timberland management company, and the purchase will be immediately accretive to cash flow," said Chairman, President, and Chief Executive Officer Michael J. Covey. "This acquisition also complements our strategy to sell and acquire land through 1031 like-kind exchanges that maximize the tax efficiency of transactions for shareholders."

About Potlatch
Potlatch is a Real Estate Investment Trust (REIT) with 1.5 million acres of timberland in Arkansas, Idaho, Minnesota and Wisconsin. Through its taxable REIT subsidiary, the company also operates 13 manufacturing facilities that produce lumber and panel products and bleached pulp products, including paperboard and tissue. The company also conducts a real estate sales and development business through its taxable REIT subsidiary. Potlatch, a verified forest practices leader, is committed to providing superior returns to stockholders through long-term stewardship of its resources.

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Boise Cascade To Sell Paper, Packaging & Newsprint Assets. Company News Release, Sept 7, 2007

Boise Cascade, L.L.C. ("Boise Cascade") has entered into a Purchase and Sale Agreement ("PSA") with Aldabra 2 Acquisition Corp. (AMEX: AII) ("Aldabra") for the sale of Boise Cascade's Paper, Packaging & Newsprint segments for cash and shares of Aldabra common stock equal to approximately $1.625 billion. As part of the transaction, Aldabra intends to change its name to Boise Paper Company ("BPC") and will apply for listing on either the New York Stock Exchange or NASDAQ. Boise Cascade, a privately held company, will maintain 100% ownership of its Wood Products and Building Materials Distributions segments following the transaction. Both companies will be headquartered in Boise, Idaho.

Tom Stephens, Chairman and CEO of Boise Cascade, said, "We're excited that Aldabra is buying our Paper, Packaging & Newsprint businesses. Our entire organization in these operations has worked hard to transform their businesses, and this is a huge vote of confidence in what the team has built and the future opportunities before them."

Stephens added, "This is also good news for the people in our remaining businesses, Wood and Building Materials Distribution, who have delivered strong results over the past three years. We will use a portion of the cash received from the transaction to pay down debt. As a well-financed and highly focused company, Wood and BMD will not only be in an excellent position to operate successfully in the challenged housing market but will also have the means to grow. As two separate companies, the businesses will be able to focus sharply on their respective core competencies to enhance performance and returns to investors, customers, and employees."

Alexander Toeldte will become CEO of Boise Paper Company. He is currently Boise Cascade's executive vice president, responsible for its Paper, Packaging & Newsprint businesses. Prior to joining Boise Cascade in 2005, Toeldte was CEO of two public companies in New Zealand (Fletcher Challenge Paper and Fletcher Challenge Building).

Toeldte said, "This transaction recognizes the progress we've made during the three years we were a private company. We reinvigorated our culture by taking out layers of overhead, streamlining management processes, and changing our relationship with employees to one of full involvement in running the business. We have also made key strategic investments, including the acquisition of Central Texas Corrugated, which increased the integration of our container business, and the conversion of the largest paper machine at our mill in Wallula, Washington, which significantly improves our competitive position for the future."

The transaction, which has been approved by the respective board of directors of Aldabra and Boise Cascade, is subject to customary closing conditions as well as (i) the approval of Aldabra's stockholders (Aldabra's certification of incorporation provides that if a shareholder chooses not to approve a transaction, the shareholder may convert his or her shares to cash; if less than 40% of Aldabra's shareholders choose the conversion option, the transaction will be approved); (ii) receipt of approvals under the Hart-Scott-Rodino Act; and (iii) receipt of debt financing on terms and conditions to be approved by Aldabra's and Boise Cascade's respective board of directors.

At closing, Aldabra will deliver to Boise Cascade approximately $1.625 billion, of which approximately $1.338 billion will be paid in cash (less $38 million in cash contributed by Boise Cascade at closing) and the balance in shares of Aldabra common stock. The sources of funds for this transaction will consist of (i) approximately $392 million of net proceeds from Aldabra's trust (which takes into account deferred underwriting fees and expected interest income projected through closing, net of taxes), (ii) approximately $946 million in a new debt facility to be raised in conjunction with the transaction, (iii) less $38 million in cash contributed by Boise Cascade, and (iv) approximately $325 million of new Aldabra shares that will be issued to Boise Cascade.

The number of shares of Aldabra common stock to be issued to Boise Cascade at closing will be calculated by dividing approximately $325 million by the average closing price per share of Aldabra common stock during the 20-day period ending three days prior to the closing of the transaction. The parties have agreed that for purposes of this calculation, the average closing price will not be higher than $10.00 or lower than $9.54. Assuming no conversion rights are exercised and an average closing price of $9.77 (the midpoint of the range), Boise Cascade would receive 34,510,747 shares of Aldabra common stock, representing 40.0% of BPC's shares post-closing. Boise's investment banking advisors on this transaction are JPMorgan and Goldman Sachs, and Kirkland & Ellis LLP is acting as legal advisor.

About Boise Cascade
Boise, headquartered in Boise, Idaho, manufactures engineered wood products, plywood, lumber, and particleboard and distributes a broad line of building materials, including wood products manufactured by the company. Boise also manufactures a wide range of commodity, specialty and premium papers, including imaging papers for the office and home and papers for pressure-sensitive applications, as well as printing and converting papers, containerboard and corrugated boxes, newsprint, and market pulp. Visit Boise's website at www.bc.com.

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Weyerhaeuser got to edit U.S. letter on logging, owls: Fish and Wildlife Service defends move. By Robert McClure. Seattle Post-Intelligencer, June 23, 2007

The U.S. Fish and Wildlife Service offered a Weyerhaeuser Co. executive the opportunity to edit a letter the agency was sending the timber company regarding "concerns" about Weyerhaeuser logging harming spotted owls.

And an internal Weyerhaeuser memo prepared for a meeting with a Bush administration official shows the company wants to do as little as possible to get environmentalists off its back while still cutting as much timber as possible.

Those two documents emerged at a four-day hearing this week before U.S. District Judge Marsha Pechman of Seattle in which the Seattle Audubon Society attacked Weyerhaeuser's alleged transgressions of the Endangered Species Act.

Audubon, calling government regulators too cozy with the timber industry, is asking the judge to halt Weyerhaeuser's logging near spotted owls. It also is asking her to restrict Washington Lands Commissioner Doug Sutherland's ability to approve logging on about 50,000 forested acres near where spotted owls have been seen. The land belongs to Weyerhaeuser and others.

Unless the judge steps in to halt the logging before the case can go to a full trial in several years, Audubon attorney John Arum predicted, "The state will issue scores of permits ... and thousands of acres of this habitat will be destroyed."

State and timber industry lawyers disagreed.

An unusual aspect of the case is that the spotted owls specifically at issue are living largely in 50- to 80-year-old industrial forests -- not the "old-growth" forests at the heart of the 1990s timber wars, the ones with which the owls are generally associated.

Because of that, Weyerhaeuser argues, scientific studies cited by Audubon to attack its rate of cutting near them in Southwest Washington is not reliable.

"If 50- to 80-year-old forests are suitable habitat, then we've got way more of that across the state of Washington than we need," argued Weyerhaeuser attorney Elaine Spencer.

Environmentalists' lawyers pointed to a 44 percent loss of owl-friendly forests in Southwest Washington, where Weyerhaeuser dominates the timber landscape, from 1996 to 2004.

Statewide, in eight years the state allowed 17,000 acres of owl-friendly forests to be cut -- a "rate of over 2,000 acres a year," Arum said in closing arguments.

"The state's regulatory program ... recognizes the Endangered Species Act and the obligation that imposes on landowners," Patricia O'Brien, a deputy attorney general who represents Sutherland, countered. Representing the timber industry, Seattle attorney John Hempelmann argued, "The owl is not being ignored. There are huge efforts being made to protect it and speed its recovery." The case centers on four 6,000-acre areas in Southwest Washington where environmentalists contend Weyerhaeuser has violated the species-protection law by taking too much timber in areas used for nesting by spotted owls.

But it represents a broader challenge to the state's entire timber regulation system.

Records from the case show that federal officials suspected at least as early as 1991 that Weyerhaeuser might be violating the Endangered Species Act.

In the mid-1990s, Weyerhaeuser told federal officials it would create a "habitat conservation plan" to guide its Southwest Washington logging.

Because of that, the state did not take special efforts to protect owls there, as it did elsewhere.

But Weyerhaeuser never produced the promised plan.

Since then, scientists have noted the increasing presence of barred owls, which are thought to compete with spotted owls and which made their way from the East in recent decades. They are displacing the spotted owls, it appears.

But loss of suitable habitat for the spotted owls also continued to alarm state Department of Fish and Wildlife biologists.

In early 2005, state scientist Paula Swedeen alerted federal wildlife officials of her concerns. U.S. Fish and Wildlife officials met with Weyerhaeuser executives in May 2005.

Three months later, a federal supervisor sent Weyerhaeuser's Kevin Godbout a draft of a letter the agency was preparing to send the timber company. Godbout wrote in suggested changes and sent the letter back.

The agency accepted some, but not all, of the changes Godbout proposed.

"We were just trying to identify and clarify what was actually said and agreed to at a meeting that had occurred four months prior," Godbout testified.

Weyerhaeuser spokesman Frank Mendizabal said Friday such a practice "would be fairly common when one party of a meeting wants to record the substance in a memo."

Jim Michaels, an official with the federal Fish and Wildlife Service who helped oversee endangered-species policy for Washington, said in an interview Friday that allowing a company such as Weyerhaeuser the opportunity to see an outgoing Fish and Wildlife Service letter in draft form is not unusual if the company is cooperating with the agency.

Agency spokesman Doug Zimmer said, "Remember, we were in a collaborative position, not an adversarial relationship."

More than a year after that episode, with environmentalists threatening to file suit, an internal Weyerhaeuser memo dated October 2006 was prepared to guide company officials in a meeting with Michael Bogert, an adviser to Interior Secretary Dirk Kempthorne.

The memo says one of the company's goals was to "defend and defeat any direct litigation while adjusting operations as little as possible to maximize chances of success in litigation."

On the witness stand this week, Godbout said it was "clearly a work in progress subject to a tremendous amount of revision." And, he said, the subject of owls never came up during the meeting with Bogert.

Asked whether it reflected the company's position, Godbout answered: "That's a fair characterization of a goal that we would have." Weyerhaeuser has a policy of protecting the 500 acres of forest thought to be most valuable to the owls around nest sites.

That exceeds state requirements outside the "special emphasis" owl areas. Those rules allow the trees to be cut except during the owls' nesting season.

Environmentalists presented testimony and other evidence that the wide-ranging owls may, in fact, need up to 5,800 acres of suitable habitat to thrive.

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Timber giant may sell containerboard and packaging division. By Christopher Donville. Bloomberg, Seattle Times, May 5, 2007

Weyerhaeuser said Friday that it may sell its containerboard and packaging unit, stoking speculation the Federal Way company is preparing to become a real-estate investment trust.

The lumber producer's shares jumped 5.7 percent, the most since 2002, after Weyerhaeuser said in a statement that it will review options for the division, which accounts for a third of its revenue. The company said it may sell the unit or merge its assets with a rival.

Weyerhaeuser issued the statement Friday as it released first-quarter financial results, which trailed analysts' estimates.

Changing to a real-estate investment trust (REIT) would lower tax rates and offer higher payouts to investors, analysts said.

Shedding the packaging business would be "a major step on Weyerhaeuser's road to becoming a REIT," Mark Wilde, an analyst at Deutsche Bank Securities in New York, said.

Chief Executive Officer Steve Rogel has sold assets and closed some wood-product plants in the U.S. and Canada amid a slump in building materials. Weyerhaeuser shed its fine-papers unit to Domtar Inc. in March to create Domtar Corp., the largest North American maker of office paper. Weyerhaeuser is also moving to sell wood-product distribution centers in Canada and the U.S.

"We are positioning Weyerhaeuser to grow in areas that present the greatest opportunities for our shareholders and employees," Rogel said on a conference call with analysts. He declined to elaborate on whether the company is considering becoming a REIT or keeping the current structure.

Weyerhaeuser and Temple-Inland are the last two major corporate owners of U.S. forests. Temple-Inland, based in Austin, Texas, said Feb. 26 it planned to sell its timberlands to focus on packaging and building materials.

Investors have urged both companies to turn their timber businesses into REITs after Congress last year failed to adopt a $1 billion measure that would have given equal tax treatment to forestland owned by corporations and REITS.

Weyerhaeuser and Temple-Inland pay a top tax rate of 35 percent, while REITS generally pay 15 percent. The U.S. legislation would have allowed Weyerhaeuser and Temple-Inland to pay 15 percent on profit attributable to harvested trees.

Weyerhaeuser reported a profit of $755 million, or $3.22 a share, in the first quarter after a gain on the sale of assets to Domtar. A year earlier, it posted a loss of $576 million, or $2.34 a share, after a write-down of the fine-paper business. Sales in the latest quarter fell 12.6 percent to $3.89 billion.

Excluding special items, profit was 20 cents a share, the company said. The company was forecast to earn 34 cents, the average estimate of 16 analysts surveyed by Bloomberg.

"We see continued challenges in many of our markets, especially in wood products where we expect to see a weaker than normal increase in seasonal demand" in the second quarter, Rogel said in the statement.

Weyerhaeuser stock rose $4.47 to close at $82.62 Friday. The percentage gain was the most since November 2002. The shares have climbed 17 percent in the past 12 months.

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Project completed to protect Cascades' Tieton River Canyon. Associated Press. Seattle Times, April 9, 2007

A project to preserve thousands of acres in the Tieton River Canyon on the east slope of the Cascades is complete.

The Nature Conservancy, along with state and federal agencies, worked for four years to bring 20,000 acres into public ownership and protect it from development.

The nonprofit group transferred its final parcel in the area to the state Department of Fish and Wildlife last week. The area 20 miles northwest of Yakima includes nearly eight miles of the Tieton River and the adjacent uplands.

"This is a really good thing, ensuring the long-term survival of a diverse ecosystem," said Betsy Bloomfield, the Nature Conservancy's south-central Washington program manager.

The land had been a checkerboard of public and private ownership before the conservancy acquired land from Plum Creek Timber. It now will be part of the state's Oak Creek Wildlife area.

As the conservancy bought up land over the past four years, it transferred it to public control. The group will recover its cost of $7.5 million through donations but isn't making a profit.

Instead, the conservation group also is donating $400,000 to the Yakima Valley Community Foundation to use for grants to complete environmental projects in the area.

Foundation President John Colgan said the donation is one of the largest in its two-year history and the first to focus on the environment.

"This brings in more local people to be involved in preservation," Bloomfield said.

The Tieton River Canyon has a variety of habitat and includes migration corridors for deer, elk and bighorn sheep. It also provides habitat for at least 15 species on the state endangered-species list and four on the federal list, including spotted owls, steelhead and bull trout.

"This is a dream come true," said Ken Bevis, a habitat biologist with the Department of Fish and Wildlife. "This is the best thing I've worked on in my whole career."

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Gunfire jolts Maple Woods housing development, By Lauren Vane, Seattle Times, April 8, 2007

Last July, Matt Hunkovic's relatives were in town for his wedding, relaxing in the backyard hot tub when a blast of automatic gunfire jolted the summertime celebration.

Hearing the noise from inside his Maple Valley-area home, Hunkovic raced downstairs, gathered up his family and told them to get inside.

He feared that someone might get hit by a stray bullet.

For Hunkovic and his wife, Kirsten, the sound of gunfire has become part of the soundtrack to their lives in the Maple Woods housing development.

Although recreational shooting is illegal in this pocket of King County not far from Maple Valley's Four Corners area, it's a favorite place for shooters to take target practice with powerful weapons. As this once-rural area continues to develop, recreational shooting has residents and local officials worried that a stray bullet might hit someone.

Officials are particularly concerned about residents who walk or ride in the green space behind their Maple Woods homes.

"There's a pretty serious safety concern," King County Councilman Reagan Dunn said. "They're going out and doing target practice. With rifles, that's a problem. If you're shooting through brush or wooded trails, there's a serious safety concern about possibly hitting people or a house."

The area is designated as a no-shooting zone and a violation is a misdemeanor offense, Dunn said.

The unauthorized target practice goes on at several spots within a large parcel of land owned by Plum Creek Timber Co. The two most well-known spots are south of Kent-Kangley Road between State Route 169 and Black Diamond-Ravensdale Road.

Plum Creek is working with police to patrol the area, company spokeswoman Kathy Budinick said. In March, signs were put up in several places around the property, declaring the land private property under 24-hour surveillance.

Residents of Maple Woods, about a half mile from the target-practice area, report hearing gunfire at all hours of the day every day of the week. "Honestly, we're just waiting for someone to get shot," Hunkovic said.

Under the crackling power lines just off Black Diamond-Ravensdale Road, the evidence of shooting is everywhere. Red, blue and yellow shotgun casings and the remnants of spent lead bullets litter the ground. A makeshift target — a pile of metal car scraps — is riddled with bullet holes.

Plum Creek is in the process of transferring the land to King County, but before it does, the company is cleaning up the mess, Budinick said.

Plum Creek, too, is concerned about residents' safety and is trying to keep the shooters out. In addition to posting signs, it has contracted with the King County Police Officers Guild to have off-duty officers provide 24-hour surveillance of the property, Budinick said.

On a recent Saturday morning Maple Woods resident Matt Kenworthy was walking with his wife and 7-year-old son on a trail in the green space when he heard gunfire nearby.

About 50 feet from where the family had been walking, he saw a man shooting a rifle out the window of a yellow Jeep. Kenworthy began waving his hands, trying to get the shooter's attention. When the shooter finally noticed Kenworthy, the man backed up his vehicle and sped away.

While Kenworthy is wary of shooters when he's out on the trails, Hunkovic fears for his safety inside his home. The Hunkovices' house backs up to the green space.

"If anyone was going to get hit, it would be us," Hunkovic said.

When the couple are relaxing at home, they sit in the front section of the house. That way, he said, if a bullet hits their house, it will have to go through several walls before it could hit anyone in his family.

In February 2006, Hunkovic decided he'd had enough with the gunfire and took it upon himself to establish a no-shooting ordinance in the area.

He went door to door collecting signatures and presented the petition to the King County Council. The council approved the ordinance last spring, Dunn said.

Once he's exhausted every legal resource to stop the shooting, Hunkovic said he may decide to sell his home. But that could be difficult.

"How do I sell a house that people are shooting at?" Hunkovic said.

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Weyerhaeuser distribution centers in U.S., Canada put on the market. AP, Seattle Post-Intelligencer, Feb 17, 2007

Forest-product supplier Weyerhaeuser Co. plans to sell its building-material wholesale centers in the U.S. and Canada, streamlining one part of its operations as company leaders consider restructuring moves.

Weyerhaeuser wasn't required to disclose the value of the potential sales, but the effect on the Federal Way-based company's finances would be relatively small, spokesman Frank Mendizabal said Friday.

Investors, however, may welcome the tightening amid slowdowns in the housing market and continued Wall Street speculation about restructuring to emphasize the company's timber holdings.

Weyerhaeuser has closed plants and made other moves aimed at pleasing shareholders in recent months, and is making final the split-off of its fine-paper business in a deal with Canadian company Domtar Inc.

"Effectively, timber is becoming a greater portion of the company's asset base," McAdams Wright Ragen analyst Paul Latta said.

Executives have said they are evaluating various restructuring measures, but declined to elaborate during the company's most recent quarterly conference with analysts.

Weyerhaeuser shares rose 64 cents, or 0.8 percent, to close at $83.03 in Friday trading on the New York Stock Exchange, but dipped 6 cents in after-hours trading.

In a statement, Weyerhaeuser said it was in final negotiations with Platinum Equity, a private Los Angeles firm, for the sale of wholesale building-product distribution centers in Canada.

Weyerhaeuser said it expects the sale to close during the second quarter. All 16 distribution centers in Canada are affected.

Weyerhaeuser said it also is in preliminary talks with an unidentified buyer for 10 of its U.S. distribution sites, which deal in lumber, plywood, roofing and other building materials.

The U.S. centers are in Louisville, Ky.; Memphis and Nashville, Tenn.; Green Bay, Wis.; Kansas City, Kan.; Oklahoma City; Omaha, Neb.; Newton, Kan.; Boston; and Buffalo, N.Y.

Weyerhaeuser will keep control of 40 such centers in larger markets, Mendizabal said.

"Even these centers that we are selling or we have for sale will continue to distribute Weyerhaeuser products," Mendizabal said. "But our own focus is going to be at those larger markets and with the bigger buyers."

The fine-paper deal with Domtar, expected to close in the first quarter, is valued at about $3.3 billion.

Weyerhaeuser will receive a $1.35 billion cash payment from Domtar, and Weyerhaeuser shareholders will receive 55 percent of the new company's stock. Domtar stockholders will own a 45 percent stake in the new company.

On Friday, Weyerhaeuser said its fine-paper business posted a 2006 loss of $613 million, or about $2.18 per share, on revenue of $3.3 billion.

The fine-paper business earned $105 million, or 37 cents per share, on $872 million in sales in the fourth quarter. The quarterly results included a gain of $65 million on a refund of duties on Canadian softwood lumber sold in the U.S.

Weyerhaeuser didn't provide comparable year-ago figures.

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Railroad grant paved way for huge land holdings. By Michael Jamison. The Missoulian, Feb 5, 2007

KALISPELL - The road runs arrow-straight, fresh blacktop laid smooth through logged-over forest, a string pulled tight between Montana's past and its future.

At one end of the road: a hole tunneled through mountain, evidence of the railroad that once followed this same track west. At the other: a soaring rock and timber entryway, rustic chic highlighted in wrought iron.

Welcome to Meadowbrooke, a brand new Old West subdivision slowly rising in the woods west of Kalispell. That it's being developed by the real-estate arm of Plum Creek Timber Co. is a sure sign of things to come. That its primary artery sits directly atop the old railroad bed is an indication of how things came to be.

"The past is driving the future on these lands," said George Draffen. "If you want to understand what's happening, you have to understand what happened."

Draffen is a researcher and writer, co-author of "Railroads and Clearcuts," and according to him what happened - and what's happening - was and is the hijacking of the public trust.

"The two million acres Plum Creek started with were federal lands," Draffen said, "public land they got for free from the citizens of the United States."

Not surprisingly, Plum Creek president and CEO Rick Holley has a different take on history.

"Those questions were resolved long ago," Holley said. "Our company has absolutely bought and paid for those timberlands."

Still, it's hard to escape the sense that something wasn't quite right with the way the railroad barons came to own so many millions of acres.

English statesman Lloyd George once observed that "to prove a legal title to land, one must trace it back to the man who stole it."

Assuming there's some truth to that, Plum Creek's land history must be traced back to larger-than-life men like financier J.P. Morgan and railroad magnate James J. Hill.

Both were central figures in the story of the Northern Pacific, a transcontinental railroad venture that pushed west from Lake Superior, across Minnesota, North Dakota, Montana, and on to Washington and the Pacific Coast.

In 1864, President Abraham Lincoln signed into law the largest railroad land grant in U.S. history, nearly 40 million acres, to help extend the Northern Pacific line. A broad swath 2,000 miles long, the land grant was a chunk of ground only slightly smaller than Washington state, equal to more than 10 Connecticuts.

The railroad builders, all agree, were supposed to raise much-needed capital by selling the land at reduced price to homesteaders. And they did sell quite a bit, right from the start. But they didn't necessarily sell to homesteaders; instead, much of the land went to Weyerhaeuser and Anaconda Copper Co., among other large companies.

In addition - and again, on this all agree - the railroaders did not sell it all.

After that, the disagreement begins.

"The problem was," Draffen said, "they didn't need 40 million acres to build that railroad."

He's read the original government charter and remains convinced that once finished, the railroaders were supposed to either give the excess and unsold land (some 32 million acres) back to the public, or sell it on the cheap to homesteaders. The law, he said, is clear on that point.

But Holley's read his history, too, and insists the 40 million or so acres were meant as a sort of "compensation" for a job well done. "It's been litigated," Holley said, "time and again."

In 1924, President Calvin Coolidge declared the Northern Pacific had, in fact, defaulted on its end of the deal. Congress then pressed for legal action against the railroad. A settlement was reached in 1941, but several key issues raised by Coolidge and Congress remained unresolved.

Some of America's railroad grant lands - about one-third, or more than 40 million acres nationwide - have been given back to the public over the years, with courts deciding the gift was not absolute and that it did, in fact, come with obligations.

But the Northern Pacific lands were not among those thus far "revested," and Plum Creek is now heir to that corporate good fortune. That's one reason land managers still struggle to manage adjacent public forests, and it's the only reason that patch of pavement at Meadowbrooke overlays so precisely the old railroad bed.

"Geographically speaking, Plum Creek is a small stream in Minnesota."

So says the official company history, which begins its tale long after the Lincoln-era land grants.

It begins, instead, in 1945, when lumberman D.C. Dunham moved his company from Bemidji, Minn. - not far from the banks of Plum Creek - all the way to Columbia Falls.

The tiny northwestern Montana town was on the verge of a Wild West boom back then, Holley said, thanks to the pending construction of Hungry Horse Dam. A whole lot of trees would fall before the reservoir filled; Dunham wanted to make boards of them all.

And he pretty much did just that, right up until he died in 1966.

Dunham's family then sold the mills (there was no land held by Plum Creek under Dunham's watch) to the Northern Pacific Railroad.

A few years later, in 1970, the U.S. Supreme Court finally let stand a monopoly merger it had denied twice before - the marriage of Hill's great Northwestern railways with other regional lines, including Morgan's Northern Pacific.

The result was the Burlington Northern Railroad.

The railroad already had forest lands, thanks to that land grant of 1864. Now, it had Dunham's lumber mills, too, located right along the tracks.

In 1988, Burlington Northern Railroad spun off the land-grant acres - and the natural resources on those acres - to a holding company called Burlington Resources. Plum Creek's mills went with the land.

A year later, in 1989, Burlington Resources spun off the timber assets and mills to yet another company, which borrowed for itself Dunham's old name - Plum Creek.

The new railroad-borne timber company went public at $20 a share, raising $256 million up front, Holley said. An additional $300 million loan capped the deal, which Holley says allowed Plum Creek to purchase outright from its parent company 2 million acres of railroad grant lands. It also allowed Burlington Resources to avert a possible leveraged buyout while still retaining a corporate interest in the railroad lands.

Whether the acres were "purchased" in the conventional sense remains hotly debated, though, with many - including Draffen - contending the modern timber company essentially inherited the ill-gotten gains of its parent.

Either way, no one's contesting today's ownership of the lots along Meadowbrooke subdivision's new blacktop road. Those belong to the soon-to-be homeowners who purchased 57 residential lots across 500 acres. And no one's contesting the profits from Meadowbrooke's lots. Those belong to Plum Creek's shareholders.

"This corporate heir to the railroad land grant empire is selling land to the public after all," Draffen wrote, "but more than a century late, and (at) thousands of dollars per acre instead of $2.50 as the law required."

When Lincoln granted the public's land to America's railroad magnates, he didn't just give them a chunk of Midwestern prairie or Montana mountaintop. Instead, the land was granted in alternating 640-acre sections.

That's why modern land-ownership maps look like checkerboards, with alternating square miles of private and public land. The idea, Draffen said, was that such a pattern would increase the value of the public's adjacent land, thanks to nearby railroad access.

But the modern result is what he calls "a completely schizophrenic land management situation in the West."

The checkerboards mean land managers are constantly bumping into public-private property lines when trying to work the woods.

In the early 1990s, former regional forester John Mumma declared that the checkerboard pattern represented a substantial obstacle to the U.S. Forest Service.

"Ecosystem management," he said, "will never be achieved in the Pacific Northwest until the checkerboard railroad lands are returned to their rightful owners - the American public. Probably no other single event in this country has contributed more to the current Northwest forest crisis than the profit-driven harvest activities on the old railroad checkerboard lands."

More recently, Mumma recalled private timber companies clearcutting their squares during the 1980s and '90s, thereby hemming in options on adjacent public lands and reducing the public harvest.

Draffen still hopes the public could again win the right to some of those railroad grant lands. Mumma thinks that's unlikely, but he does advocate for public purchase of the best of the railroad inheritance.

He's seen that happen already in the Southwest, he said, and even up north of Montana's Crazy Mountains.

"I truly believe there's a great opportunity for the public land interest to purchase those acres," he said. "There's precedent for it to happen."

In fact, Plum Creek already is selling acreage to conservation groups and land trusts, and some of that land is making its way back into public ownership.

But many of the modern sales are not to the public; instead, they're to residents in soon-to-be rural subdivisions such as Meadowbrooke. And that has public landowners - both state and federal - worried about their new neighbors.

The checkerboard was troublesome enough, Mumma said, during the days when everyone - public and private land managers - were united in the business of cutting trees.

Now, though, it promises to become even more complicated, "because people won't want a logging operation next door to their house. The purpose of that land is changing, and it's going to be a real mess now."

A decade after Burlington Northern Railroad begat Burlington Resources begat Plum Creek, the timber company reorganized as a real estate investment trust, or REIT.

The change - which took effect July 1, 1999 - did not necessarily signal a trend toward residential land development, Holley said, but rather was a tool to help Plum Creek attract investors and their capital.

"It was really driven by the need to grow," Holley said.

And grow it did. Almost as soon as the REIT reorganization was complete, Plum Creek used that new investment capital to leverage a $3.8 billion merger with The Timber Co. (Georgia-Pacific), becoming the second-largest private timberland owner in the nation, with some 7.8 million acres. Overnight, Plum Creek's acreage increased by 152 percent.

Then came 307,000 acres purchased in Wisconsin; 139,000 acres in South Carolina, Arkansas and New Hampshire; 78,000 acres in Arkansas and Maine; 56,000 acres in Florida; 650,000 acres in northern Michigan.

By the end of 2005, the company D.C Dunham left with nary an acre held 8.23 million acres nationwide, making Seattle-based Plum Creek the largest private landowner in the country. The biggest holding is in Montana, where Plum Creek owns 1.282 million acres of forestland. Montana also is home to most of the company's 2,000 employees, and not a little of its $1.5 billion in annual revenues.

The REIT, Holley said, sells trees to its own corporate subsidiaries, which then cut logs for sale on the market. Another subsidiary mills logs into lumber.

Likewise, a division called the Plum Creek Land Co. brokers land sales for the REIT, buying the property from its parent and then selling it to private owners.

It's a neat deal. The REIT avoids corporate income taxes, leaving the taxable side of the business to its subsidiaries. But if you own a share of the REIT, you also own a share of the subsidiaries, with everything consolidated under the Plum Creek corporate banner.

It's "vertically integrated," as businessmen like to say, selling trees and land to itself and then passing the profits along to investors.

This modern business model requires only one thing - lots of land. (Plum Creek has been buying land since becoming a REIT, but not mills and manufacturing facilities.)

Holley insists his company purchased the initial railroad land that made all this commerce possible, free and clear. Critics beg to differ.

The railroad violated its original government charter several times over, Draffen said, which should have forced revestment. Railroaders kept the land, contrary to the legal intent. They and their corporate heirs paid no substantial property or income taxes for decades. Then they sold the timber at a profit, hobbling the public harvest on adjacent lands. And now, Draffen said, they're liquidating the logged-over land for still more shareholder profit.

The modern manifestation of 150 years of history is now impacting local tax coffers, he said, and local schools. It impacts timber harvest, sawmill viability, economic stability. It impacts wildfire management, timber management, wildlife management. It impacts access to hunting and fishing, access to lakes and rivers and public lands. It impacts community planning, community identity, community tax assessments.

"Yeah," Draffen said, "I've got a problem with that. Everyone should have a problem with that. It's illegal."

The company acknowledges those impacts and more, but says it's working to address emergent problems and insists there are no modern or historic legal complications. And while Holley shares concerns about communities - he calls them stakeholders - he's adamant that his first priority must be to shareholders.

In the words of Plum Creek itself, "we work to capture the most value from every acre that we own."

The railroads were granted public lands across America for a public purpose. On that all agree. If, as Holley says, the debt of obligation to the public has been paid, then Plum Creek can with clear conscience pursue private profits.

But if, as Draffen says, some debt remains, then Plum Creek's history demands attention in Montana's future.

"What's lost is the idea of public resources and public duties," Draffen said. "That's just gone. This is a corporate culture now, and money - private money - is what it's all about. The idea of the public good, that's just a line you're not allowed to cross anymore."

But there are other lines, lines etched hard into the land itself, lines like that strip of blacktop stretching out over the old railroad tracks and into Meadowbrooke.

Draffen considers that line, and then considers Holley's conviction that the land-grant acres are paid for, free and clear. That road, Draffen says finally, "gets right at Plum Creek's contention that they're not the railroad. There it is, the railroad, right there on Plum Creek's land."

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Weyerhaeuser finds a buyer for pulp mill, seeks one for veneer factory. Bloomberg, Jan 26, 2007

Weyerhaeuser Co., the world's biggest lumber company, said Thursday that it may sell a closed pulp mill to Charleston Investments and will seek a buyer for a veneer factory in the state that employs 73 workers.

Charleston Investments made a proposal for the Cosmopolis mill near Aberdeen that "offered the greatest value" and "most viable long-term investment for the community," Federal Way-based Weyerhaeuser said. The mill has been closed since late 2005.

Weyerhaeuser, under pressure from activist shareholder Franklin Mutual Advisers LLC to boost profit, has been selling assets and closing mills in Canada and the United States that don't generate sufficient returns. The company also has been hurt by falling prices for lumber as U.S. home building slowed.

The Cosmopolis pulp mill, built in 1957, can produce 140,000 tons a year of specialty pulp for plastics, photographic papers and cigarette filters.

Weyerhaeuser's veneer plant in Elma has a capacity to produce 165 million square feet of 3/8-inch green and dry veneer. The facility began operating as a sawmill in the 1920s.

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Potlatch eliminates 37 jobs from its resource group. By Elaine Williams. Lewiston Tribune, Jan 25, 2007

Potlatch Corp. eliminated 37 jobs from its resource group this week, including 20 in Idaho.

Most of the employees who were cut in Idaho worked in north central Idaho and the remainder were in the St. Maries area, said Matt Van Vleet, Potlatch's Lewiston spokesman.

Of the 20 positions, 17 were full-time, one was part-time and two were seasonal posts that were not filled, Van Vleet said.

The reductions were greatest in Idaho because that is where 73 of Potlatch's 152 resource group employees worked, Van Vleet said.

Potlatch is the largest private land owner in Idaho with 670,000 acres.

The changes are part of a plan to restructure the resource group that monitors the growth of trees on Potlatch land and schedules treatments and harvests, Van Vleet said.

Until now, it has been separated into groups serving Idaho, Oregon, Arkansas and Minnesota, Van Vleet said.

Potlatch will need fewer employees because some employees will gain responsibilities for larger geographic areas to eliminate redundancy, Van Vleet said.

The reorganization combines employees with expertise in areas such as forestry and wildlife management into a single group who will be able to manage land whenever Potlatch purchases it, Van Vleet said.

The change will give Potlatch more flexibility as it settles into being a real estate investment trust and puts a greater emphasis on raising trees for harvest and acquiring real estate, Van Vleet said.

For example, Potlatch just purchased 76,000 acres in Wisconsin, a state it previously had no holdings in.

"The purpose of it was to structure a professional organization that will meet the challenges of a growing and changing forest land company,'' Van Vleet said.

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REIT executive elected to Weyerhaeuser board. Seattle Times, Jan 19, 2007

Weyerhaeuser said Debra Cafaro, chief executive officer of Ventas, a real estate-investment trust that owns health-care facilities, was elected to the board of directors of the Federal Way-based lumber company.

Cafaro emerged as a candidate in discussions with Franklin Mutual Advisers, Weyerhaeuser said. Franklin, Weyerhaeuser's second-biggest shareholder, last month urged the lumber company to convert timber assets to a real estate-investment trust.

"Her experience in real estate and broad business knowledge will prove valuable as she works with the rest of our directors to shape Weyerhaeuser's long-term direction," Weyerhaeuser Chief Executive Officer Steven Rogel said in a statement.

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Debra A. Cafaro Elected to Weyerhaeuser Board of Directors. Company news release, Jan 18, 2007

Weyerhaeuser Company (NYSE: WY) today announced the election of Debra A. Cafaro, 49, to the company’s board of directors effective Feb. 15. Cafaro will stand for election at the 2007 Weyerhaeuser annual meeting of shareholders on April 19.

Cafaro is chairman, president and chief executive officer of Ventas, Inc. (NYSE: VTR), a leading health care real estate investment trust (REIT). She also serves on the executive committee of the board of governors of the National Association of Real Estate Investment Trusts (NAREIT).

The Wall Street Journal profiled Cafaro in 2004 as one of the "50 Women to Watch" and she was voted one of the "Best of the Best" REIT CEOs by a poll of institutional investors in 2003.

"We are pleased that Debra has accepted our invitation to join our board of directors," said Steven R. Rogel, chairman, president and chief executive officer. "Her experience in real estate and broad business knowledge will prove valuable as she works with the rest of our directors to shape Weyerhaeuser’s long-term strategic direction. In my conversations with her, Debra has impressed me with her multi-dimensional approach to creating shareholder value and I look forward to her contributions as a director."

During recent discussions between Weyerhaeuser and Franklin Mutual Advisers, a large shareholder, Cafaro's name emerged as a possible candidate to serve on Weyerhaeuser’s board.

Prior to joining Ventas in 1999, Cafaro served as president and director of Ambassador Apartments, Inc. (NYSE: AAH), a multifamily REIT. She previously practiced real estate, corporate and finance law for 13 years at the firm of Barack Ferrazzano in Chicago, where she was a founding member. She also taught real estate transactions and finance from 1988 to 1992 as an adjunct professor at Northwestern University Law School. Cafaro earlier served as a judicial clerk to the Hon. J. Dickson Phillips, U.S. Court of Appeals for the Fourth Circuit.

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Conservationists vie with developers to snap up forests for sale. By Laura Oppenheimer. Newhouse News Service. Seattle Times, Jan 13, 2007

Timber companies across the country are transforming their most desirable forestland into subdivisions and resorts.

Logging is no longer the Northwest's economic engine, and demand nationally for second homes and rural lifestyles appears limitless.

In Maine, residents are bitterly divided over a Plum Creek Timber plan to build resorts and vacation homes in a 425,000-acre swath of lakes and forests. Plum Creek is the nation's largest private landowner.

Other big timber companies are finding their own niches. Weyerhaeuser split several patches of forest in Washington and marketed the large parcels to people who want to try forestry around their new home.

Timber companies say they don't intend to sell out the nation's woods but want to pluck land in prime recreation spots and reinvest in more remote forests.

But the movement has conservationists scrambling to buy forestland or to pay companies not to develop it. Houses increase fire danger, they say, and trees provide homes for critters and playgrounds for hunters and hikers.

People can't have it both ways — preserving forests and living in them, too — says Ted Lorensen, Oregon's assistant state forester.

"We need to look in the mirror," Lorensen says. "We're the ones who are driving this. The public views forestland as, 'It's our water, it's our forest.' Yet we want to own a piece of it."

About 1 million acres of private forests are being developed every year, according to a study by the U.S. Department of Agriculture. An additional 44 million acres are expected to see housing by 2030.

Companies used to own forests and process the timber in their mills. Today, many businesses specialize in one or the other.

The result: About half the private forestland in the country has changed hands in the past decade. Boise Cascade sold its forests to an investment group two years ago. International Paper sold most of its 6.8 million acres this year to focus on paper and packaging.

Meanwhile, timber-investment management organizations and real-estate investment trusts have gained popularity because they offer tax advantages. Many in the industry say this model pressures companies to profit by developing land.

There's plenty of demand. When stocks tanked several years ago and interest rates sank, investors turned to real estate. And baby boomers with a thirst for the outdoors were buying second homes where they could vacation or retire.

Gracie and Tom Pauly, who run a software business from their home near Tacoma, are the target audience. The astronomy buffs wanted a weekend getaway where stars, not cars, lit the night sky. And they wanted someplace where they could retire after their son, 16, finishes college.

20-acre lots sold

The Paulys decided to build a home, observatory and planetarium at Nisqually River Forest Reserve, where Federal Way-based Weyerhaeuser carved 20-acre lots from a commercial forest.

You won't find garage sales or bus stops here. Instead, buyers receive a personal forestry plan and lesson. They attend classes on everything from using a compass to harvesting timber. Roads are gravel. And, if you stand still, you can hear the river gurgling below.

"My preference is to build an observatory and house on that big white thing right there called Mount Rainier," jokes Tom Pauly, a former science teacher and avid hiker. "For some reason, the federal government frowns on that. So this is the next best thing."

The Paulys forged trails, dug a well, cleared a home site and paid for a barrage of tests to show they'll treat the land well.

Weyerhaeuser has long sold slivers of land with beautiful scenery, easy access to town and little importance to the company's forestry, says Scott Dahlquist, vice president of the real-estate division.

But Weyerhaeuser, still a publicly traded company, recently began marketing communities with an outdoorsy theme.

"People are looking for an investment," Dahlquist says. "They're looking for a lifestyle. And there's some element of the frontier: controlling your own destiny."

In most states, it's possible to divide rural land into roomy lots or apply for new uses. Oregon prevents forest owners from creating lots smaller than 80 acres and sets a high bar for rezoning land.

When regular people move to the woods, Lorensen says, "it generally results in less timber production."

"It often results in less forestland," he says.

As forestland gets developed, conservation groups scurry to preserve the most important pieces.

Preservation effort

The Nature Conservancy has spent about $1 billion buying forests or paying for agreements that prevent development and guarantee public access.

One of the nation's largest conservation deals protects 218,000 acres in 10 states, land formerly owned by International Paper. In Maine, 98 percent of the land in Plum Creek's plan will be protected if the state approves development.

Companies can satisfy shareholders while pleasing people who want to keep forests wild, says Bill Ginn, who manages the conservancy's Global Forest Partnership.

"People are passionate about where they live," Ginn says. "It's not an abstract concept to them. It's their backyard."

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Roslyn keeps watchful eye as timber town transforms. By Laura Oppenheimer. Newhouse News Service. Seattle Times, Jan 13, 2007

The moose that ambled down the street in "Northern Exposure" is long gone, but Roslyn remains the quintessential Northwest town.

Locals say hello to strangers entering a restaurant; people take their gripes to the mayor's home; icicles the size of baseball bats hang above storefronts.

So the prospect of golf courses and million-dollar homes rising in the forest above town rattled Roslyn native Dawn Abourezk. But if the Suncadia resort was unavoidable, she decided she'd better embrace it.

The 31-year-old mother of two launched Copper Crest Concierge, marketing herself as one-stop-shopping for wealthy vacation-home owners. She'll buy groceries, plow snow, solve plumbing emergencies, water plants, book pedicures.

And, like others in this town of 1,000, she'll keep a watchful eye on the transformation.

"There are angry people," Abourezk says. "There are excited people. And there are people who really don't care.

"It will be interesting to look back in 10 years and say, 'This is how it turned out.' "

Like dozens of towns across the United States, Roslyn is being reshaped along with the timber industry. Companies scour their real-estate portfolios for land to develop.

Plum Creek Timber made way for Suncadia by selling 6,300 acres near Roslyn. A company representative says the area cried out for a resort because it offers fishing, hunting and skiing in a breathtaking setting 80 miles east of Seattle in the Cascades.

Suncadia is owned by Oregon window company Jeld-Wen, Sunriver developer Lowe Enterprises and Portland real-estate company PacTrust. When construction is complete, 3,200 vacation homes will attract buyers from the Puget Sound area, Portland and beyond.

Roslyn started as a company town, drawing immigrants from all over the world to work in the coal mines. Shops, pubs and brothels buzzed along the main drag.

But mines sputtered, eventually closing in the 1960s. Many people turned to the town's towering green backdrop — fir trees — for work.

Just when timber began to fade, "Northern Exposure" producers picked Roslyn as the stand-in for fictional Cicely, Alaska. From 1990 to 1995, daily tour buses delivered fans dying to eat at the Roslyn Cafe and pump locals for insider trivia.

Suncadia's marketing director, Steve Dunn, describes Roslyn like this: "It's real. It's not made up. It's not Disneyland."

Potential buyers, who can tour the area by helicopter, appreciate Roslyn, Dunn says, and he hopes locals will feel the same way about Suncadia. When construction is finished in a few years, the resort will employ 700 people and generate about $5 million in annual property taxes.

About 100 homes are under construction, with the cheapest selling for $1 million. Guests can stay at a boutique inn overlooking one of three golf courses. In 2008, a central village will open with condos, shops and an ice rink.

But many Roslyn residents thought of this forest as their own. They didn't like the prospect of being outnumbered by millionaire city slickers. And, they figured, Suncadia signaled the death knell of the timber industry.

Long before Plum Creek sold property, Peg Bryant and Cordy Cooke formed the environmental group RIDGE to promote sustainable forestry. Members lobbied the county to designate land near town for long-term timber use.

But the county saved its forestry zone for remote areas, assigning land between Roslyn and nearby Cle Elum to a general rural category. A few years later, a master-planned resort was approved.

Bryant and Cooke say they don't love Suncadia, but they can live with it. A development agreement permanently protects 1,200 acres along a meandering river. Resort trails are public. And lighting can't illuminate the night sky.

Most important, Suncadia donated more than 300 acres to Roslyn as a buffer — part of it abutting Bryant and Cooke's yard.

"Our city is forever preserved as a little town in the forested mountains," says Cooke, a city councilor.

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Weyerhaeuser-Domtar deal gets Canadian antitrust OK. Puget Sound Business Journal, January 10, 2007

Weyerhaeuser Co.'s $3.3 billion deal to combine its fine paper business with Canadian paper products maker Domtar Inc. has been approved by the Canadian Competition Bureau.

The deal, announced in August, will create a company called the "new Domtar" and will be 55 percent owned by shareholders of the Federal Way-based forest products giant (NYSE: WY).

The deal includes 10 pulp and paper mills, 14 converting centers and two sawmills. The transaction still must be approved by Domtar shareholders at a February meeting and the deal is expected to close in the first quarter of 2007.

Domtar (NYSE: DTC), based in Montreal, Canada, is a manufacturer of business papers, commercial printing and publication papers, and technical and specialty papers, with 8,500 employees.

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