Railroads & Clearcuts
Railroad Land Grant
Corporations in the News: 2010
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Lessons from Weyerhaeuser and the decline of the U.S. economy
by Jon Talton, Seattle Times, December 14, 2010
If you want a snapshot into today's American economy and its inability to create productive jobs, look no further than Weyerhauser. The iconic Northwest company was once one of the largest integrated timber and paper companies in the world. It made things. It was the jobs engine for thousands in small mill towns in the Northwest, as well as at its headquarters in Tacoma, and later, Federal Way.
Now it's preparing to convert to a Real Estate Investment Trust, where most of its profits will go directly to investors. On Monday, it announced a tripling of its dividend ahead of the conversion. Today's Weyerhaeuser is essentially a large owner of timberland, most of its productive manufacturing operations shut or sold off.
This transformation may be very profitable for investors. (Maybe not, considering how much of the profit base depends on a housing market that may be sick for many years to come; the REIT idea was hatched during the real-estate bubble). For new jobs, productive activity and exports, not so much. The company employed 37,900 in 2007 — the number of jobs had dropped to 14,900 by 2009. In 2008, Weyerhauser eliminated 1,500 well-paid white-collar jobs, most at its headquarters. The damage reached from scores of small towns to metro Seattle.
A series of management missteps, a messy merger and bad luck put Weyerhaeuser on Wall Street's bad side. But so did the change in the capital markets and a financialized economy: Demands for quick and unsustainable profits, anti-competitive industry consolidation, hostility to re-investing for the long haul, greed manifested in the housing bubble. Now, with the REIT, big investors will win, at least in the short term, as the wealth it took a century to create is picked clean. But carry the Weyerhauser story across the American economy, and you see how we have a problem.
BURLINGTON NORTHERN SANTA FE
Derailed: A Minneapolis Star Tribune Investigation
From Minnesota to California, BNSF Corp. has drawn judicial penalties for misconduct.
Collision in the courts first of a four-part series, December 5, 2010
A life lost in the fog second of a four-part series, December 6, 2010
A case goes awry third of a four-part series, December 7, 2010
BNSF’s empire map
Plum Creek completes Montana sale
Home Channel News, December 7, 2010
Seattle-based Plum Creek Timber company announced it has completed the final phase of its sale of western Montana forestlands to The Nature Conservancy and The Trust for Public Land.
The company said it received $89 million in cash for approximately 70,000 acres of land.
The sale was completed in three phases for a total of 312,000 acres at a total of $489 million. The previous two phases were completed in 2008 and 2009.
The agreement is part of an effort to keep the forests in productive timber management and protect the area’s clean water and abundant fish and wildlife habitat, while promoting continued public access to these lands for fishing, hiking, hunting and other recreational pursuits.
A condition of the agreement provides for continued timber harvesting on some of these lands to help supply Plum Creek mills with wood fiber for up to 15 years. This harvesting is third-party certified as sustainable forestry.
Plum Creek is the nation’s largest and most geographically diverse private landowner with more than 7 million acres of timberlands in major timber producing regions of the United States and 10 wood products manufacturing facilities in the Northwest.
Plum Creek Completes Montana Sale
Zacks.com, December 2, 2010
Plum Creek Timber Co. Inc., a real estate investment trust (REIT) owning and managing timberlands in the U.S., has recently completed the third and final phase of the Montana forestland sale to ‘The Nature Conservancy and The Trust for Public Land’. The company has received $89 million in cash for approximately 70,000 acres of forestland.
Earlier in 2008, Plum Creek had entered into an agreement with the conservation organization to sell 312,000 acres of western Montana forestlands for $510 million. The deal was an effort to maintain the ecological balance of the region by keeping the forests under productive timber management and protecting the area’s clean water, fish and wildlife habitat, while promoting continued public access to these lands for fishing, hiking, hunting and other recreational pursuits.
The agreement also provided for timber harvesting on some of the selected forestlands to continue raw material supply to Plum Creek for about 15 years. The harvesting was certified by third-parties as sustainable forestry initiatives and contributed to the stability and productivity of the forestlands.
The property was purchased in three phases, with Phase I completed in December 2008 and Phase II in February 2009. The acquisition was funded through Qualified Forestry Conservation Bonds, a public financing mechanism created in the 2008 Farm Bill, which enabled ‘The Nature Conservancy and The Trust for Public Land’ to purchase forestlands either through the issuance of tax credit bonds or through direct federal grants.
Based in Seattle, Washington, Plum Creek owns one of the largest and most geographically diversified private timberland in the U.S. The company produces lumber, plywood and medium density fiberboard in its wood products manufacturing facilities. Plum Creek also operates a real estate development business as a taxable REIT subsidiary. In addition, the company has natural resource businesses that focus on opportunities such as mineral extraction, natural gas production, and communication and transportation.
Plum Creek’s business is affected by the cyclical nature of the forest products industry. In addition, prices of logs and manufactured wood products remain highly volatile. As such, factors beyond the direct control of the company undermine its long-term growth potential. We maintain our ‘Underperform’ recommendation on Plum Creek, which presently has a Zacks #5 Rank indicating a short-term ‘Strong Sell’ rating. However, we currently have a ‘Neutral’ recommendation and a Zacks #3 Rank for Weyerhaeuser Co., one of the competitors of Plum Creek.
PLUM CREEK - MONTANA
Purchase of 310K acres of Plum Creek land complete
Associated Press, December 2, 2010
Conservation groups say they have completed the purchase of vast swaths of western Montana land from Seattle-based Plum Creek Timber Co.
The Nature Conservancy and Trust for Public Lands on Wednesday said they had closed the last part of a three-phase deal involving more than 310,000 acres and costing $510 million.
Much of the land is being transferred to the U.S. Forest Service, after the federal government contributed $250 million to the deal.
Wednesday's phase included an estimated 69,000 acres in the Swan Valley, Mill Creek and Seeley Lake areas. Prior phases included land in the Lolo and Rock Creek drainages.
Montana Legacy Project complete with last transfer of Plum Creek land
By Rob Chaney, The Missoulian, December 1, 2010
The third and final part of the Montana Legacy Project closed on Wednesday with a transfer of 69,000 acres from Plum Creek Timber Co. to two conservation groups.
The Nature Conservancy and The Trust for Public Lands paid $89 million for the former logging lands. The groups plan to pass most or all of it over to public ownership.
"People are glad to have this phase closed and the paperwork done," TNC spokeswoman Bebe Crouse said Wednesday. "We still have some money to raise and pay it off, but I think everybody's ready to take a breath and celebrate."
The deal includes 24,208 acres in the Clearwater River area, 24,506 acres in Mill Creek between Missoula and Frenchtown, and 20,809 acres in the Upper Swan River drainage near Condon. Much of the property is in checkerboard ownership, mixed with state or federal lands.
"The Montana Legacy Project not only preserves habitat for wildlife," said Kat Imhoff, state director of the Montana Chapter of The Nature Conservancy. "It ensures that people are still able to use this land for recreation, as a source of clean water and as a place to make a living through activities such as ranching and sustainable forestry."
Wednesday's deal also included transfers of two parcels to the Montana Department of Fish, Wildlife and Parks. FWP bought 13,821 acres known as the Marshall Block in the Clearwater area for $10.6 million, and took a conservation easement on 9,348 acres in the Swan drainage for $14.8 million.
"We were pleased to partner with the Nature Conservancy and Trust for Public Lands on the project, and to help conserve this land we know is special to people in Montana," Plum Creek spokeswoman Kathy Budinick said on Wednesday. Plum Creek continues to operate on about 900,000 acres in Montana, the most land the company owns in any state. The company owns about 7 million acres in 19 states.
The entire Montana Legacy Project encompassed 310,000 acres spread throughout western Montana. Large chunks have already been turned over to the U.S. Forest Service or the state, such as a new wildlife management area and state park in the Fish Creek drainage south of Alberton.
O&C Lands Proposal seeks compromise
By Darcy Wallace, Cave Junction Oregon, IllinoisValley News, December 1, 2010
For decades, Southern Oregon counties have counted on timber sales to fund schools and other community programs. But a combination of factors, including a struggling economy, have resulted in severe budget cuts to programs.
A new proposal seeks to balance preservation with the need for revenue.
The Federal Forest Counties and Schools Stabilization Act of 2010 (FFCSSA) calls for dividing 2.4 million acres of federally-owned Oregon and California (O&C) railroad land roughly in half for harvest and preservation.
"That’s why I think the O&C proposal is so brilliant," said rural policy analyst Karla Edwards of Cascade Policy Institute. "It allows both economic and environmental growth. They’re [planning] to protect 1.2 million acres of old growth forest where the spotted own and a lot of other protected species are."
These efforts have been called "sustainable forest management," allowing controlled harvest of timber that will continue to yield without overtaxing or damaging other ecosystems.
In a press release, Edwards said the O&C lands were originally owned by railroad companies. In 1937, the O&C Act put the lands under control of the U.S. Department of the Interior, establishing some environmental protections and an Allowable Sale Quantity (ASQ) based on how much the land could yield without overharvest.
But over the course of the 20th century, a high volume of logging caused controversy due to environmental concerns. With timber yields reduced, various plans were introduced to help offset fund losses to several Oregon counties that count on timber revenue.
Earlier efforts to provide funding include The Secure Rural Schools and Communities Self-Determination Act of 2000. Edwards said the act supplements several county governments, but is set to expire in 2012.
According to the release, the FFCSSA proposal would reauthorize the Secure Rural Schools ’safety net,’ provide a reliable timber supply, assure full environmental protections, create jobs, and reduce reliance on federal timber harvest, instead focusing on harvests in Oregon.
Deanne N. Kastine, research/administrative assistant at Cascade Policy Institute, said Josephine County Commissioner Dwight Ellis is on the Board of the Association of O&C Counties supporting the proposal.
The Oregon Association of O&C Counties is conducting polls to determine public support as the proposal continues to be developed. Early results have shown support from the public, but some are concerned about environmental impacts and other issues. More information on the proposal and concerns will be released in the coming weeks.
BNSF offers financial data online
Progressiverailroading.com, November 30, 2010
Although it’s privately owned by Berkshire Hathaway Inc., BNSF Railway Co. still is publicly releasing some financial data.
Under a "Financial Information" link on the "About BNSF" tab at www.bnsf.com, the Class I provides stock data for before and after the Berkshire merger, including historical stock prices, as well as proxy statements, annual reports and Securities and Exchange Commission (SEC) filings.
On Feb. 12, Burlington Northern Santa Fe L.L.C. and BNSF Railway became Berkshire subsidiaries. Burlington Northern Santa Fe and BNSF continue to file annual, quarterly and current reports with the SEC.
Rail as controversy is not at all new
By Samuel Cutler Jr., Milwaukee Sentinel, November 27, 2010
In the mid-19th century, a transportation revolution swept the country and offered untold opportunities for the farmers out West. Railroads opened national and international markets like never before.
In Wisconsin, wheat was a cash crop that could be easily shipped by rail. What wasn't so easy was getting a railroad built. Huge amounts of capital were required. And it was hard to predict if, when, and how much of a return would be generated by the investment. In short, it was a risky operation, albeit vital to the future economic growth and prosperity of the country.
Lacking private capital, railroad entrepreneurs sought help from the ultimate resource: the U.S. government. Back then, the federal government wasn't exactly flush with cash, but what they did have was an abundance of land, especially "out West."
The deal was fairly straightforward. Commit to build the track and the government would give you not just the right of way, but free land to help pay for it. To get the transcontinental railroad built through desolate or mountainous territory the government was willing to give the railroads 20 square miles of land for each mile of track constructed.
In Wisconsin, the government land grants were not quite that generous, but still substantial enough to attract a great deal of interest. In Milwaukee, one man clamored to build a railroad into the heartland - Byron Kilbourn.
As one of the early promoters of the city, he was driven, some would say ruthless, in his attempt to make Milwaukee famous. From the early settlement days, when he virtually single-handedly drove the Potawatomi tribe out of town in 1836, to the eve of the awarding of the railroad land grants in 1857, Kilbourn fought tooth and nail to achieve his vision.
For Kilbourn there was no way that he would lose out to the "lumber barons" in northern Wisconsin who were angling for a federally subsidized railroad from Green Bay to St. Paul to get their timber to market.
When the Wisconsin state legislature finally awarded the federal grant, Kilbourn was indeed victorious and the Milwaukee & La Crosse Railroad became a reality. Milwaukee was on its way to becoming the "wheat trading capital" of the nation. What also became quickly apparent was that Kilbourn had made sure the Legislature would do his bidding. It was flat out bribery: A $5,000 bond for each vote in the Assembly. A $10,000 bond for each vote in the Senate. The governor's blessing was worth a $50,000 bond.
The scandal became national news. Kilbourn's corruption got him fired as the railroad's president. The railroad's board of directors quickly declared bankruptcy. The state took back the land. Kilbourn left the city and headed for Florida. But the railroad survived. Alexander Mitchell, Milwaukee's premier banker, and his fellow Scottish investors bought the Milwaukee & La Crosse out of bankruptcy and turned it into a railroad empire.
They eventually sold their holdings to John D. Rockefeller's younger brother to become part of the "Milwaukee Road."
Looking at today's squabble over building a railroad from Milwaukee, one is reminded of Mark Twain's observation: "History doesn't repeat itself...But sometimes it rhymes."
* Samuel Cutler Jr. is a former teacher and retired financial adviser from Robert W. Baird & Co. He lives in Thiensville.
WEYERHAEUSER - WASHINGTON
Tenino adds forest to city park
12 more acres: City buys and swaps land with Weyerhaeuser
By JOHN DODGE, Bellingham herald, November 25, 2010
TENINO - Tenino's city park and signature stone quarry swimming pool have received a new layer of protection with a recent 12-acre park expansion.
Nine acres of forested hillside behind the swimming hole, once slated for logging by the Weyerhaeuser Co., instead was sold to the city for $123,560, said Julie Keough, Weyerhaeuser’s forestland-use manager for the Vail Tree Farm.
The city and timber company also swapped about three acres each to complement the park expansion.
The deal, which closed Oct. 29, was the culmination of a grass-roots effort begun by Tenino residents more than two years ago to protect the park and swimming hole from logging.
"Everybody’s really happy," Tenino resident and park-expansion project manager Paul Donohue said.
Citizen opposition to Weyerhaeuser’s proposed plans to log its property next to the park triggered meetings among a citizens groups called Friends of Tenino, city officials and Weyerhaeuser.
Weyerhaeuser agreed to postpone its logging operation while the city pursued funding to purchase land from the company to expand the park.
A breakthrough occurred in 2009, when the city landed a $57,500 state grant from the Washington Wildlife and Recreation Program, matched by the city.
Subsequently, citizen park activists, aided by the Heernett Environmental Foundation, raised $5,000 toward the purchase. In addition, a $25,000 federal grant to the city from the Federal Land and Water Conservation Fund is pending.
With the park expansion completed, the next phase of the project is to develop trails linking the park property to adjoining property owned by the Heernett group and dedicated to wildlife habitat and environmental education.
In October, Weyerhaeuser moved ahead with logging of 50 acres above the park.
"But the new acquisition completely screens the logged area from view," Donohue said.
The logged land will remain in timber production and will be replanted soon, Keough said.
Forest plan features details to sweeten land swap
Victoriaadvocate.com, November 23, 2010
LEWISTON, Idaho (AP) - Officials with the Clearwater National Forest are floating a plan to buy a big chunk of private timber land in the upper Lochsa River basin as one way to curry public favor for a land exchange with a private company.
The proposed purchase is just one of several options outlined in an environmental impact statement issued by the agency Monday on the so-called Lochsa Land Exchange. The document, more than a year in the making, offers four separate alternatives for a land trade that could put 40,000 acres of private land with ecological and cultural significance into the public realm.
One alternative calls for the government to buy the entire 40,000 acres, while another suggests obtaining the acreage through a mix of purchases and swaps. Each of the alternatives would reduce the amount of public land proposed in an earlier version of the deal.
The land deal has drawn criticism since the agency first proposed two years ago trading 28,000 acres of public land for private property owned by Western Pacific Timber Co. Opposition led by a group of retired U.S. Forest Service employees managed to kill the deal. Critics panned the agency's plan to trade tracts of popular federal land for remote acreage owned by the company.
In response, the draft environmental impact statement cuts the maximum number of federal acres that could be traded from 28,000 to about 18,000.
"Eighteen-thousand acres is close to what we think we need for a value-for-value exchange," said project leader Teresa Trulock. "We think that amount is still doable for land for land."
The option preferred by the forest service calls for trading 6,200 acres of small, isolated tracts scattered across three national forests for an equal value of private land. It would also count on about $2 million from the federal Land and Water Conservation Fund to buy up the rest of the private land. The fund is supported by money collected from offshore oil and gas leases and is used for conservation, but forest officials concede the battle to win money from the fund is competitive.
Another option would be spending three years trying to raise some of the $2 million from private donors, conservation groups and other sources, said Clearwater Forest Supervisor Rick Brazell.
"There could be a lot of energy in the public to help us find those funds outside of the Land and Water Conservation Fund," Brazell told the Lewiston Tribune.
The timber company bought the checkerboard land from Seattle-based Plum Creek Timber five years ago with the intention of trading it with the forest service.
WPT purchased the checkerboard of land, which was once owned by the Northern Pacific Railroad, from Seattle-based Plum Creek Timber.
"We wanted to do an exchange and in good faith, not to touch these properties. And we haven't," Andy Hawes, general counsel for the company, told the Moscow Daily News.
Critics of the previous proposal are still digesting the study and options.
Idaho County leaders say they are still concerned about the prospect of losing an estimated $80,000 in tax dollars collected annually from the private lands. They remain skeptical of a one-time payment designed to offset that annual loss.
"Realistically that land is worth two school teachers in Idaho County every year forever," Idaho County Commissioner Skip Brandt said. "So Idaho County is not too excited about this thing moving forward unless we have a long-term solution."
The public has 90 days to comment on the document and the agency is planning open house events in Moscow, Elk River and Elk City in January.
Patriot Rail seeks STB exemption to control six Weyerhaeuser short lines
Progressive Railroading, November 16, 2010
Patriot Rail Corp. is seeking Surface Transportation Board (STB) approval to continue in control of Columbia & Cowlitz Railway L.L.C., DeQueen and Eastern Railroad L.L.C., Golden Triangle Railroad L.L.C., Mississippi & Skuna Valley Railroad L.L.C., Patriot Woods Railroad L.L.C. and Texas, Oklahoma & Eastern Railroad L.L.C.
The short lines currently are owned by Weyerhaeuser Co. In August, Patriot Rail announced it agreed in principle to purchase the six short lines from Weyerhaeuser pending certain closing conditions, including due diligence and regulatory approval. The parties now plan to complete the transaction on or about Dec. 21, according to a STB filing.
The short lines, which operate a total of 160 miles of track in four states, currently are named the DeQueen and Eastern Railroad Co., which comprises the DeQueen and Eastern, and Texas, Oklahoma & Eastern railroads; the Columbia & Cowlitz Railway; Weyerhaeuser Woods Railroad; Golden Triangle Railroad; and Mississippi & Skuna Valley Railroad.
The railroads primarily serve Weyerhaeuser and International Paper mills, as well as some third-party customers. The acquisition would double the rail holdings of Patriot Rail, which currently owns and operates six short lines operating in eight states.
Settlement clears track for Burlington Northern Sante Fe buyout
Westlaw, November 15, 2010
A Delaware Chancery Court judge has approved the settlement of lawsuits by shareholders who claimed they were railroaded into selling out too cheaply in the $26 billion buyout of Burlington Northern Sante Fe Corp. by investor Warren Buffet's Berkshire Hathaway.
Vice Chancellor J. Travis Laster's decision clears the way for the consummation of the deal.
The Burlington board had earlier agreed to provide shareholders with more information about the transaction and how it was negotiated, but the plaintiffs won no increase in the stock price, and the defendant officers and directors admitted no wrongdoing.
Suits filed in Delaware and Texas alleged the Fort Worth-based railway company was worth more far more than the $100-per-share offer that Burlington's directors rubber-stamped.
The suits claimed Buffet boasted that he used his chummy relationship with Burlington CEO Matthew Rose to engineer a bargain-basement deal "in about 15 minutes."
Since Burlington is incorporated in Delaware, its directors had a duty to shop for the best price they could get for the company but instead breached that duty by favoring their own interests, the plaintiffs said.
The global settlement releases all claims related to the buyout and does not allow any plaintiffs to opt out of it.
It provides for an award of $450,000 for the plaintiffs attorney. In the settlement order, Vice Chancellor Laster said it was up to the Delaware plaintiffs' attorneys to share that award with the plaintiff law firm in the Texas action.
In a brief, Burlington said the award was too large when considering the benefit the lawsuit obtained for the shareholders, but it did not formally object to the amount.
In their brief in support of the fee award, the plaintiffs said Burlington allowed expensive parallel litigation to go on in both the Delaware and Texas courts rather than moving to have one court take over all the suits early on in the litigation.
In re Burlington Northern Sante Fe Shareholders Litigation, No. 5043, 2010 WL 4268999 (Del. Ch. Oct. 28, 2010).
Plum Creek a prime conservation player in Alachua County
It is largest private land owner in the county, state and nation.
By Anthony Clark, Gainesville Sun, November 14, 2010
Plum Creek is little known to most of Alachua County, but the Seattle-based timber company is a giant in conservation circles and is poised to become a major area developer.
A transaction little noticed locally in 2001 made Plum Creek the largest private landowner in Alachua County when the real estate investment trust merged with Georgia-Pacific's 4.7 million-acre timberland division.
With that came 70,000 acres of forest in Alachua — covering 14 percent of the county. That and a subsequent purchase of 56,000 acres in northwestern Florida — while the St. Joe Paper Company has divested some of its timberlands — made Plum Creek the largest private landowner in the state, with about 600,000 acres in 22 counties, 90 percent of it in timber production.
In fact, Plum Creek is the largest private landowner in the nation with 7 million acres in 19 states, with 1.3 million acres in conservation.
Although Plum Creek is the largest local company in land mass, working in the woods doesn't make it the best known. But as Florida director of real estate Todd Powell points out, it has more conservation land here than Paynes Prairie at 24,000 acres — land that people use every time they bike the Gainesville-Hawthorne Trail or use city water from the Murphree Well Field in northern Gainesville.
The company moved its Florida headquarters to Gainesville in 2006, with an office in Tioga Town Center that houses three real estate people, two supervisors who manage 22 foresters statewide, and a community relations manager.
Powell said the company selected Gainesville to be close to the University of Florida and its agricultural research. UF's Institute of Food and Agricultural Sciences currently is conducting a study on eucalyptus trees growing on Plum Creek property in eastern Alachua County.
The bulk of Plum Creek's business is in selling timber and pulpwood to saw and paper mills. Of $1.3 billion in revenue last year, $520 million was from timber sales, while the rest was split between real estate transactions, manufacturing at lumber and fiber mills in the Northwest and royalties from mineral mining.
In Florida, Georgia-Pacific continues to be one of Plum Creek's largest customers, with pulp going to the Palatka paper mill and timber to the Hawthorne saw mill, though its largest customer is the Smurfit-Stone Container Corp. pulp and paper mill in Fernandina Beach.
Real estate deals also have been a big part of Plum Creek's business in Alachua County, though to date most have not been the kind that make environmentalists cringe. To the contrary, the company's transactions have included selling land outright for conservation purposes or selling conservation easements that protect the land from development while Plum Creek retains the timber rights.
The local conservation efforts started under Georgia-Pacific by many of the same people still in Plum Creek today. Greg Galpin, senior manager of planning, was with G-P when it sold 10,300 acres near Lake Lochloosa to the St. Johns River Water Management District in 1993 to form the Lochloosa Conservation Area.
Two years later, G-P sold the first conservation easement in the state, an adjoining 16,600 acres to the water district while retaining the timber rights.
On a recent tour of the property, Galpin pointed out a gopher tortoise preserve behind a low enclosure of fabric as a shy tortoise ducked back into its hole. Last year, Plum Creek was the first to take advantage of state incentives to create such a preserve, setting aside 570 acres to take in tortoises rescued from construction sites and converting nearby plantations to longleaf pine, the tortoises' preferred habitat.
Also nearby is the 640-acre Phifer Flatwoods conservation land that includes part of the Hawthorne Trail and fronts State Road 20. As part of a periodic auction of properties, Plum Creek rejected the highest bid from a Louisiana developer and instead sold it to the Alachua Conservation Trust in 2005. The trust then sold it to Alachua County.
"They bent over backwards to make that property a success," said Robert "Hutch" Hutchinson, executive director of the trust. "I think their local folks really love this community and saw the cost/benefit of selling to a developer versus a conservation organization and made it work for us."
Hutchinson said he would like to see Plum Creek forestland conserved to guarantee a nearby supply of fuel for GRU's planned biomass plant.
Galpin said the company has not been part of the biomass discussion, but "any market for forest products is good."
In 2000, G-P sold the 7,200-acre Murphree Wellfield conservation easement in northern Gainesville that includes five Gainesville Regional Utilities water wells and rights for a sixth to the St. Johns and Suwannee River water districts and the city of Gainesville.
Not included in the easement was 1,800 acres of "high value" property along both sides of State Road 121 that G-P set aside for future development.
As a publicly traded investment trust, Plum Creek's strategy is to determine the best value of each parcel of land, said Pete Madden, vice president of operations support who also started at G-P.
In recent years, that has included development projects in Florida, such as a 700-acre industrial park in Palatka.
For the Murphree property, it meant carving out 1,800 acres along SR 121 north of U.S. 441.
Galpin said the company figured Gainesville eventually would grow north toward the Seminole Woods subdivision north of its property — "so we kept this out of the conservation easement for potential long-term opportunities."
That opportunity arose when Plum Creek — then in partnership with LandMar as the builder — came to the city in 2007 with plans for a development with 1,890 homes and 100,000 square feet of retail and commercial space, nearly the size of Haile Plantation. With LandMar out of the picture, Plum Creek now is referring to it as the Gainesville 121 project. The city annexed part of the property that wasn't already in the city limits, and after years of revisions, the City Commission and state Department of Community Affairs signed off last year on a comprehensive land use amendment for the project.
Mayor Craig Lowe, then city commissioner, was the sole vote against its original plan in 2007 but was part of a unanimous final approval in 2009 after several changes, including preserving more than 60 percent of the property.
"My position didn't change so much as their plan changed to where they did incorporate more set-aside of natural areas," he said.
Rob Brinkman, then with the local Sierra Club, also spoke out against the development over concerns about its impact on Turkey, Rocky and Hatchet creeks that originate on the property.
While he said he is not totally happy with the final comp plan, he said Plum Creek is "not as bad as they could be."
Though he said he is at odds with the company's development plans, he takes comfort in the company it keeps, such as Gainesville land use attorney David Coffey and UF wetlands ecology professor Mark Clark, who worked on the project.
With more zoning and site plan reviews ahead, Powell said it would be late 2012 at the earliest before the company started moving dirt, but that also depends on new housing demand that has been absent in recent years.
Between the 121 project and a 500-acre industrial park approved for Lake City, Powell said Plum Creek's development plate is full and that timber will always be its top priority.
But long term, a 17,000-acre woodland east of Newnan's Lake between State Roads 20 and 26 could become the company's next big development.
About a third of the property is unusable wetlands, while Hutchinson said conservationists would like to see another third conserved to protect Lochloosa Creek and link to other conservation lands.
That leaves another third for possible development.
Powell said there are no such plans and that talk is premature.
But Hutchinson said Plum Creek has laid out maps showing where it could develop a portion of the property with minimal environmental impact.
Galpin said the future of the property will depend on what the public will get behind.
Hutchinson points out that the city and county have expressed a desire to see more economic development in east Gainesville that — unlike other areas — still has the capacity for traffic and schoolkids.
"They're in it very, very long term, and they're large enough that they can be patient with this," he said. "And they're making decent income off the timber, too."
BURLINGTON NORTHERN SANTA FE
Fuel Us Twice? The railroad fights oversight at an Idaho refueling depot - again.
by Kevin Taylor , Pacific Northwest Inlander, November 3, 2010
The Burlington Northern Santa Fe Railway has launched a peremptory federal lawsuit against Kootenai County, challenging local government’s authority to order additional safety regulations for BNSF’s 500,000-gallon diesel refueling depot near Hauser.
The fueling depot, quite famously, was guaranteed to be "virtually leakproof" by railroad officials, who later discovered the $42 million facility had been leaking even before it opened in 2004.
Even after it was discovered the new facility had cracks in the concrete fueling platform and bad seals in the underground liners, BNSF continued to refuel trains. It took an Idaho District Court judge to shut down the depot, citing imminent threats to human health and welfare as diesels reached the Rathdrum Prairie Aquifer.
The aquifer, just 160 feet below the refueling depot, is the sole source of drinking water for an estimated half-million people in Kootenai and Spokane counties.
In fact, says Geoffrey Harvey of the Idaho Department of Environmental Quality, traces of the 2004 leak are still detected in the aquifer.
"It’s still an open case. The cleanup standard in the aquifer is ‘no detection,’ which is a very high standard. There are a few polyaromatic hydrocarbons — which are components of diesel — that are still detected," Harvey says.
The amounts are really, really tiny, he says, "but they are not below detection. And that’s the rule for this aquifer because 500,000 people drink from it."
The depot has a clean safety record since it reopened in 2005 after 74 days of court-ordered shutdown and $10 million in repairs, Harvey says.
The railroad has entered into agreements with Kootenai County and DEQ on issues of training, leak protection and monitoring.
There are three levels of containment, Harvey says, and additional layers of test wells that DEQ inspects monthly.
The county commissioners, as part of a five-year review of the conditional-use permit with BNSF, are proposing some heightened safety standards on monitoring and a protocol on when to shut the refueling depot down if there are significant leaks.
This is what the railroad appears to be fighting in the suit it filed last week in U.S. District Court in Coeur d’Alene. "Kootenai County does not have the authority to regulate freight railroad facilities or operations that are part of the interstate rail transportation system," the suit alleges.
It’s a familiar chest-thump. "BN has consistently maintained for all these years that nobody can regulate them. That’s pretty much how they look at it," says Rachael Paschal Osborn, a water-quality activist and attorney in Spokane. Early on, Osborn fought the proposal to site the high-speed refueling depot at Hauser, just above the aquifer and in an area of particularly porous, gravelly soil.
She and others tried to get the federal Surface Transportation Board to intervene, but the board ruled that it, too, lacked authority to regulate a railroad.
So when the facility opened with public relations fanfare (free hot dogs, soft drinks and tours) in 2004, the assembled dignitaries hailing it as "state-of-the-art" didn’t know it was already leaking wastewater and fuel.
An estimated 2,000 gallons of contaminants reached the aquifer, according to DEQ.
After the judge ordered it shut down, BNSF agreed to conditional-use permits with Kootenai County.
This could be key to, er, derailing the lawsuit, Osborn says.
"There have been cases where if a railroad voluntarily enters into [conditions of use] then it is enforceable," she says. "It is not unreasonable for the Kootenai County commissioners, as they revisit the agreement, to say, ‘We need to ensure continued monitoring or enhanced monitoring.’ "This is not wild-eyed fear. Burlington Northern’s track record is horrible," Osborn says. "They have polluted aquifers across the country."
Burlington Northern Settlement Approved by Judge
By Phil Milford and Jef Feeley, Bloomberg, October 28, 2010
Warren Buffett’s Berkshire Hathaway Inc. and its Burlington Northern Santa Fe Corp. unit won a judge’s approval to settle an investor lawsuit challenging the fairness of Berkshire’s $26 billion acquisition of the railroad.
Company officials agreed in January to provide stockholders with additional information about the buyout to resolve the litigation. Delaware Chancery Court Judge J. Travis Laster approved the settlement at a hearing in Wilmington today.
"It’s a settlement that’s reasonably easy to approve," Laster said. He also awarded investors’ lawyers $450,000 in fees and expenses.
Berkshire, based in Omaha, Nebraska, said in November it would buy the 77.4 percent of Fort Worth, Texas-based Burlington Northern it didn’t already own for $100 a share. At the time, the stock was trading at $76.07. The transaction was completed in February.
Marc D. Hamburg, a Berkshire Hathaway spokesman, didn’t immediately return a call for comment on the ruling today.
The judge was initially asked to award $3.5 million in legal fees, according to court papers. He said today the application citing 2,400 hours of work on the litigation in Delaware and Texas posed "a serious credibility stretch."
Berkshire fell $630 to $120,025 at 4:15 p.m. in New York Stock Exchange composite trading.
The consolidated case is In re Burlington Northern Santa Fe Shareholders Litigation, 5043, Delaware Chancery Court (Wilmington).
PLUM CREEK - MONTANA
Montana Land Board OKs $21M Loan for Timberland
By Matt Gouras, Associated Press, October 19, 2010
The state is moving forward with plans to buy 32,000 acres of former Plum Creek Timber Co. land near the Blackfoot River as early as next month, even though it will cost the general fund $1.5 million a year.
The Land Board, led by Gov. Brian Schweitzer, gave its formal approval Monday to the idea of borrowing money by issuing $21 million in bonds. The Board of Examiners, also led by the governor, backed that decision later in the day.
The notion was first approved by the 2009 Legislature, when the state thought it could buy 26,000 acres. The state Department of Natural Resources and Conservation said real estate prices have dropped, allowing it to buy more.
The DNRC said it will sell logging and grazing rights on the land, with that money going to schools. It could close on the deal next month.
The state will be issuing bonds to pay for the land, with payments from the general fund of tax collections expected to be about $1.5 million a year for the next 20 years.
The income on the land managed by the Department of Natural Resources and Conservation will be about $222,000 a year. But that money is earmarked for a school construction account and will not offset the bond payments out of the general fund.
Montana faces a projected shortfall over the next two-year budget period potential in excess of $300 million. Schweitzer has ordered spending reductions across state government, and is even considering privatizing Medicaid services as a way to save money.
But the governor said the land is a good deal despite the other budget reductions.
The state is getting it cheap and will be paying a low interest rate probably below 3 percent because of its good credit rating, he said. He noted that the land will be generating money — and appreciating in value — long after the bond is paid off.
"It will generate a fair amount of revenue until the end of time," Schweitzer said. "This is a business investment. We have in effect bought a tree factory and that tree factory will harvest money for students for the next 100 years."
The land to be acquired is part of the Legacy Project, a project ledby The Nature Conservancy, which is transferring 310,000 acres of Plum Creek timberland to public and nonprofit ownership. Plum Creek had considered selling much of the land to private developers.
Mary Sexton, director of the DNRC, said the deal also ensures the land that is highly prized for its recreation opportunities will remain open to hunting, hiking and fishing now that the state is getting ownership.
The land is south of Highway 200 in the Potomac Valley east of Missoula.
One lawmaker who opposed the plan from the beginning said the state's current financial woes only make it a worse decision.
"In tough economic times, that's $1.2 million we have to get to make the general fund whole," said Rep. Tom McGillvray, R-Billings. "It's the wrong direction, an it's not responsible. We don't need more land, we can't afford it."
The Land Board earlier this year also endorsed an idea to use roughly $40 million PPL Montana has been ordered to pay to buy up more of the former Plum Creek Timber land currently owned by The Nature Conservancy. PPL has not paid the money and is still contesting the order in court.
WEYERHAEUSER - OREGON
Weyerhaeuser says Ore. sawmill cleanup nearly done
Associated Press, September 22, 2010
Weyerhaeuser Co. says the cleanup of its former sawmill in Warrenton [Oregon] is nearly done.
The Daily Astorian reports the wood products giant based in Federal Way, Wash., has hauled away about 4,000 tons of gasoline-contaminated soil at the mill the company sold last December to Hampton Affiliates.
The Oregon Department of Environmental Quality said Weyerhaeuser has been removing soil and groundwater from a former fueling station at the mill for the past few weeks and work should be finished soon.
Weyerhaeuser officials declined to disclose the cost of the job under a voluntary agreement with the state. But a spokesman said the company was pleased to see the work near completion.
The new owners of the mill plan to reopen it in spring.
WEYERHAEUSER - WASHINGTON
Weyerhaeuser sold Cosmopolis pulp mill
September 21, 2010
Weyerhaeuser has sold the Cosmopolis [Washington] pulp mill, which has been idle since 2006, to private equity firm The Gores Group and a group of investors including Dermot Smurfit, The Gores Group reports. The mill, which had an annual capacity of 140,000 tons of dissolving pulp, is to restart production under the name of Cosmo Specialty Fibres, Inc. as soon as it has been modernised.
Weyerhaeuser to distribute 324M shares in dividend
Associated Press, Bloomberg, August 27, 2010
Weyerhaeuser Co., one of the world's largest lumber and wood products companies, said Wednesday it will distribute about 324 million shares to pay the stock portion of its special dividend.
The company calculated the distribution based on a stock price of $15.54, the average closing price of the stock on Aug. 24, 25 and 26.
The special dividend will be paid Sept. 1 to shareholders of record as of July 22.
After paying the dividend, the company estimates it will have approximately 536 million common shares outstanding.
The special dividend is a required step in the company's path to becoming a real estate investment trust.
A majority of its shareholders elected to receive their cut of a special $5.6 billion dividend in cash.
Weyerhaeuser shares added 25 cents to $15.73 in afternoon trading.
WEYERHAEUSER - WASHINGTON
Owners miss county deadline for landfill compliance
By Barbara LaBoe, The [Longview WA] Daily News, August 29, 2010
Taxpayers may be on the hook for Mount Solo landfill
Owners of the troubled Mount Solo Landfill failed to meet the county's deadline to develop a plan to fix numerous violations at the site, paving the way for likely court action.
County officials had given Robert Radakovich Sr., who owns the landfill, and his son Robert Radakovich II, who managed it, until Aug. 18 to say how they'll bring the closed, private landfill back into compliance. The landfill, located in West Longview near the Columbia River, has flunked its last two annual inspections. In addition, none of the required post-closure monitoring and safety work is being done to make sure the landfill is not causing health, safety and environmental problems, according to county records.
Robert Radakovich II said earlier this month that he and his father are both bankrupt or facing bankruptcy and can't afford to maintain the landfill. He also claimed that Weyerhaeuser Co., the landfill's main client, didn't put enough money into a post-closure trust fund and that the company should cover the new costs. Weyerhaeuser officials say the $9 million the company paid in the 1990s ended its obligation to the site.
County officials say they're expecting to take the Radakovichs and possibly Weyerhaeuser to court over the matter. The county estimates it will cost hundreds of thousands of dollars to bring the landfill into compliance and then continue annual maintenance and testing.
With the deadline passed, it's up to the county commissioners to decide when and if to fund such legal action. Commissioners said they're aware of the issue and expect to address it soon.
WEYERHAEUSER - WASHINGTON
County delays finalization of landfill purchase
By Barbara LaBoe, The [Longview WA] Daily News, August 28, 2010
50 trucks per day would haul trash if county buys landfill
County reaches tentative agreement to buy Weyco landfill
Cowlitz County commissioners won't decide on a proposed purchase of the Headquarters Road landfill until September or perhaps October as final sticking points continue to be negotiated.
Commissioner George Raiter had hoped to take the vote Tuesday, the last meeting before Commissioner Kathleen Johnson retires. Raiter said the decision on whether to buy the 300-acre landfill from Weyerhaeuser Co., for $19 million was "important enough" that he wanted three commissioners to vote if possible. Mike Karnofski, who will replace Johnson, has said he'll recuse himself from any landfill purchase votes because he's retiring from Weyerhaeuser.
Friday, however, Raiter said that negotiations are continuing and there are two unspecified sticking points that would doom the deal if agreement can't be reached. Raiter said the county is awaiting a response from Weyerhaeuser and then likely will sit down for more face to face negotiations the second week in September.
"The artificial deadline of Tuesday wasn't working, so now we'll be able to take a more deliberative approach," Raiter said of the final sticking points.
Weyerhaeuser put its private, industrial landfill on the market last year, with company officials saying they wanted to focus on "core properties."
Raiter said buying the Silver Lake area landfill would eliminate the need to ship the county's trash to Eastern Washington starting in 2013, give the county 100 years of waste disposal capacity and save about $1 million annually.
The purchase is controversial with some Toutle area neighbors saying adding household waste to the exisiting landfill mix will ruin their way of life and sink property values. Others support the purchase saying it's better to have the county running the landfill than to have it sold to an outside private company.
Even once commissioners take the initial vote the sale won't be final. Any agreement will be contingent on the county getting a permit to accept municipal waste at the site as well as a review by an outside firm to ensure the landfill is sound. That process, once activated, is expected to take six to 18 months.
WEYERHAEUSER - WASHINGTON
County reaches tentative agreement to buy Weyco landfill
By Barbara LaBoe, The [Longview WA] Daily News, August 20, 2010
Cowlitz County and Weyerhaeuser Co., have reached a tentative $19 million purchase agreement on the company's Headquarters Landfill, and commissioners will discuss details in public for the first time Tuesday morning.
If approved, the county would buy the 310-acre private landfill and convert it to a municipal waste landfill for household trash, estimating they will save $1 million annually in the process. Weyerhaeuser would continue to use the landfill as a paying customer.
"We're still in the process of hammering out the details, but it looks like things are progressing and we're confident the deal can get done, of course realizing the county still has to go through the public process," said Weyerhaeuser spokesman Anthony Chavez Friday. "We're close and we're confident."
The main items have been agreed upon, though final details still are under negotiation, Commissioner George Raiter said Friday. The tentative agreement will be discussed by commissioners at 9:30 a.m. Tuesday. Public comment also will be taken at that time.
Most of the negotiations have been conducted in private at Weyerhaeuser's request, with just Raiter and a few county employees involved. The details must be shared with the other two commissioners and the public before commissioners vote. That vote could be as early as Aug. 31, Raiter said Friday.
Nothing is binding until the commissioners vote, and a yes vote is not certain on the controversial proposal.
Commissioners Axel Swanson and Kathleen Johnson have supported the negotiation process, but they've not said whether they'll vote for the purchase. Ideally, Raiter wants the matter resolved before Johnson leaves office Sept. 1, saying she already has the background needed for the decision. The final negotiations may not allow that to happen though, Raiter said Friday.
Initial details of the agreement include:
* A $19 million purchase price. The money would come either from federal bonds or the county's landfill reserve fund, Raiter said. The county fund was established to build a new landfill and would be effectively wiped out with the purchase. Raiter said he'd prefer to use low-interest federal bonds — a form of borrowing — but is waiting to see how much is available to the county.
* A contingency clause that cancels the sale if the county can't receive a new permit for municipal waste. Raiter estimates it will take six to 18 months to secure a new permit. The landfill now is permitted only for industrial waste.
* A guaranteed tipping fee for Weyerhaeuser's industrial waste at the site. The guaranteed price would escalate over time. The county also would agree not to offer Weyerhaeuser competitors a lower disposal fee, Raiter said.
* Weyerhaeuser landfill employees would be given first consideration for county jobs at the site. No jobs are guaranteed at this point, Raiter stressed. Employees were notified of the potential for a sale Friday afternoon, Chavez said.
Raiter and county employees estimate that storing the county's trash at Headquaters would save $1 million a year in shipping costs to Eastern Washington when the county's Tennant Way landfill closes in 2013. The savings could be used for county projects, with particular emphasis on the Toutle area and quality-of-life projects such as parks, Raiter said.
Only about 50 acres of the site has been developed so far, and officials estimate the landfill still has 100 years of capacity. Waste Control Inc. of Longview would continue to collect and transport the county's waste.
Several neighbors of the Toutle-area landfill oppose both the sale and the landfill in general, dating back to when it was built in 1993. Several have said their property values and way of life would be ruined if a municipal landfill is allowed, and they want the site closed.
Fanning the opposition is a promise Weyerhaeuser officials made in the 1990s that the landfill would never accept household trash. Any new owner, including the county, would not be bound by that promise, which has infuriated landfill neighbors.
Tuesday's discussion starts at 9:30 a.m. in the hearing room on the third floor of the county Administration Building, 207 Fourth Ave. N., Kelso.
WEYERHAEUSER - NORTH CAROLINA
City takes closer look at Weyerhaeuser project
By Laura Oleniacz, New bern Sun Journal, August 16, 2010
New Bern’s leaders are slated to look at effects of Weyerhaeuser Real Estate Development Co.’s proposed 586-acre commercial and residential project at a work session today.
The session is a follow-up to the New Bern Board of Aldermen’s July 27 meeting when the board delayed action on an agreement for the city to provide water and sewer to the project that would be located at the U.S. 70 and N.C. 43 intersection.
Taylor Downey, the company’s North Carolina operations manager, said following that board meeting, he fielded concerns from retailers and others who are in talks about the project.
He said "we have been in contact" with restaurant, cinema and business officials about the project, which is expected to take 10 to 12 years to complete, and could include a cinema, shops, schools, offices and restaurants as well as houses, town homes and apartments.
"I was getting calls from a lot of folks that I’ve talked to about Craven 30, and they were concerned that all of a sudden the city’s not going to provide utilities for what we’re trying to accomplish out there. I really tried to make them feel comfortable," Downey said. "I’m talking to retailers, and folks all over the United States, and it’s surprising in this new age, how information travels quickly."
He said "more serious negotiations" with retailers or restaurant officials for the commercial side of the development could start after an agreement is in place.
"The big reason is, these end-users don’t want to make a commitment on something, or make an investment on something they don’t know that is going to be served by accesses off of (N.C.) 43 or by water and sewer by the city," Downey said.
Dana Outlaw, the Ward 6 alderman, said the board pushed back discussions on the agreement because "that’s a very, very, large project" and "we wanted to make sure that we were all understanding it."
"This project mix of residential, commercial, is real state-of-the-art concept, and I applaud Weyerhaeuser for the amount of research they’ve done to identify and target our market, particularly with the 43 connector, but the primary issues would be sewer, electrical (and traffic)," Outlaw said.
Addressing one of those issues, Jordan Hughes, city engineer, said he believes the city has "plenty" of available sewer capacity.
The city uses 3.5 million gallons per day of its permitted 6.5 million-gallon-per-day capacity. Of the remaining 3 million, he said 800,000 gallons have been committed to developers of projects in various stages of construction.
Downey said Craven 30 would have a planned sewer allocation of 520,000 gallons per day at full build-out.
New Bern planners approved the zoning for Craven 30 in October of 2008 on a tract now in the city’s extraterritorial planning jurisdiction, although the developer plans to annex to the city.
"We feel like the commercial certainly will come first," Downey said. "And we think that we’ll have probably 65 to 75 percent of the build-out of the commercial in the first five years. The residential component of it, we think, will probably be a year or two lagging."
Downey said he plans to be at the work session to make sure the board members have all the information they need.
"We’re tying to work with the city to make sure that everybody knows that it is a win-win situation for the city and the folks of New Bern, and hopefully the retailers that we’ll be bringing in," he said.
PLUM CREEK - MONTANA
West Swan conservation plan finished for Plum Creek land
Daily Inter Lake, August 11, 2010
Montana Fish, Wildlife and Parks has written a draft environmental assessment for the proposed West Swan Valley Conservation Project located about seven miles south of Swan Lake in Lake County, within the east half of the Swan River State Forest.
The state agency proposes to secure permanent conservation management on up to 9,500 acres of important fish and wildlife habitat on land currently owned by Plum Creek Timber Co. The three alternative methods to achieve this outcome include purchasing a conservation easement, purchasing fee-title ownership or a combination of conservation easement and fee-title ownership. No action is also an option.
The public comment period for the draft runs through 5 p.m. Sept. 7.
A public meeting is scheduled for 7 p.m. Aug. 19 at the Swan Lake Community Center, located behind the Swan Lake Fire Hall just south of mile marker 71 on Montana 83.
Copies of this draft are available on the Fish, Wildlife and Parks website at fwp.mt.gov under Recent Public Notices. Copies also are at the Fish, Wildlife and Parks Region One office, 490 N. Meridian Road, Kalispell; the Flathead County libraries in Kalispell and Bigfork; Polson City Library; Swan Lake Library; and Swan Ecosystem Center, Condon.
Direct written comments to Nancy Ivy, FWP, 490 N. Meridian Road, Kalispell, MT 59901; or e-mail to email@example.com.
For further information, contact fisheries mitigation coordinators Joel Tohtz, at 406-751-4570 or e-mail firstname.lastname@example.org; or Alan Wood, 406-751-4595 or email@example.com.
Weyerhaeuser sells company railroads
Associated Press, August 10, 2010
BOCA RATON, Fla. — Weyerhaeuser has agreed to sell its short-line railroads to a private Florida-based company.
Terms of the deal with Boca Raton-based Patriot Rail have not been revealed. Patriot says it hopes to complete the purchase in the fourth quarter.
The sale by the Federal Way-based forest-products company includes two railroads in Mississippi totaling just over 34 miles, plus other short-haul lines in Washington state, Oklahoma and Arkansas.
BURLINGTON NORTHERN SANTA FE
Bell faces $35-million bond debt
Voter approval was not needed for the obligation, which is more than twice the size of the city's budget.
By Scott Gold and Kim Christensen, Los Angeles Times, August 7, 2010
The small and cash-strapped city of Bell is on the hook for a $35-million bond debt that voters didn't approve — and that the city can't afford to pay off, The Times has learned.
The debt, which Bell took on three years ago to buy land near the 710 Freeway, is more than twice the size of Bell's annual operating budget. Come November, the city could lose the land to foreclosure. The city's hope to profit from the purchase fell apart in 2008 after city officials failed to conduct basic environmental reviews.
The looming debt raises new questions about how city affairs were run under Robert Rizzo, who resigned as Bell's city manager after The Times revealed he was earning nearly $800,000 a year. Rizzo and Mayor Oscar Hernandez defended his salary at the time, saying his management of the city's finances warranted the high compensation.
"This council has compensated me for the job I've done," Rizzo told The Times then. He did not return phone calls seeking comment for this article.
A spokesman for the European bank that holds the bonds said that the city is behind in its payments on the bond and has acknowledged that "due to budget constraints it cannot comply with its obligations."
It's unclear what wider effect the city's potential default on the bond issue might have on Bell's finances or services.
The bank may not want to foreclose because the property is now worth less than what Bell paid for it four years ago. Even if the property is foreclosed, the city does not appear to be required to tap its general fund or other sources to make good on the debt. Nor, experts say, would a default on this type of debt, known as a lease-revenue bond, have a significant effect on Bell's future borrowing power.
But with Bell still "in crisis" because of the salary scandal, interim City Manager Pedro Carrillo said, he has not been able to investigate the potential effect of the failed deal.
"I haven't looked at it yet. But I better look at it fast," he said. "I'm sure we're going to analyze all options. I just don't know what those are yet."
The ill-fated deal began to come together in June 2006, when Rizzo, who held the dual posts of city administrator and executive director of the Bell Public Financing Authority, told the City Council that an opportunity was "at hand."
The idea, he explained, was to float a bond and use the money to buy an unused piece of federal land and lease it to Burlington Northern Santa Fe Railway. The federal government, he said, wanted to sell the property, a forlorn patch of land in an industrial pocket near the 710. Bell could buy it, Rizzo said, and rent it to the railroad, which was interested in expanding its nearby freight distribution operations.
The long-term lease, which would bring in monthly rent of $142,693, would be a money-earner, he wrote in a memo to city leaders. To finance the deal, the city issued $35 million in lease revenue bonds, all bought by Dexia Credit Local, an arm of a European bank.
But despite spending about $25 million for the property and millions more to improve it, Bell never closed the deal with the railroad and apparently has not managed to lease the land to anyone else.
To the City Council members, Rizzo presented the new project as an extension of an existing one in which Bell has leased a slightly smaller parcel of land to the railroad under a similar arrangement. That lease brings in about $210,710 a month, according to city records. It is loosely connected to a massive logistics operation in the area, including the railway's Hobart rail yard, the busiest in the country in terms of moving cargo containers between trucks and trains.
Three of the four council members who are the target of criticism now because of their big salaries — Hernandez, Vice Mayor Teresa Jacobo and George Mirabal — were also on the council that approved the lease arrangement and bond issue. None of the three returned messages seeking comment on the deal.
Council members gave Rizzo broad authority to negotiate the deal. The bonds did not require voter approval because lease revenue bonds do not obligate the city's general funds to pay them off.
Much of the $35 million in bond proceeds went to pay off an earlier loan used to buy the land, and part went to prepare the property for the railroad's tenancy, according to records and interviews. Some $3 million was marked by Rizzo for payments to contractors, a property manager, financial advisors and bond lawyers, although records reviewed by The Times do not spell out who got how much.
Had all gone according to plan, Bell would have refinanced the property, using the railroad lease as collateral, then paid Dexia in time for the bond to mature in November.
But all did not go according to plan.
In October 2007, East Yard Communities for Environmental Justice, a citizens group that tries to blunt the effect of industrial pollution on the 710 corridor, filed suit against the city and the railroad.
East Yard argued that the city had failed to conduct a state environmental review before buying the land and negotiating the lease. Locomotives, diesel trucks and on-site equipment could pose serious health risks for tens of thousands of nearby residents and could increase toxic emissions and storm water discharge, the suit argued.
In July 2008, Los Angeles County Superior Court Judge James C. Chalfant agreed; he scolded Bell officials for ignoring their obligations under the California Environmental Quality Act.
"The whole idea of CEQA is that you are supposed to prepare your environmental review before you enter into the lease with the railroad," the judge said. The law "is supposed to be followed for a project. They didn't do anything."
Chalfant's ruling spelled the end of the railroad's involvement in the deal, according to a person familiar with it who spoke on condition of anonymity because he was not authorized to discuss the deal publicly. It didn't help, that source said, that traffic at the ports of Los Angeles and Long Beach was declining, reducing the need for new intermodal shipping facilities.
Edward W. Lee, Bell's attorney at the time, did not return phone calls seeking comment.
BNSF lawyer John C. Nolan declined to comment.
Even before the salary scandal broke, Bell had signaled that it was in trouble on the $35-million debt.
Thierry Martiny, a Dexia spokesman, told The Times that the city had informed the bank earlier this year that it could not make payments. In June, Martiny said, the bank and Bell agreed on a "framework for confidential negotiations" to resolve the issue.
But no one, apparently, has been designated to negotiate for the city now that Rizzo is gone.
"Due to the staff turnover recently, such negotiations have not yet commenced," Martiny said, adding that Dexia is "very concerned" that the city make "a serious attempt to resolve this issue" before Nov. 1.
UNION PACIFIC RAILROAD
Union Pacific Railroad trail land appraises at $2 million
By Audrey Gilpin, Mountain Mail, August 9, 2010
About 14 acres of Union Pacific Railroad land in Salida, needed to build a proposed trail, was appraised for about $2 million, city officials learned last week.
Dara MacDonald, city community services director, told councilmen during a work session Tuesday Union Pacific real estate manager Greg Larson said the appraisal, completed in July, was $2,025,000.
However, Union Pacific officials haven't "shared" appraisal documents with the city, MacDonald said.
The 14-acre parcel begins at Marvin Park, follows the Arkansas River through Riverside Park and ends below the Touber Building in front of the newly built condos.
City personnel presented Union Pacific with a trail design proposal last spring, which utilizes about 5,000 linear feet of land. In addition, the proposal includes legal access to existing trails within the Arkansas Hills system.
"We either have to purchase the land directly or through an easement. Either way, it's expensive," she said.
A Great Outdoors Colorado land acquisition grant is available, and council and city developers have waited on the appraisal before applying for the grant.
In order to receive the grant, the city would have to match 30 percent of the appraisal, which is $600,000.
Council members agreed Tuesday with declining sales tax revenue and budget cuts, spending $600,000 isn't feasible.
MacDonald said Friday, "We want to keep working with Union Pacific, but in pursuit of something we can afford."
Council said an option could be pursuing portions of the 14 acres.
RTD to pay Union Pacific $78M for FasTracks land
Denver Business Journal, August 3, 2010
The Regional Transportation District will pay $78 million to buy pieces of land from the Union Pacific Railroad that’s needed for three of the FasTracks rail lines.
A signing ceremony is scheduled for Wednesday. The land will be used for East line to Denver International Airport, the Gold line to Wheat Ridge and the West corridor, now under construction, to Golden.
The RTD board on July 20 had approved paying up to $84 million to buy the railroad’s land for the three passenger rail lines. In 2009, RTD paid the railroad $118 million for land that will be used for the North Metro line to run between downtown and Thornton.
In Memoriam: Robert Downing, the driving force behind the Burlington Northern Railroad merger
Progressive Railroading, August 6, 2010
Robert Downing, the former president of the Burlington Northern Railroad (BN) and driving force behind a merger that forged the Class I, died Aug. 2. He was 96.
Downing began his railroad career in 1935 at the Pennsylvania Railroad after graduating from Yale University with a civil engineering degree. He joined BN predecessor the Great Northern Railroad (GN) in 1938 as assistant to the superintendent at Whitefish, Mont., and worked his way up before and after a stint in the U.S. Navy during World War II. By the time he retired from BN in 1976, Downing had served as president and chief operating officer from 1971 to 1973, and vice chairman and COO from 1973 to 1976.
He was instrumental in the 1970 merger of the GN; Northern Pacific; Chicago, Burlington & Quincy; and Spokane, Portland and Seattle Railway that formed BN, a BNSF Railway Co. predecessor, according to an item posted on the "BNSF News" web page.
"Many historians have suggested that without Downing's diplomatic skills, the merger might never have come to fruition," the news item states.
As COO, Downing suggested to BN’s board that the railroad build a line between Gillette, Wyo., and Orin Junction in the Powder River Basin to serve proposed low-sulfur coal mines — a line that became a key coal route for BNSF.
Although Downing stepped down from BN’s board in 1979, he remained active in rail historical societies and frequently advised BNSF executives, according to BNSF.
"I was honored to have called Bob a friend, and on numerous occasions I sought his counsel," said BNSF Chairman, President and Chief Executive Officer Matt Rose. "Bob's contributions to our railroad and the industry are immeasurable. He truly had a hand in shaping our company as we know it today. He was a great leader and a wonderful mentor, and we will miss him."
A road on BNSF’s Fort Worth, Texas, headquarters campus is named after Downing.
PLUM CREEK - MONTANA
PPL is asking for help from US Supreme Court with Montana order that company rent for its dams
By Matt Gouras, Associated Press, Canadianbusiness.com, July 23, 2010
HELENA, Mont. (AP) - PPL Montana said Thursday it plans to appeal to the U.S. Supreme Court a Montana order that it must pay the state for the use of the riverbeds where hydroelectric dams sit.
Company spokesman David Hoffman said the company has until Aug. 12 to put together a request asking the Supreme Court to intervene, although there is no guarantee the high court will get involved.
"What we need to show the court is that there is an issue of federal significance," Hoffman said.
The company is still writing its legal arguments, Hoffman said.
In March, the Montana Supreme Court ruled PPL must pay $40 million in current rent and damages for not paying rent in the past, plus even more in future rent.
The court decision means the land under the dams is like other public land that is rented out to those who graze cattle or drill for oil. The court left the question of future rent up to the state Land Board to negotiate with the utility.
PPL has argued the decision could impact other river users who could ultimately be forced to pay rent, but the state has said the high court made it clear that farmers and ranchers who use riverbeds for irrigation are not under the same rental obligations as the power companies.
PPL has posted a bond to cover the amount should it ultimately have to pay the money, and interest accrued on it. State law says court-ordered judgments accrue interest at a rate of 10 percent a year from the original decision, which in this case is the District Court order dating back to mid-2008.
Montana has already started spending the money.
The Land Board run by the five statewide elected officials has decided to buy more state land with the money.
The Department of Natural Resources and Conservation has proposed the state look into buying former Plum Creek Timber land, currently owned by The Nature Conservancy. It said the new land will produce an ongoing source of revenue, like other land that is leased for grazing, logging, mineral exploration and other uses.
Some lawmakers have objected to that move, and hope PPL does not pay the money at least until the next Legislature convenes in hopes that it can weigh in on the decision of what to do with the cash infusion before the Land Board spends it.
Plum Creek Timber completes $200M repurchase
Associated Press, June 4, 2010
Plum Creek Timber Co., one of the nation's largest timber companies, said Friday it expects to ask its board for approval to start a new repurchase program after completing a buyback of $200 million in shares.
The company said it repurchased the remaining $50 million in stock of the previously announced $200 million program on Friday. It expects to ask its board for approval to start a new buyback at its next meeting.
During the second quarter, the company repurchased nearly 1.4 million shares at an average price of $36.37 per share. As of Tuesday, Plum Creek had about 161.6 million shares outstanding.
Shares fell 97 cents, or 2.7 percent, to $34.54 in afternoon trading.
NW businesses push for climate legislation
Associated Press, June 4, 2010
Weyerhaeuser and Nike are joining other Northwest companies and environmental groups to urge the U.S. Senate to pass a climate and energy bill.
The bill is aimed at cutting greenhouse gases, reducing oil imports and creating energy-related jobs.
Representatives from the companies spoke during a teleconference Thursday organized by Climate Solutions, an environmental advocacy group that says hundreds of Northwest businesses support the legislation.
Nike's Sarah Severn says many of its customers are young, active and deeply concerned about global warming. Weyerhaeuser vice president Sara Kendall says the wood products company thinks a national law makes more sense than state-by-state regulations.
Potlatch Corporation Names New General Counsel
Business Wire, June 2, 2010
Potlatch Corporation announced today that Lorrie D. Scott has been named Vice President, General Counsel and Corporate Secretary for the company. She replaces Pamela A. Mull, who retired in March 2010 after 20 years with Potlatch.
Scott joins Potlatch from Weyerhaeuser Company, where she has held a variety of positions since 2001, most recently as Senior Vice President and General Counsel for Weyerhaeuser Realty Investors, a wholly-owned subsidiary of Weyerhaeuser Company that manages private real estate funds and arranges financing for small to mid-size homebuilders nationwide. Prior to Weyerhaeuser, she was Counsel for The Boeing Company in Seattle for 13 years with broad responsibilities including transactional law, securities, mergers and acquisitions, domestic and international joint ventures and corporate finance. Prior to Boeing, she was employed as an Associate at the firm of O'Melveny & Meyers in Los Angeles, CA., and as an Associate at the firm of Riddell, Williams, Bullitt & Walkinshaw in Seattle.
Scott holds a J.D. from Harvard Law School, an M.A. in Old World Archaeology from the University of Chicago and a B.A. in Anthropology from the University of California at Berkeley.
Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.6 million acres of timberland in Arkansas, Idaho, Minnesota and Wisconsin. Potlatch, a verified forest practices leader, is committed to providing superior returns to stockholders through long-term stewardship of its forest resources. The company also conducts a land sales and development business and operates wood products manufacturing facilities through its taxable REIT subsidiary. More information about Potlatch can be found on the company's Web site at www.potlatchcorp.com.
Weyerhaeuser's shift takes company to its timber roots
By Brad Broberg, Puget Sound Business Journal, May 28, 2010
The i’s are dotted and t’s crossed. All that remains is to write some checks and issue some stock, and the tree-growing company will become a tree-growing REIT.
The Weyerhaeuser Co. decided in December to convert from a traditional corporation to a real estate investment trust – aka REIT – but the change won’t be official until shareholders receive a special dividend payment for undistributed earnings and profits of between $5.5 billion and $5.7 billion.
"We have everything in place from an accounting standpoint," said Bruce Amundson, company spokesman. "When we make that payment, we effectively make the conversion."
The Federal Way-based company has not said when it will make the payment – which will consist of 10 percent cash and 90 percent stock – but plans to pony up sometime before the end of the year. That way it can reap the tax benefits of operating as a REIT when it files its 2010 tax return.
As a REIT, Weyerhaeuser will avoid paying corporate income tax on most earnings and profits. However, the company must begin paying out at least 90 percent of most earnings and profits in dividends – including nearly $6 billion in undistributed earnings and profits from past years when the board of directors decided how much to pay out in dividends and how much to put in the bank.
There’s a lot to love about this for investors, starting with the fat dividend payouts. Better yet: The IRS won’t be taking a 35 percent bite out of most earnings and profits before the dividend is calculated.
Underlying Weyerhaeuser’s change of stripes is its evolution from a diversified forest products company into a company more narrowly focused on growing and harvesting timber. Over the last few years, Weyerhaeuser has axed pulp, paper and container board operations — cuts driven by a changing marketplace but also necessary to rebalance its mix of businesses in order to qualify as a REIT.
Three-quarters of a REIT’s value and income must be derived from real estate-related assets — in Weyerhaeuser’s case, timberlands. Non-real estate assets can account for only 25 percent of a REIT’s value, and income and must be held in a taxable REIT subsidiary (TRS).
After pruning enough nontimber operations to meet that threshold, Weyerhaeuser will retain its lumber, panel, home-building and specialized pulp operations within a TRS. It will still be called Weyerhaeuser and still be publicly traded.
Weyerhaeuser’s remake is taking the company back to the future and unlocking the value of its most attractive asset.
"The core of the company is timberlands," Amundson says. "They’ve been a cornerstone for the 110-year history of the company and a lot of investors own us for the timberlands."
In its last year as a traditional corporation, Weyerhaeuser went out with a thud. Net sales fell from $8.1 billion in 2008 to $5.5 billion in 2009 and red ink continued to flow – although at a slower pace as net losses shrank from $1.2 billion in 2008 to $545 million in 2009.
The collapse of the housing market says all you need to know about why Weyerhaeuser struggled.
"About 75 to 80 percent of our business comes from the housing market in one form or another," Amundson said.
First-quarter results for 2010 show improvement over the same quarter in 2009: Net sales rose from $1.3 billion to $1.4 billion and net losses shrank from $264 million to $20 million.
"We saw some improvement in the first quarter, but it’s still a very tenuous situation," Amundson said.
PLUM CREEK - MAINE
Plum Creek's Apology for Timber Violations Leaves Critics Skeptical
By Susan Sharon, MPBN.net, May 26, 2010
For the second time in four years, the Plum Creek timber company has been assessed one of the largest penalties in Maine history for violations of the state's Forest Practices Act. The company has apologized for three improper clearcuts in an area near Moosehead Lake that is now protected by a conservation easement.
The violations occurred on a 2008 harvest in Beaver Cove on the east shore of Moosehead Lake. Regional enforcement coordinator Tim Whitworth of the Maine Forest Service says some state foresters visiting the site last year noticed what they thought was a particularly heavy cut. They investigated and found a series of clearcuts that did not have adequate separation zones or required harvest plans prepared by a licensed forester.
"They had a harvesting crew working, like in a thousand acre block or so, and they did these -- what they thought were regeneration cuts -- and they turned out to be clearcuts," Whitworth says. "There was a 64-acre clearcut; a 72-acre clearcut and a 104-acre clearcut."
Under a settlement agreement, Plum Creek will pay a civil penalty of $38,675 dollars for the violation, change its policy for regeneration harvests and participate in forest practices training.
"We made an error with this harvest and removed more trees than our plan had called for," says Mark Doty, a resource manager and spokesman for Plum Creek.
He says the company will also undergo a voluntary, independent audit of its 884,000 acres in Maine. "We apologize, and we pledge to do better going forward. We have made significant changes to our processes to prevent this from happening again."
Four years ago, Plum Creek was fined $57,000 dollars for forestry, permitting and wetland violations. At the time it was the largest penalty ever assessed under the Forest Practices Act.
In 2009 Plum Creek acknowledged that it mistakenly harvested a deer wintering yard and violated a voluntary agreement with the Department of Inland Fisheries and Wildlife. One month later, the company came under fire for a logging contractor's operations on Kibby Mountain in western Maine, where erosion caused a 900-foot mudslide.
The Natural Resources Council of Maine, which has been one of the company's biggest critics, brought that situation to light. NRCM staff scientist Nick Bennett says the latest penalty is part of a pattern. "It indicates a consistent pattern of disregard for both the health of Maine's environment and for Maine's environmental laws and regulations," he says. "It's just a question of trust and they keep violating the public trust."
Bennett says what's also concerning is that the latest harvesting violations occurred in an area that is part of the Moosehead Concept Plan conservation easement. Terms of the easement prohibit most types of development and require the woods to be sustainably managed.
Plum Creek sold the development rights on 350,000 around Moosehead Lake as part of its plan to develop two large-scale resorts and hundreds of housing lots in the same region. Approved by the Land Use Regulation Commission last fall, the plan is being challenged in court by the NRCM and other groups.
In the meantime, Alan Hutchinson of the Forest Society of Maine, says Plum Creek will face more scrutiny from his group, which provides oversight of the terms of the easement.
"The Forest Society of Maine, as the easement holder, is now part of their planning process around harvests like this so we'll be watching very carefully and trying to ensure that they do things properly, and if they don't in the future we'll hold them accountable under the easement as well," Hutchinson says.
That means in addition to penalties from the state, the company could also face fines from the Forest Society of Maine for any future violations on easement holdings.
PLUM CREEK - MAINE
Plum Creek Fined for Timber Harvest Violations
MPBN.net, May 26, 2010
The company has agreed to pay fines and change practices after being cited for violating the state's forest practices laws.
A company planning a major development near Moosehead Lake is facing fines for timber harvesting violations.
Maine's Department of Conservation says Plum Creek Maine Timberlands has agreed to pay a $38,675 civil penalty for the violations.
State officials say improper harvest operations on the company's property resulted in three clearcuts that did nto have adequate separation zones or harvest plans prepared by a licensed forester.
The violations occurred on the company's land in Township A2, Range 14 WELS, on the lake's eastern side. In addition to paying the penalty, Plum Creek has agreed to adjust its policy in handling regeneration harvests and to participate in forest practices training.
Plum Creek has proposed a major residential development and resort complex on the lake.
PLUM CREEK - MONTANA
Grants to help laid off timber workers
TheWesternNews.com, May 27, 2010
Department of Labor grants designed to benefit out-of-work Montana timber workers were hailed this week by Sens. Max Baucus and Jon Tester.
The intent of the $1.8 million in grants is to offer re-training opportunities for such workers over the next two years.
"This grant will be a lasting opportunity for Montanans to get the help they need to find good-paying jobs here at home," said Baucus, chairman of the Senate Finance Committee. "The closure of the Smurfit-Stone mill and layoffs at other mills were devastating for Montana, and you can bet I’ll keep working to ensure folks in our state are on the path toward economic recovery and growth."
The Montana Department of Labor and Industry will distribute the money to employment agencies in Lincoln, Flathead, Lake, Mineral, Missoula, Ravalli and Sanders counties.
"For the folks whose livelihoods depended on Montana’s wood products industry, this is a step to help them and their families get back on their feet," said Tester, who noted 1,700 Montanans lost jobs in the industry in 2009.
A U.S. Department of Labor release indicated that the grant is primarily for around 450 workers affected by layoffs at Plum Creek Timber Co., and Smurfit-Stone Container Corp. Plum Creek laid off employees between Jan. 8 and June 25, 2009. Smurfit-Stone laid off workers following its closure on Dec. 31, 2009.
PLUM CREEK - MONTANA
Job training funds for Plum Creek, Smurfit workers
Associated Press, May 24, 2010
The U.S. Department of Labor has announced a $1.8 million grant to offering job training and other assistance to about 450 workers laid off by wood products companies in western Montana.
The Department of Labor and Industry will administer the program to help workers laid off by Plum Creek Timber Co. between Jan. 8 and June 25, 2009 and by Smurfit-Stone Container Corp., earlier this year.
The grant will be distributed among communities in Lincoln, Flathead, Sanders, Lake, Mineral, Missoula and Ravalli counties.
Montana Sens. Max Baucus and Jon Tester say local employment bureaus will work with participants to provide services including short-term training and education and employment plan development.
Weyerhaeuser spent $790,000 on 1Q lobbying
Associated Press, May 17, 2010
Lumber and wood products maker Weyerhaeuser Co. spent $790,000 in the first quarter to lobby federal officials on issues including homebuyer tax credits to boost the sagging housing market.
The amount was detailed in a disclosure report. It's an increase from $720,000 in the fourth quarter and $910,000 in the first quarter of 2009. The year-ago report was amended this year to increase the amount originally reported by $20,000.
Congress approved an $8,000 tax credit for first-time homebuyers early last year as part of a plan to boost the economy and extended it until May, when it was allowed to lapse.
Weyerhaeuser also lobbied on renewable energy, health care changes, greenhouse-gas legislation, and a bill to make permanent a cut in the tax companies pay on timber gains. The timber-tax proposals have not progressed far in the House and Senate.
Weyerhaeuser lobbied Congress, the White House, the IRS, the departments of Commerce, Treasury and Agriculture, the Environmental Protection Agency and others, according to the report filed April 20 with Congress.
Weyerhaeuser log exports on the rise as China's timber demand grows
By Erik Olson, The Daily News, tdn.com, May 13, 2010
Business is picking up at Weyerhaeuser Co.'s Longview log export docks, fueled by a sudden rise in timber demand from China, company officials said at a meeting with community leaders Thursday morning.
Japanese logs exports to Japan - traditionally Weyerhaeuser's largest Asian trading partner - were flat in Longview for the quarter ending March 31, and Korean exports were steady, Steve Barnowe-Meyer, Weyerhaeuser's state forest team leader, said at the Cowlitz Expo Center.
Weyerhaeuser last month reported $373 million worth of log sales for the first quarter ending March 31 companywide, a 14 percent boost from the previous year.
The company does not break down quarterly financial data for specific export facilities, nor does it report export and domestic sales separately, company spokesman Anthony Chavez said. The Longview facility is Weyerhaeuser's largest on the West Coast, he said.
Industry and investment analysts say Chinese demand for timber and lumber is clearly propelling log sales along the West Coast and Canada. Other analysts are wary that the boom times won't last.
Chinese log importers have been moving away from timber suppliers in Russia, whose prices have tripled over the past three years due to rising tariffs and transportation costs, said George Fisher, an investment analyst for Seeking Alpha, a national financial blog.
China is starting to plant its own forests of fast-growing trees, but they are too young to harvest, Fisher said.
"These factors will ensure a robust timber import market for the foreseeable future," Fisher said.
Chinese timber demand is already driving economic growth in the Cowlitz County. The Port of Longview exported 92.6 million metric tons of logs in the first quarter, a staggering 250 percent jumped from the previous year. The uptick in log exports is part of the reason the port is asking shippers to add about 10 new union longshore jobs.
Lumber exports to China are also skyrocketing, according to Random Lengths, a forest-products industry trade publication. In 2009, U.S. lumber exports to China jumped 72 percent from the previous year, while Canadian exports rose 123 percent, according to Random Lengths.
However, a timber industry analyst cautioned not to read too much into China's log-buying surge. Invoking the name of the world's most populated nation can send markets into a tizzy that may not last, said Paul Latta, an analyst at Seattle-based McAdams Wright Ragen brokerage.
"These days, mentioning China with the log markets was a lot like mentioning dot com in the tech markets of the 1990s," Latta said.
China's government is tight-lipped with financial information, making long-term forecasting difficult, he added.
"Data on China is a lot more difficult to get your arms around."
PLUM CREEK - MONTANA
State may buy Plum Creek land with PPL dam-rental money
Great Falls Tribune, May 12, 2010
HELENA -- The state is considering using a $40 million windfall to buy thousands of acres of former Plum Creek Timber land from The Nature Conservancy.
The proposal from the Department of Natural Resources and Conservation goes to the state Land Board on Monday.
The money comes from a court order that says that PPL Montana needs to pay rent for the land on which its hydroelectric dams sit. Part of that order included damages owed the state in excess of $40 million.
In 2008, The Nature Conservancy agreed to buy 310,000 acres from Plum Creek. The conservancy now wants to sell much of it to the state.
The Land Board, made up of the state’s five statewide elected officials, will meet Monday to look at the plan to use money from the PPL lawsuit to buy the land.
Weyerhaeuser investors boost their influence
MarketWatch, April 16, 2010
Weyerhaeuser Co. shareholders increased their power over management this week when they passed a proposal to give major stakeholders the right to convene special meetings.
A spokesperson for Weyerhaeuser -- one of the world's largest providers of timber, pulp and paper -- confirmed in an email late Thursday that the measure extending the right to call special meetings to shareholders had passed.
Typically only management and board members can call special meetings, but the recession has unhappy investors seeking greater influence over board directors and, in some cases, securing a greater say on realigning operations.
"Shareowner input on the timing of shareowner meetings is especially important during a major restructuring -- when events unfold quickly and issues may become moot by the next annual meeting," according to proxy-research firm Egan Jones, which supported the initiative.
The move highlights the wider trend: Between 2004 and 2008, the percentage of Standard & Poor's 500 companies that grant special meetings grew by 23, or 4.5 percentage points, to 44.9%, according to FactSet SharkRepellent, a research group.
Last year such measures won shareholder support at CVS Caremark, Sprint Nextel, Safeway, Motorola Inc. and R.R. Donnelly & Sons.
This year there are 41 shareholder proposals seeking a say on special meetings, said FactSet.
Company boards are generally opposed to such measures, claiming the meetings can be time consuming and costly. And of course, no one wants to face the tirade of an angry stakeholder.
Weyerhaeuser management asked shareholders to vote against the nonbinding proposal, but company directors generally heed shareholder recommendations.
Last year, Weyerhaeuser investors supported a nonbinding proposal to allow shareholders to remove directors with a simple majority vote, doing away with a supermajority requirement. A proposal was put forward this year to incorporate that tenet into company bylaws with management's backing.
That proposal also passed on Thursday, said Weyerhaeuser spokesperson Anthony Chavez.
According to Egan Jones, the Weyerhaeuser special-meetings proposal sought to allow investors holding 10% or more of outstanding shares the power to call meetings without exception.
Shares of Weyerhaeuser rose about 1.2% during a general decline in the market to $47.47. In another proposal, the company agreed to become a real estate investment trust this year, which allows for the company to pay out the maximum amount of shares to shareholders under IRS rules.
For 2010 the agency allows a 90% stock distribution of earnings and profits.
Weyerhaeuser shareholders approve share issue plan
BusinessWeek, April 16, 2010
Weyerhaeuser Co. said on Friday its shareholders have approved its plans to issue a large number of shares as part of its conversion to a real estate investment trust.
The wood products company said it has not set a timetable for the conversion and corresponding payout of earnings and profit, although it has said it could happen as soon as this year.
The company said it intends to distribute the maximum amount of stock allowable by tax rules. For 2010, that would be a 90 percent stock distribution of earnings and profits, the company said.
Weyerhaeuser shares rose 31 cents to $47.20 in midday trading.
PLUM CREEK - MONTANA
County 'isn't interested' in Plum Creek's request on density in Seeley Lake plan
By Kim Briggeman, The Missoulian, April 5, 2010
An 11th-hour plea by Plum Creek Timber Co. to loosen density restrictions in the Seeley Lake planning region isn't playing well at the Missoula County Courthouse.
"We pretty much told them we weren't interested," County Commissioner Jean Curtiss said Friday.
Indeed, commissioners have instructed their planning staff to look for areas designated to allow a minimal number of houses that would be better off with no homes at all.
Much of the land to be scrutinized is owned by the timber company, which in recent years has turned increasingly to real estate sales.
Plum Creek is asking for a more balanced plan that treats the company "reasonably and fairly as a valued, contributing member of the community with legitimate property rights and economic interests," Kathleen Sims, the company's senior director of real estate law, said Friday in an e-mail.
The issue figures to be a bone of contention as the Seeley Lake Regional Plan reaches its final stages. Already the commissioners have conducted five public hearings, with a sixth slated for April 21 in Missoula, when changes to the plan will be aired out.
Curtiss said the commissioners could be ready to make some motions at the following hearing, which will probably be held in Seeley Lake, though no date has been set.
Plum Creek owns 35 percent of the acreage in the planning region, which blankets the Clearwater River drainage from Summit Lake to the Blackfoot River. At the March 17 hearing in Missoula, the timber company's David Greer proposed changes to four land-use designations in the plan.
Greer asked that dwelling units on three of the four resource protection levels be at least doubled - from one per 80 acres to one per 40 acres on some, from one per 160 to one per 80 on others. The most protected lands that would still allow dwellings shouldn't be one per 640, but one per 160, Greer said.
At the most recent hearing last Wednesday, commissioners directed their staff to look at the latter two designations to see if there were areas that would be better off designated for timber and agriculture rather than residential, said Pat O'Herren, the county's Rural Initiatives director.
Plum Creek also zeroed in on Section 17, just north of Placid Lake. There are roughly 140 lots in two-thirds of a section that aren't Plum Creek-owned, Sims wrote. "Plum Creek has requested that the growth policy reflect a density of one unit to 20 acres on Plum Creek's adjacent property. This would equate to a much lower density than currently exists on the developed areas around the shoreline of the lake."
Placid Lake homeowners have avidly resisted a plan to allow Plum Creek to build on Section 17, which straddles the drainage into the lake. They say homes there would jeopardize an ecologically sensitive area as well the water quality of the lake.
What's more, "Plum Creek has no legal entitlement to residential uses in the area, as commercial forestry remains a viable economic use in Plum Creek's holdings in the Clearwater Valley," maintained California attorney Jim Moose, one of those homeowners and president of the Placid Mission Coalition, in a March 28 letter to the county.
Plum Creek counters that the current draft provides an "economic and market advantage to existing owners of small, rural lots, like the numerous 1-acre lots on Placid Lake."
The plan penalizes Plum Creek "for not restricting public access or aggressively subdividing, selling, developing or otherwise converting its property," Sims wrote. "If adopted (as is) the draft plan will provide an unambiguous but perverse incentive to all Missoula County landowners to convert their land for development."
The Seeley Lake plan is resource-based, Curtiss said.
"That's why people who live in Seeley love Seeley. It talks about lynx and grizzly bear, lakes and water quality and all of those things. When that's the basis for a plan, looking at it, is it appropriate then to put houses in that interface?" she said.
"We've had a fair amount of testimony that this area is kind of the base of the Crown of the Continent," said O'Herren. "It's where the crown kind of begins at its southern end."
Couple that with the amount of Plum Creek land prioritized in the area by the Nature Conservancy and Trust for Public Land, he said. "They seem to have put a lot of faith in those studies that have indicated there's incredible resources there, and put their money there as well."
Commissioners, based on input they've received, have also asked their staff to look at a more clustered approach at Woodworth east of Salmon Lake, and at adding the flexibility to change density in areas close to the town of Seeley Lake and on state lease land around the lake when and if sewer and water systems reach them.
Such flexibility does two things, Curtiss said.
"It gives them opportunities to have more cabin sites, and two, it gives the folks in Seeley who are working on trying to get a sewer built a lot more households to help pay for the infrastructure," she said.
According to Sims, who has participated in the process from the start, her company wants to support the Seeley plan. But it has "fundamental disagreements ... in a number of key areas," she said.
"Plum Creek supports planning that is reasonable, equitable, and fairly applied," she wrote. "This plan as drafted, with the changes proposed by Commissioner Curtiss, does not reflect those important attributes, is not good for local business, does not reflect sound planning (and) respect for property rights, and it is not good for the Seeley community, greater Missoula County or Plum Creek."
WEYERHAEUSER - WASHINGTON
Weyerhaeuser to tighten logging rules on some property during watershed studies
The (Centralia) Chronicle, March 26, 2010
As debate continues about the role of logging practices and landslides in the 2007 Chehalis River flood, Weyerhaeuser Co. has agreed to a review of its watershed analysis on Stillman Creek and the upper Chehalis River and will voluntarily increase its landslide protections while the studies are completed.
Although the changes are temporary, the state Department of Natural Resources said they anticipate permanent changes after the studies are complete.
"While this is initially a voluntary action on the part of Weyerhaeuser, I expect that the scientific information generated by this and other efforts of the partnership will result in improvements to resource protection," said Commissioner of Public Lands Peter Goldmark, a Democrat who was elected to office after using the 2007 Chehalis River flood as an example of what he said were lax logging rules under his Republican predecessor.
Under current forest practice rules, potentially unstable slopes can be logged under what is known as a watershed analysis, which is outside the forest practice rules used on other forested lands. These watershed analyses are developed by the landowners and stakeholders and then reviewed by the Department of Natural Resources. In its Thursday press release, the Department of Natural Resources said analyses of the state's 52 watersheds are "dated," allowing logging using information that hasn't been updated since 1992.
Under this agreement, Weyerhaeuser agrees to apply current forest practices rules and avoidance measures while it reviews its watershed analysis. The company and DNR also pledged to review the effectiveness of the existing watershed analysis prescriptions in those two watersheds and apply emerging technologies like slope stability models, digital elevation terrain mapping and advanced aerial photography imagining to enhance detection of potentially unstable slopes.
"We are pleased to partner with DNR and Commissioner Goldmark on this initiative and share the technical and scientific information we have gained on potentially unstable slope management over the last several years," Rich Wininger, Weyerhaeuser's vice president, said in a statement.
The DNR urged other logging companies to voluntarily agree to have their own watershed analyses reviewed and to operate under stronger interim protections until the reviews are complete.
Weyerhaeuser received criticism after the 2007 flood, with a Seattle Times investigative report just days after the deluge suggesting that logging on the steep slopes caused landslides that created temporary dams and contributed to the rush of water downstream. Others also say clear-cutting caused more rain to flow off the hillsides, adding to what became the worst Chehalis River flood in recorded history.
WEYERHAEUSER - BRITISH COLUMBIA
Weyerhaeuser sells tenure
Barriere Star Journal, March 22, 2010
West Fraser and Interfor announced last Monday that they had purchased Weyerhaeuser’s timber tenures in the Kamloops and Headwaters Forest Districts.
West Fraser is taking over Tree Farm License 35 (Jamieson Creek)southwest of Barriere plus portions of Weyerhaeuser’s forest license for a total annual allowable cut (AAC) of 682,000 cubic meters.
Interfor’s share of the former Weyerhaeuser forest license is 275,000 cubic meters.
"We’ll focus on the mountain pine beetle damaged stands in the Kamloops area to begin with," said Wayne Clogg, West Fraser senior vice-president, woodlands. "It’s hard to put a date on when we would be up to speed in the Vavenby area. We plan to start work on the tenures this summer."
There has been no logging in the local Weyerhaeuser operating areas for about two years, although there has been some reforestation done.
"Obviously, that has been difficult for the contractors who rely on that work," said Clogg.
According to a news release from West Fraser, the acquisition is expected to benefit the company’s operations in 100 Mile House, Chasm (near Clinton) and Williams Lake.
The tenures will increase West Fraser’s long-term timber supply and are expected to offset anticipated declines in supply caused by the mountain pine beetle.
The plywood mill at Williams Lake has been operating steadily despite the economic downturn, said Clogg. The 100 Mile and Chasm sawmills slowed down with a work-share agreement in 2009.
The Tree Farm License is an area-based tenure, Clogg said. That means West Fraser will have exclusive rights to harvest timber within its boundaries.
The forest license, on the other hand, is volume-based. It gives the company the right to harvest so many cubic meters per year inside the Kamloops Timber Supply Area. Within the TSA the various forest companies have their own operating areas, but those are based on informal agreements among the companies and are not legally designated.
Interfor’s share of the deal includes about half of Weyerhaeuser’s former operating areas in the northern portion of the TSA, said Ric Slaco, Interfor’s vice president and chief forester.
"With the completed purchase, Interfor is planning to resumeharvesting activities sometime this year," said Slaco. "Exact details of where and who is not known at this time."
The Interfor vice president noted that the company’s new mill at Adams Lake is now running at full capacity and the newly acquired tenure with help support its fiber needs.
Weyerhaeuser announced the proposed sale of its timber tenures in 2008 when it closed its Kamloops sawmill.
Tk’emlups Indian Band and Skeetchetstn Indian Band, concerned about the loss of resources and jobs, have opposed the deal.
Weyerhaeuser permanently closed its Vavenby sawmill in 2003.
GREAT NORTHERN - MONTANA
Land Board approves Otter Creek coal lease - Protesters arrested before 3-2 vote
By Mike Dennison, Billings Gazette, March 18, 2010
HELENA - Minutes after anti-mining protesters were arrested and removed by police from the state Land Board's Capitol meeting room, the board voted 3-2 today to approve leasing 570 million tons of state-owned coal for development into a mine in southeastern Montana's Otter Creek Valley.
Gov. Brian Schweitzer, who voted for leasing the coal, extolled the long-term economic benefits of a new, massive coal mine in the valley, saying it would bring $5 billion in tax revenue over the life of a mine.
"This is not one-time money," he said. "Every time the Legislature comes to town, there will be a pot of $500 million waiting for them."
State Auditor Monica Lindeen and Secretary of State Linda McCulloch joined Schweitzer in accepting an $85.8 million "bonus bid" from Arch Coal Inc. of St. Louis to lease the coal for the next 10 years.
Attorney General Steve Bullock and state Superintendent of Public Instruction Denise Juneau voted against the lease. Juneau has opposed leasing the coal from the beginning; Bullock has opposed it since the board voted in February to lower the minimum bid price, saying the state is not getting a fair value for its resources.
The vote came after five protesters from Missoula disrupted the meeting by chanting "Hands off Otter Creek - you're not listening!" as McCulloch motioned for the vote to approve the lease.
The protesters, who had been sitting in the front row of chairs in the packed meeting room, sat down in the room several feet from board members, chanting, and refused to leave.
Schweitzer recessed the meeting and Helena Police officers ordered the room cleared, as they waited for other officers to arrive and assist with arresting the protesters. About 40 minutes later, police handcuffed and arrested the protesters for disorderly conduct.
The governor and other Land Board members then filed back into the room, reconvened the meeting and discussed the lease before eventually voting on it.
Before the protest, the board listened to 90 minutes of testimony from opponents and supporters of the lease. Opponents said the state is getting a poor deal for the coal, and that it's irresponsible for the state to take part in enabling a huge, new coal mine that will contribute to global warming, other air pollution and damaging of water resources in the area.
Support came from organized labor, school officials near Otter Creek, Arch Coal, economic-development boosters and some disabled citizens, who testified in favor of the lease because, they said, it would help the state with its short-term budget picture and avoid proposed cuts to human services that would affect the disabled.
The lease gives Arch Coal the right to develop the large coal field 150 miles east of Billings, along with its lease of another 730 million tons of privately owned coal that is interspersed with the state coal.
Schweitzer and others said the mine wouldn't be developed until five to seven years in the future.
INITIAL REPORT: A meeting of the state Land Board was halted this morning after five people stood to protest the state’s plan to lease coal tracts for development in southeastern Montana.
Helena Police officers were called to the state capitol building to arrest the five people, all members of the Northern Rockies Rising Tide, a Missoula-based environmental organization opposing coal development.
Secretary of State Linda McCulloch had just made a motion to approve the leases when the five protestors stood to say in unison, "Hands off Otter Creek coal. You’re not listening."
Gov. Brian Schweitzer, a member of the state Land Board, recessed the meeting and had the room cleared. The five protestors sat down and refused to leave.
St. Louis-based mining giant Arch Coal Inc. has offered nearly $86 million to develop the state-owned coal in the Otter Creek valley. Schweitzer said Tuesday hoped the board would approve the deal during today’s meeting.
GREAT NORTHERN - MONTANA
Arch Coal wins Montana deal with $86M bid
St. Louis Business Journal, March 18, 2010
Arch Coal Inc. said Thursday it was the successful bidder for a state coal lease for the Otter Creek tracts in southeastern Montana.
Arch subsidiary, Ark Land Co., was the sole bidder and offered $85.8 million, payable in April.
The coal lease will give Arch the right to mine 8,300 acres ofstate-owned minerals.
"We view the combined Otter Creek coal reserves as a strategic platform for future growth in the Northern Powder River Basin," Chairman and Chief Executive Steven Leer said in a statement.
Arch now controls about 1.5 billion tons of coal in Montana’s OtterCreek area, including previous reserve additions in November 2009 through Great Northern Properties Ltd. The company signed a coal lease with Great Northern to mine 9,600 acres of Great Northern-owned minerals, paying 10 cents a ton, or $73.1 million, over five years.
St. Louis-based Arch Coal (NYSE: ACI) is the second-largest U.S. coal producer with revenue of $2.6 billion in 2009.
GREAT NORTHERN - MONTANA
Montana Board Approves Lease Agreement With Arch Coal
By Mark Peters, Dow Jones Newswires, March 18, 2010
Montana officials approved a lease agreement with Arch Coal Inc. (ACI) for hundreds of millions of tons of state coal reserves, opening up new tracts for mining where the company already has lease holdings.
The state land board voted 3-to-2 Thursday in favor of the lease package for an estimated 572 million tons of recoverable coal reserves after years of debate. The state-controlled Otter Creek reserves are interspersed with an estimated 731 million tons of private reserves Arch leased last fall.
Under the state agreement, Arch will pay a lump sum of $86 million up front plus a 12.5% royalty on each ton of coal it mines among other ongoing payments. The St. Louis-based coal producer already has a large mining footprint in the Powder River Basin, which stretches through Montana and Wyoming accounting for more than 40% of U.S. coal output.
Arch was the lone bidder for the reserves. The land board, which consists of top state officials including Democratic Gov. Brian Schweitzer, originally asked for a minimum bid of 25 cents a ton. But after getting no offers, it lowered the minimum bid to 15 cents a ton, which is the amount Arch offered.
Schweitzer, who voted in favor of the lease agreement, said the new coal mining will bring ongoing benefits to the state's coffers, public education, job growth and Montana's economy.
Thursday's vote was delayed as people attending the board meeting loudly chanted: "Hands off Otter Creek, you're not listening." The protesters forced a recess as state officials had them cleared from the meeting room.
The state went through a lengthy process to lease the rights to the reserves, which Montana received nearly a decade ago from the federal government. The state's part of the Powder River Basin represents only a fraction of its production, with a majority of the mining located in neighboring Wyoming.
The Otter Creek reserves come with challenges. Montana coal tends to have a higher sodium content than Wyoming coal, traditionally limiting the number of power plants that can burn it. The Otter Creek region also needs an estimated 90 miles of new railroad track to connect it with existing lines. Finally, potential federal climate-change regulations could curb demand for coal by power generators over the long term.
Arch will need state environmental permits before moving forward, with mining on the state reserves not likely to start for five to seven years, said Mary Sexton, director of Montana's natural resources and conservation department.
Arch Coal shares recently traded 4.2% lower to $24.91.
Environmental groups have opposed the leasing of the reserves by the state. The groups argued increased coal mining would harm theenvironment. They also questioned whether the state was getting the best deal for the reserves, or just trying to raise state revenue in the face of budget challenges.
But business groups supported leasing the reserves to develop the state's economy and fuel job growth. Educational officials also lobbied for the leases, saying local schools are desperate for more funding. Revenue from the sale will go to education.
Last November, Arch Coal reached a lease agreement in Otter Creek with privately held Great Northern Properties LP to mine an estimated 9,600acres. The deal includes a front-end bonus of 10 cent a ton, or $73 million, to be paid over five years.
GREAT NORTHERN - MONTANA
Schweitzer says coal money could be used to offset cuts or for stimulus projects
By Matt Gouras, AP, Missoulian, March 18, 2010
HELENA - Gov. Brian Schweitzer said Wednesday that if Montana's Land Board approves an $86 million bid for state coal leases, the money could be used to reduce pending state budget cuts he is considering.
Schweitzer said some of the money could also be used to fund local stimulus projects that the administration currently has frozen - as long as everyone understands it's coal money that is making it possible.
The governor, who said avoiding cuts for services to the disabled would be his top priority, said not all cuts may be avoided.
"I am not using an ax here. This is a surgeon's knife," Schweitzer said. "We are going to carve small pieces out. If I carve too much there will just be more money available when the appropriators arrive next legislative session."
But first, the Land Board must approve the bid from Arch Coal Inc. that gives it the right to mine a half-billion tons of state-owned coal in southeastern Montana near the Wyoming border, a place known as the Otter Creek coal tracts.
The board meets Thursday to make a decision. The Department of Natural Resources and Conservation is recommending approval.
Environmentalists, without success, have been trying to persuade the Land Board, chaired by Schweitzer, to stop the development. They argue a mine would industrialize a rural area of Montana and exacerbate global warming when the coal is burned.
Secretary of State Linda McCulloch, a member of the Land Board who has advocated for leasing the coal land, said she expects to vote in favor of it Thursday. She pointed out that up to a billion dollars in royalties would go into the trust that provides money to state schools.
But McCulloch, who was previously superintendent of public instruction, hopes the upfront bonus bid also is used to help education.
"Of course it's my hope we use that money for schools in Montana," she said
The governor said he has been particularly troubled by proposed budget cuts that would trim services for the disabled.
"If we can't protect our most vulnerable, what does that say about our society?" Schweitzer said. "It's not just me. I think we Montanans have a special place in our heart for the disability community. I am going to pull back from those cuts if that money is approved."
The governor is currently mulling a $40 million cut, almost 5 percent, to the state budget as a way to ensure the state doesn't face a deficit next year.
The administration's move to freeze spending on more than $3 million of local stimulus projects has drawn the ire of some Republican lawmakers and local officials.
The Democratic governor said the coal money would allow him to release that money - but with some conditions.
Schweitzer said he may personally inspect the projects to make sure they are worthy. And, in an apparent jab to Republicans, he said he may not send money to districts of legislators who originally opposedallocating the stimulus money last year in House Bill 645.
Sen. Dave Lewis, a Helena Republican, was among the first to raise theissue of the frozen funding. A new firehouse in Ryegate, currently on hold after the administration's decision, is in Lewis' district.
"Remind the governor that I voted for House Bill 645 - and if I have to come up there and kiss his ring to get the firehouse in Ryegate, I will do that," Lewis said. "Let's get things down the road here."
PLUM CREEK - MONTANA
Montana Legacy Project nets public 112,000 acres
Associated Press, March 18, 2010
The public took ownership of 112,000 acres of Plum Creek Timber Co. land earlier this week when the second phase of the Montana Legacy Project took effect.
The Nature Conservancy and The Trust for Public Land helped arrange the western Montana land deal in February. The purchase was financedby $250 million in federal money, and the land was transferred to the U.S. Forest Service on Monday.
The Lolo National Forest got 67,000 acres, and the Flathead National Forest received the remaining 45,000 acres.
The Montana Legacy Project will eventually involve a total of 320,000acres of Plum Creek land being conveyed to state or federal agencies at a total cost of $510 million.
PLUM CREEK - MONTANA
Fish Creek land purchase for state park, wildlife area approved
By Rob Chaney, The Missoulian, March 18, 2010
The state Land Board unanimously approved buying 41,000 acres of former Plum Creek Timber Co. land in Fish Creek for a future state park and wildlife management area.
Thursday's vote cleared the way for the Montana Department of Fish, Wildlife and Parks to spend $17.35 million in state and federal dollars for the purchase. Most of the money comes from federal Pittman-Robinson grants for wildlife habitat work. FWP is contributing about $3 million in park development funds.
Fish Creek runs south of Interstate 90, between Alberton and Lolo Hot Springs. While it has been extensively logged and suffered from several forest fires, it also holds lots of prime elk winter range and bull trout spawning habitat.
The nonprofit land trust The Nature Conservancy bought the land from Plum Creek in 2008 as part of the Montana Legacy Project. Plum Creek is divesting itself of about 310,000 acres of timberland in western Montana. While most of that is set to go to the U.S. Forest Service, the state jumped on the Fish Creek property to stitch together large patchwork holdings it already owns there.
FWP parks manager Lee Bastian said the planning process for the state park will have lots of public input. While much of the interest is focused on river activity around Alberton Gorge, the best flat area for camping and other facilities extends from the mouth of Fish Creek south into the drainage.
That area was originally drawn to contain 7,650 acres. It now has about 6,200 acres.
Two factors drove that change. One was an increase in the asking price from The Nature Conservancy, which brokered the deal with Plum Creek. TNC originally asked for $14.35 million for the property, but an appraisal valued it at closer to $22 million. TNC officials said they couldn't make that large a donation to the state.
So shifting some acreage out of the state park and into wildlife management meant the state could tap a larger chunk of Pittman-Robinson federal dollars. That federal fund is making up most of the $3 million price increase.
The second factor was concern from Mineral County residents who argued the park was too large and improperly placed. They wanted more or all of the land to be put into wildlife management.
Bastian said of the 97 public comments received on the Fish Creek deal, those writing about the state park were split evenly over support and opposition. Reducing the park size was a first step in addressing those concerns, he said.
"All the rest of that is to be determined," Bastian said. "We know that's going to take some time. We just want to start with good, open dialogue with everybody."
Gov. Brian Schweitzer said the proposal went through the Land Board without dissention.
"It's a good deal for Montana, and we're buying it for less than appraised value," Schweitzer said. "It's a piece of land we will treasure for generations to come."
Marc F. Racicot to Join Plum Creek Board of Directors
Business Wire, February 10, 2010
Plum Creek Timber Company, Inc. today announced that Marc F. Racicot will join the company's board of directors, effective March 1, 2010.
Racicot was president and chief executive officer of the American Insurance Association from 2005 through 2009. Prior to that, he was a partner in the law firm of Bracewell & Giuliani, LLP. He served as governor of the state of Montana from 1993 to 2001.
"Marc's impressive background as an experienced statesman and leader, along with his deep roots in the state of Montana will be of great value to Plum Creek," said Rick Holley, president and chief executive officer. "We are very pleased that he has agreed to join our board."
Racicot serves on the boards of Allied Capital Corporation, The Avista Corp., Burlington Northern Santa Fe Corporation and Massachusetts Mutual Life Insurance Company.
Racicot earned a bachelor's degree in English from Carroll College in Helena, Montana, and a law degree from the University of Montana. For many years, Racicot has been involved in numerous nonprofit enterprises including United Way, Jobs for America's Graduates and the board of visitors for the University of Montana School of Law.
Racicot is the eighth independent member of Plum Creek's board, which is comprised of nine individuals.
Plum Creek is the largest and most geographically diverse private landowner in the nation with approximately 7 million acres of timberlands in major timber producing regions of the United States and wood products manufacturing facilities in the Northwest.
WEYERHAEUSER & PLUM CREEK
Rest in Peace, Timber Beasts
By Dave Skinner , Flathead Beacon, January 20, 2010
Last month, bankrupt Smurfit-Stone announced it was done in Montana. However, a more-important news item passed with little notice the next day. On Dec. 15, Weyerhaeuser's board of directors "determined that conversion to a real estate investment trust (REIT) would best support the company's strategic direction." CFO.com reports the conversion should occur by Dec. 31, 2010.
In other words, the transformation pioneered by Montana's very own Plum Creek will be complete. With Weyerhaeuser's conversion, America's last major integrated timber company, the biggest, baddest timber beast of them all, will be no more.
Now, Weyerhaeuser liked being a timber beast, but Congress and Wall Street left it no choice. While the REIT conversion process is complex, the bottom-line math is simple and brutal: Integrated manufacturers pay a corporate tax rate of 35 percent on net income, and stockholders are further hit with capital gains. But a REIT pays no corporate income tax. Instead, the income is "distributed" to shareholders who pay the lower gains rate of 15 percent.
On $100 in an integrated company that nets $10, you'll net about $5.52 after taxes. On $100 in an otherwise-identical REIT, you'll net around $7.65, much better.
The flip side of this bargain is that the IRS's cut shrinks from $4.48 to $1.35, a tax loophole so vast, the timber industry threw millions of acres and hundreds of mills through it. How did Congress respond? They gave Weyerhaeuser $172 million in tax breaks in 2008, lowering its tax rate to match that for its REIT competition, in essence a bribe not to become a REIT. Worked well, didn't it?
Weyerhaeuser spent 2009 shifting its mills into "taxable REIT subsidiaries" or selling them. The sales have generated $6-billion-plus in retained earnings which Weyerhaeuser must now clear off the books, distributing it to its shareholders, most likely in the form of stock. The money came mostly from a 114-facility deal with International Paper – a former integrated that was spun away from its land base. Helping IP swing the deal is, according to the blog Dead Tree Edition, $2 billion of "black liquor" tax credits from taxpayers. Incidentally, Reason reports Stone scored $500 million.
Current shareholders will get that stock, and because the effective rate of return on each dollar of REIT stock value will go up 38 percent, each share will be worth at least that much more than integrated stock. Weyerhaeuser stock was trading at under 20 bucks a share in March. As I write this, it's $44 and climbing.
Clearly, despite being last in line, going REIT will be good for Weyerhaeuser stockholders. What about for everyone else? Or for the forests?
Well, integrateds used to make money either by buying cheap wood or growing their own "free" wood, then efficiently milling it into finished products. They made money primarily from manufacturing.
But for REITs, manufacturing is a sideshow. Federal law mandates that manufacturing assets held in a "TRS" can only be 25 percent of total holdings and can only produce 20 percent of total earnings.
REITs can, and do, sidestep the manufacturing earnings limit by shifting costs internally. Milling must still be efficient, but if the REIT-owned TRS buys wood from the REIT at a premium price, the premium goes straight into REIT profit at a lower tax rate. Most if not all profit therefore comes from selling wood off the real estate for milling, or, if the profit from land sales is higher, by selling the dirt – preferably after cutting as many trees as possible.
What's the bottom line? Crosscut.com nailed it: "forests are no longer about timber; they're about harvesting tax-advantaged money." Giant chunks of what we used to think of as the forest-products sector no longer focus on making forest products. They are focused strictly on making money; as much as possible in the most tax-favorable way in the shortest possible time.
America's timber beasts aren't dead. All of them, from Plum Creek to Mead to Longfibre to Potlatch and Weyerhaeuser have simply evolved … into money beasts. They still roam the forests, and they're hungrier than ever, for your money. I'll explain how next time.
Behind Weyerhaeuser's move to REIT-hood
Weyerhaeuser is close to becoming a real estate investment trust. For tax analysts and shareholders, forests are no longer about timber; they're about harvesting tax-advantaged money.
By Daniel Jack Chasan, Crosscut, January 4, 2010
The Weyerhaeuser Company has finally dropped that other shoe, or at least has decided to drop it. Last month, Weyerhaeuser announced that its board of directors had finally committed the company to becoming a Real Estate Investment Trust or REIT. The company may make the switch in 2010. Or it may not. The only question is when.
Arguably, that has been the question for a long time. Many investors and observers have been awaiting this news for years.
In 2008, the company lobbied successfully for legislation that cut its tax rate in half, comparable to the corporate tax paid by a REIT — if a REIT paid taxes. But a REIT isn't likely to have much taxable income. Instead, it channels 90 percent of its earnings to shareholders, who pay as individuals, avoiding the "double taxation" levied on most corporate profits and dividend income.
Weyerhaeuser will hardly be the first on its block to take the plunge. Congress created the REIT back in 1960, evidently in order to make the joys of commercial real estate speculation available to Everyman. (This was, of course, long before Everyman started viewing his own house as a speculative investment.) As that long-gone Congress conceived them, REITs "are, in essence, financial vehicles that allow investors to pool their capital for participation in real estate ownership or mortgage financing, while providing those investors with the benefits of many of the tax advantages available to larger and more sophisticated investors and businesses who can afford to invest directly in real estate," Jack H. McCall explains in The Legal Basics of REITs (PDF), published by Tennessee Journal of Business Law in 2001. "Hence, REITs can generally be thought of as ... a kind of business enterprise that is analogous to a mutual fund for real estate investments."
Twenty-nine years later, Congress "modernized" the legislation, allowing a REIT to own a taxable operating subsidiary to provide unconventional services to tenants of REIT property. This could mean providing telecom services to the people who live or work in your high-rise. It could also mean milling the timber cut on your forest land. Plum Creek got the IRS to say yes, the REIT laws applied to timber too. By now, Jada A. Graves wrote a few years ago in REIT.com, "timber REITs have joined an assorted group of equity REITs specializing in movie theaters, correctional facilities, and car dealerships."
Once the IRS said yes, Plum Creek quickly reorganized itself as a REIT. Plum Creek’s transformation attracted a lot of outside capital. The company promptly used its new wealth to buy The Timber Company, which owned all of Georgia Pacific’s timberland. Thanks to the GP purchase, Plum Creek has supplanted Weyerhaeuser as the nation’s largest private timber land holder. Other traditional forest products companies have restructured accordingly. In 2004, 2005, and 2006, Rayonier, Longview Fibre, and Potlatch became REITs too.
And no wonder: In many analysts' and investors' eyes the advantages of the old vertically integrated forest products company have been outweighed by disadvantages in the federal tax code. Wall Street doesn’t want the timber without the tax breaks. A flow of logs to nearby mills has been replaced by a flow of tax-advantaged dollars to distant investors. To Wall Street, forests are no longer about wood; they're about money.
"Forest land is increasingly a financial, rather than an industrial asset," the UW College of Forest Resources reported to the Washington Legislature last spring. The report observed that "old-line companies have monetized their forest assets and been replaced by institutional investor-managers, or reorganized into real estate investment trusts."
Wall Street has just been waiting for Weyerhaeuser to join the 21st century. Scott St. Clair wrote in Crosscut that "Wall Street effectively made the decision that it will no longer measure the value of Weyerhaeuser by what it makes but, rather, by what it owns."
What it owns no longer includes much of King County. Since 2000, Weyerhaeuser has shifted its geographic focus within Washington, abandoning East King County for Southwest Washington, where it ships logs and lumber through the Port of Longview. Weyerhaeuser still owns or manages more than 20 million acres, over a million of it in Washington, from its headquarters in Federal Way. But the company has closed its Snoqualmie and Enumclaw mills and sold its timber in King, Pierce, and Snohomish counties.
While the company hasn't rushed into changing its corporate form, it has already laid the groundwork for a REIT conversion. A Real Estate Investment Trust may be basically a tax scam created by federal law, but it's a tax scam that operates under very specific rules. Structurally, a company that wants the tax dodge can't get more than 20 percent of its earnings from operations that aren't REIT-qualified.
At the beginning of August 2008, right after Weyerhaeuser announced 1,500 layoffs, St. Clair wrote that "starting a few years ago, Weyerhaeuser began spinning off assets. Always committed to focusing only on businesses in which it could be a major player, it now shifted to getting out of many of those businesses altogether. Its printing and writing-grade paper operations became, in a complex trade, part of Canadian-based Domtar Industries. And just last week, in perhaps the biggest blow of all, Weyerhaeuser closed on the sale of its packaging business to [International Paper]. Some 114 facilities, including paper mills, carton plants, and recycling centers, were sold for $6 billion."
Unloading the paper and container board operations gets Weyerhaeuser through that particular hoop in the REIT law, and many people assumed that was why the company unloaded them. Weyerhaeuser spokesman Bruce Amundson said early last year that wasn't so, that neither division fit into Weyerhaeuser's view of the future. With the proliferation of online communication, the future of paper looked questionable. And with Asian companies starting to supply the Asian market for container board, the future of that product line looked questionable too. To compete, the company would have had to start manufacturing abroad. It had no experience manufacturing outside North America, and no interest in investing the large amounts of capital that offshore container board plants would have required.
Nevertheless, Amundson didn't deny that the company had made the structural changes it would need to become a REIT. It has already reorganized itself into two separate reporting units: timber, and everything else. It has also started reporting on a calendar-year schedule, as the REIT law requires.
And it has stockpiled cash. Weyerhaeuser's revenues are tied closely to the housing market. Not surprisingly, the company's 2008 annual report featured some pretty bleak numbers: Net sales and revenues from continuing operations dropped 25.9 percent. Basic and diluted net earnings per share dropped 255 percent. The company slashed its dividend from 60 cents to 25 cents per share, and then, in the second quarter, surprised many analysts by slashing it again, down to a nickel.
Some people saw the second dividend cut as a step in the right direction. To become a REIT, the company must distribute its retained earnings to its shareholders. Eighty percent can be distributed in the form of stock. That means 20 percent will have to be distributed as cash. Because the company has an estimated $6.5 billion of retained earnings, it would have to come up with about $1.3 billion in cash. Without saying it planned to become a REIT, Weyerhaeuser made it clear that the second dividend cut enabled it to hoard cash, just in case. After the second dividend cut, Longbow Research analyst Joshua Zaret observed that "everything they're doing now is about preserving cash."
And Zaret approved. He thinks the REIT conversion is long overdue. He'd prefer a pure timber REIT, but what Weyerhaeuser will have when it makes the switch looks far better to him than what it has now. What it will have, essentially, is the same tax advantage its competitors enjoy. Zaret sounds somewhat outraged by that suggestion that reorganizing Weyerhaeuser's entire corporate structure in order to save taxes is perverse. "Is there a better reason?" he asks.
Daniel Jack Chasan is an author, attorney, and writer of many articles about Northwest environmental issues.
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