Railroads & Clearcuts

Railroad Land Grant
Corporations in the News: 2012

FAIR USE NOTICE: This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of the land grant issue. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C.Section 107, the material on this site is made available without profit to those who have an interest in receiving the information for research and educational purposes.

News from 2003-2004

News from 2005

News from 2006

News from 2007

News from 2008

News from 2009

News from 2010

News from 2011

Current news

Land grant corporation profiles

Articles on Blixseth

Articles on Sierra Pacific Industries

Railroads & Clearcuts home


Founding owner of North Stars has died

Minneapolis / St. Paul Business Journal, December 31, 2012


W. John Driscoll, a founding owner of the Minnesota North Stars and the former CEO of private investment firm Green Valley Holding Co., has died.


Driscoll, 83, of Sunfish Lake, died Dec. 22after a long battle with Parkinson's disease, according to an obituary in the Star Tribune.


Driscoll, a great-grandson of lumber baron Frederick Weyerhaeuser, graduated from St. Paul Academy and Yale University, where he played hockey. He served in the U.S. Marines during the Korean War.


He was the first chairman of the NHL's North Stars, and he served on the boards of Weyerhaeuser Co., the St. Paul Cos., Northern States Power, Burlington Northern, the First National Bank of St. Paul, and Life Time Fitness Inc.


He also was chair of the Minneapolis Institute of Arts, chairman of the Macalester College Board of Trustees, and helped start Valleyfair amusement park in Shakopee.

He is survived by Lee, his wife of 58 years, four children and 11 grandchildren.


Obituary published in Star Tribune on December 30, 2012:

Driscoll, W. John of Sunfish Lake died on December 22, 2012 at the age of 83. At home with his family, John died peacefully after a multi- year battle with Parkinson's.
He is survived by Lee, his wife of 58 years; his children, Jack (Kirsten), Bill (Lisa), Libby (Ed) and Peggy (Rob); 11 grandchildren and his black lab, Scout. Preceded in death by his parents, Walter Bridges Driscoll and Margaret Weyerhaeuser Driscoll, and his brother, Rudolph, John was born in St. Paul and graduated from St. Paul Academy (class of '47) and Yale University (class of '51).
He served proudly as an officer in the US Marines during the Korean War.
His business career was long and varied with many years at the Weyerhaeuser Company and as CEO of Green Valley Holding Company, a private investment company.
He was one of the founding owners of the Minnesota North Stars. He served as director of several companies including: Weyerhaeuser, The Saint Paul Companies, Northern States Power, Burlington Northern, the First National Bank of St. Paul, and Lifetime Fitness.
He was a loyal citizen of the Twin Cities community and served as Chair of the Minneapolis Institute of Arts, Macalester College and the Northwest Area Foundation.
His greatest loves were spending time with his family, the arts and being outdoors hunting, hiking, gardening, and trimming trees. John will be remembered for his steady leadership, commitment to family and mentorship of those following in his large footsteps.
His generosity, high ethics, warmth and good humor will be missed in ways we are just now discovering. A memorial service at the House of Hope Church in St. Paul is planned for 11:00 AM on January 11th, 2013.

# # #

The Lincoln Land Co. developed much of Nebraska and created many of its towns

By Jim McKee, Lincoln Journal Star, December 23, 2012


Although America’s railroads received huge grants of land as encouragement to build the nation’s system of rails, the land had to be sold to provide cash to finance actual construction.


That meant millions of acres of land in the western portion of the United States were offered, some at rock-bottom rates, and settlement of states, such as Nebraska, became the goal of thousands of families.


Roger Welsch, a Nebraska folklorist who lives in Dannebrog, used to say early Americans arrived on the Mayflower while early Nebraskans arrived on the Burlington. To accomplish land sales, a number of companies were established by the railroads.


After the end of the Civil War, the federal government turned its attention to the completion of the transcontinental railroad, and a period of near rail-laying frenzy ensued. To spur this construction, the United States gave land to the major players, with the Burlington & Missouri River Railroad receiving 2,374,091 acres in Nebraska alone. The Union Pacific’s land was a fairly contiguous grant, but where its  grants would overlap the Burlington’s, the latter was given other land farther from its tracks. In addition to the federal grants, counties and cities gave land to encourage rail service to their areas.


Railroad land, other than right-of-way, was primarily a commodity that needed to be sold as quickly and for the greatest amount possible to finance the construction of the lines.


In general terms, Burlington sold land from $4 to $18 an acre, depending on desirability, ultimately averaging $6 by the time sales were completed. To this end, land agents, such as George Harris, were brought from Iowa to Plattsmouth and later to Lincoln to act for the railroad. Others, such as Rollo Phillips, were hired locally.


The land agents' jobs were not always easy, as the Great Plains often were not hospitable to farmers. In 1873, drought was multiplied by grasshoppers. Ads had to be worded ingeniously, one stating that although the grasshopper “carried away the corn and worked havoc” and because farmers were deserting their claims, “their want of courage affords the best possible opportunity for obtaining some of the finest tracts of land at bottom figures.”


Burlington cast its nets widely, promoting in Europe as well as in eastern states, spending as much as $500,000 a year on lavish maps, brochures, traveling agriculture displays, ads, free excursions, engraved pictures, free transportation of livestock and household goods and even free seeds to those who bought land.


Because every farmer also was a potential freight customer, Burlington encouraged even homesteaders who bought government land. As the first Germans from Russia arrived in 1873, Burlington sent covert agents back to Russia to encourage additional immigrants to form colonies.


As Burlington’s lines stretched westward, it also began setting up towns spaced every 7 to 10 miles. It was felt that at that distance, farmers along the right-of-way always would be within a day’s travel from a depot and trading center.

Because lines were being laid so quickly, towns had to be developed at the same speed. That meant they began to resemble each other -- with streets platted parallel to the tracks and named in groups after trees, U.S. presidents, states or simply numbered. The railroad then dug a town well, built a depot and moved on.


Town names also had to be assigned quickly giving rise to the alphabet lines, such as Crete, Dorchester, Exeter, Fairmont, Grafton, Harvard … and others named for railroad employees, such as Phillips and Holdrege.


Towns were said to be sprouting so fast “a steamboat captain was a fool to haul passengers when he could have made a fortune freighting town stakes.” Existing towns did everything in their power to attract railroads, and if unsuccessful, they often withered and were abandoned, such as Arborville, which picked up and moved to Polk.


In 1880, Burlington went a step further and incorporated the South Platte Land Co. and the Lincoln Land Co., both with H.B. Scott as president, John D. McFarland as clerk and Rollo Phillips as secretary and treasurer. It became the companies’ function not only to sell land but to attend to all the details of establishing new towns.


The two companies, which shared Room 7 at the Lincoln depot, were said to have sold $10,000 worth of land in a single day. The two also were not above flexing Burlington’s muscle, and “if a town had been founded before the railroad came, in all probability (it) was passed up for a location organized by the Lincoln Land Company.” Thus, Alliance was built and prospered, while adjacent Grand Lake was ignored and ultimately abandoned.


By 1880, A.E. Touzalin had moved to Omaha and  become general manager of Burlington. But on the heels of the two Burlington-controlled land companies, he, along with John R. Clark and John D. McFarland, started their own private Lancaster Land Co., which owned and developed -- with Burlington’s help -- Havelock.


By 1905, virtually all of Burlington’s land in Nebraska had been sold, principally by the Lincoln Land Co. In less than 25 years, the vast prairies had been converted to farms, ranches and towns. Thus, the history of the Lincoln Land Co. was “intimately interwoven with the development and prosperity of the Great South Platte country.”



Tehama County seeks info on Mill Creek land deal

By Rich Greene, Red Bluff Daily News, October 19, 2012

The Tehama County Board of Supervisors formally requested more information Tuesday regarding a proposed land deal between Sierra Pacific Industries, Lassen National Forest and the Western Rivers Conservancy in the Mill Creek area.

Earlier this year around 600 acres near Lower Deer Creek Falls became a part of the Northern California Regional Land Trust, which secured a 30- mile stretch of the creek from future development.

Additional funding for future land purchases was available from a federal Land and Water Conservation Fund grant.

Western Rivers Conservancy was coordinating the purchase of another 2,700 acres from Sierra Pacific, and Lassen National Forest had $1.5 million available for additional land purchases in the nearby Mill Creek Canyon.

On Tuesday the board authorized Chairman Bob Williams to send a letter to Forest Supervisor Jerry Bird requesting additional information regarding real estate transactions citing the Freedom of Information Act and coordination of governmental agencies.

The Board of Supervisors has several concerns regarding this acquisition, the letter states.

Tehama County contains portions of the Lassen National Forest within its boundaries and takes an active interest in this transaction because it essentially removes approximately 2,385 acres from private land to public land within our county.

Roughly 25 percent of land in Tehama County is owned by government agencies.

According to the Western Rivers Conservancy website, the Deer Creek project in Tehama County is an effort to restore endangered salmon and steelhead in the Sacramento River system as well as enhance hiking and backpacking opportunities in the area.

The group hopes to keep the area dam-free and undeveloped.


Study says Union Pacific project potential limited

CBSNews.com, September 25, 2012

There would be limited potential to develop state trust land near the southern Arizona landmark of Picacho Peak as an industrial park if Union Pacific Corp. is allowed to buy some of the property for a new railroad switching yard, according to a study released Monday.

The report by consultants hired by the state Land Department said a value set on the site should probably depend on its unique value to the railroad, not the expectation of a larger payoff from development of adjacent trust land.

The proposed 900-acre site, now consisting of desert and farmland, is next to Interstate 10 and about 35 miles northwest of Tucson.

Local officials have endorsed the rail project as an economic development opportunity, while critics have said it'd be an environmental blemish within eyesight of Picacho Peak State Park, particularly at night.

Suggestions by Union Pacific that the state could benefit by developing adjacent trust land for industrial use may be too optimistic, according to the report by Gruen Gruen and Associates.

It cited slow development near other railroad freight yards, limited demand for certain types of rail capacity and availability of land elsewhere in Pinal County.

A separate state-commissioned study also released Monday listed infrastructure projects totaling tens of millions of dollars that would be needed to provide road, drainage, water and sewer services to a potential industrial park.

That study said access to an industrial park on the eastern side of the rail yard would be constrained because the yard itself would be about six miles long to accommodate long tracks to park and assemble trains.

The yard project was first proposed about six years ago, but the railroad and the state put it on the backburner for several years when the Great Recession slowed rail traffic.

Trust land is former federal property that Arizona acquired at statehood. Proceeds from use or sale of trust land must be used to benefit schools and certain other public institutions.

State Land Commissioner Maria Baier said department officials will use the studies as a basis for additional talks with Union Pacific about the company's proposal.

"We have a pretty level playing field now to try to have conversations on whether this land can and should be auctioned," Baier said.

No decision has been made yet on whether to auction the land, Baier said, adding that she couldn't estimate when a decision would be made. Typical proposed sales of trust land take 12 to 18 months, but this one is complex and already has been in the works for years, she noted.


Weyerhaeuser kin, a combat veteran who antes $500,000 to own campaign, makes congressional election a race

Peninsula Daily News, May 2, 2012

Tacoma, Washington -- A great-great-grandson of lumber baron Frederick Weyerhaeuser has entered the race for Congress in the 6th District to succeed departing Rep. Norm Dicks.

Bill Driscoll joins several other Republicans taking on state Sen. Derek Kilmer of Gig Harbor, who is a Port Angeles native and the sole announced Democrat.

Driscoll, a Republican and Marine Corps veteran of Iraq and Afghanistan, said he will donate $500,000 to his own campaign — which puts his campaign war chest far above those of declared Republican candidates Doug Cloud of Gig Harbor and Jesse Young of Tacoma, and toe-to-toe with Kilmer.

It promises a lively primary election — and probably the "top two" general election in the fall — for the congressional seat being vacated by Dicks, who has held it since 1977.

The 6th Congressional District includes all of Clallam and Jefferson counties and extends southeast into Tacoma.

In addition to his two military hitches, Driscoll has worked in the timber industry.

His great-great-grandfather founded the Weyerhaeuser Co. in 1901.

Driscoll has worked in the family business and in other forest-products companies.

"Career politicians have had their chance and failed," Driscoll said in a statement announcing his candidacy Monday.

"It’s time for new leaders who’ll rise above partisan bickering and demand results."

Driscoll served in the Marine Corps in the 1980s, returned to the timber industry, and then was recommissioned in the Marines in 2006 and served combat tours in Iraq and Afghanistan.

In his announcement Monday, Driscoll said his business and military focuses would carry over to Capitol Hill if elected.

"In Congress," Driscoll said, "I will focus on real job growth, balancing the federal budget, providing a strong national defense, and keeping our promises to those who’ve served our country in uniform.

"Politicians talk about these issues all the time, but I learned in business and the military that results are what matter."

If campaign fundraising is a barometer, Driscoll’s $500,000 contribution to his own campaign aligns him with Kilmer, who said three weeks ago that he raised $358,039 in one month.

"We estimate that he’s approaching half a million dollars by now," Driscoll said of the state senator.

"I’m investing $500,000 in my campaign, which should bring us even with Sen. Kilmer."

Cloud and Young fundraising are far behind, based on April campaign finance statements.

Young, an economic development consultant, reported $106,000 in his campaign coffer, and Cloud, a Tacoma attorney and perennial Dicks foe since 2000, reported $2,900.

Two other Republicans — David "Ike" Eichner, a Tacoma accountant, and Stephan Brodhead, a Bremerton businessman — have also indicated that they might run.

Official election filing won’t start until May 14 and last five days.

Driscoll and his wife, Lisa, a University of Washington-Tacoma professor, live in Tacoma with their two children.


Weyerhaeuser reduces wood product division losses

Timber Trades Journal, May 2, 2012

Higher sales volumes and prices helped Weyerhaeuser’s wood products division reduce its losses in the first quarter.

Pre-tax losses before special items totalled US$22m, compared to losses of US$61m in the preceding quarter.

Weyerhaeuser said sales and prices were better across all product lines and operating rates also improved. These were partially offset by increased freight costs.

The company expects its wood products business to achieve break even in the second quarter on the back of continuing volume and price growth.

Group-wide, Weyerhaeuser recorded net profits of US$41m in the first quarter, down from US$99m a year ago and from US$65m in the preceding quarter.

Sales were US$1.49bn, up from US$1.42bn a year ago but down from US$1.61bn in the preceding quarter.


Weyerhaeuser Turns Profit on Site Near Houston

Wall Street Journal, April 24, 2012

What a difference an energy-stoked economy makes.

In many parts of the U.S., prices of raw land, which typically has no roads or sewers, intended for housing have barely recovered from the depths of the downturn. Some of the land in remote areas even is being returned to agricultural use.

But in the Houston area, which is enjoying strong job growth thanks to the energy sector, Weyerhaeuser Co. WY +1.13% just made a profit on the sale of 3,200 acres of mostly raw land to a venture led by Tricon Capital Group Inc. TCN.T 0.00% for $125 million. A Weyerhaeuser spokesman confirmed the profit but declined to say how much it was. Weyerhaeuser paid about $56 million for the land in 2005, according to people familiar with the property.

Indeed, the Cross Creek Ranch master-planned community, which the land is part of, has seen continued signs of progress throughout the downturn.

There were 250 homes sold last year, up from 189 in 2011 and 161 in 2010. Homes have sold at an average price of about $330,000 since 2008.

"This is a market-rate sale," said David Jarvis, Houston director of Metrostudy, a housing-research firm. "That's what you're seeing in Houston."

Last year, Houston recorded 18,366 housing starts, the most of any U.S. market followed by Metrostudy but still way below its peak of 48,000 starts in 2006. Demand for new homes in the Houston area is strengthening, and more than 20,000 new-home starts are expected this year, according to Metrostudy.

Demand for Texas land owes some of its strength to the population that has jumped 26%, to 5.9 million, in 2010 since 2000. In Houston, housing demand also has been fueled by the growth in the energy sector, where more than 16,000 energy and energy-related jobs were added in the 12 months ending in March, according to the Greater Houston Partnership.

Cross Creek Ranch is located in Fulshear, about 30 miles west of downtown Houston, and near to such employers as BP BP.LN -1.70% PLC and ConocoPhillips COP -3.40% . Much of a main roadway from Houston to Fulshear recently was widened, shortening travel time.

"Folks [from Houston] used to make a day out of coming out and getting barbecue," said C.J. Snipes, Fulshear's administrator. On a good day, it now takes about 35 minutes to get to downtown Houston, Mr. Snipes said.

Since its 2005 purchase, Weyerhaeuser has invested millions more to improve parts of it, adding roads, a sewer system, thousands of trees and amenities like a water park and gym.

Since it opened in 2008, about 600 homes have been sold by Weyerhaeuser and others that purchased lots from the company. Tricon Capital, a Canadian real-estate-investment firm, plans to sell an additional 300 lots this year.

In other parts of the country, results haven't been quite so rosy for Weyerhaeuser, a forest-products company as well as a large home builder. The number of single-family homes it sold dropped to 1,902 last year from a peak of 4,152 in 2007.

On Tuesday, Weyerhaeuser's shares closed at $20.52, up 50 cents, or 2.5%, in 4 p.m. New York Stock Exchange composite trading. That is up from the 52-week low of $14.82, but still below the $80 range they were trading at in 2007. The company has warned Wall Street that it would have a loss from its single-family home-building operations in the first quarter.

Weyerhaeuser's sale of the Cross Creek land comes as home builders generally have been backing away from the practice of banking land for future projects. Instead, they have been opting to buy land when needed.

Will Holder, president of Weyerhaeuser's Trendmaker Homes subsidiary, which developed Cross Creek, said selling the land to Tricon gives the company more flexibility to invest in other areas of Houston. Weyerhaeuser's deal with Tricon allows it to keep buying lots at Cross Creek, he said.

Weyerhaeuser's strategy makes particular sense in a state like Texas, where it is relatively easy to get entitlements to build on land. It makes less sense to hold such large tracts, said Paul C. Quinn, an analyst with RBC Capital Markets.

The 3,200 acres that Weyerhaeuser sold included 131 finished lots, 295 partially finished lots and 4,463 raw lots. Also in the package: 400 acres of open space, 144 acres for commercial development, 50 acres for multifamily development and about 75 acres for five planned schools.

Tricon joined with Johnson Development Corp., a Houston land developer, and an unnamed Canadian institution to buy Cross Creek. Glenn Watchorn, Tricon's chief operating officer, said the master-planned community was attractive partly because of the amenities and infrastructure that Weyerhaeuser has already added.

"If you believe the housing market has bottomed out, there's probably no better place than land," said Mr. Watchorn.



Plum Creek seeks 4-year extension for planned project

By Christopher Curry, Gainseville Sun, April 24, 2012

Some four years after the Plum Creek company unveiled plans for a mixed-use development on 1,700 acres of timberland in north Gainesville, the project sits in limbo.

The timber giant — the largest private landowner in the county, state and country — has asked the Gainesville City Commission for a four-year extension to obtain zoning approval for the project. That would move the deadline from this July to July 2016.

Last Thursday, commissioners initially approved the request. It will get a second and final vote in May.

In a January letter to commissioners, a Plum Creek executive said the extension is needed because of the still-struggling economy. "As you are aware, the economy has not had a speedy recovery in the state of Florida, not unlike the rest of the United States," wrote Todd Powell, the company’s director for real estate. "At present time, there remains an oversupply of dwelling units within the Gainesville housing market."

Powell wrote that the extension would provide an opportunity to "evaluate future market demands" in order to determine how to "best serve the future housing demand" in the city without rushing to "permit a project unnecessarily at a premature time."

Powell could not be reached for comment Tuesday.

"There’s just not much point to implementing zoning when the demand for housing has not yet picked up," said David Coffey, a land-use attorney for the Plum Creek project.

Plum Creek’s proposed north Gainesville project would include up to 1,800 residential units — with homes condominiums and apartments in the potential mix — and 100,000 square feet of commercial space, including a walkable "village center." The property is located north of Northwest 53rd Avenue near the northern border of the city. State Road 121 splits the property, which is northeast of U.S. 441.

Plum Creek first proposed the development in 2007 and the City Commission approved a land-use change in January 2009. At that time, members of the Suwannee-St. Johns Sierra Club raised environmental concerns over the development. Wetlands cover more than one-third of the property and Rocky, Turkey and Hatchet creeks originate on the site.


Oconee National Forest Expanding

By USDA Forest Service - Georgia Public Broadcasting, April 20, 2012

The Trust for Public Land and the USDA Forest Service announced completion of the sale of 901 acres of TPL owned property within the boundaries of the Oconee National Forest to the Forest Service. (photo courtesy of the USDA National Forest Service)

The Trust for Public Land (TPL) and the USDA Forest Service announced completion of the sale of 901 acres within the boundaries of the Oconee National Forest to the Forest Service.

This transaction occurred in two phases. Previously owned entirely by Plum Creek Timber Company, Inc. – the largest private landholder in the U.S. - the first 461 acres was conveyed from TPL to the Forest Service in 2010. The current sale to the Forest Service transfers ownership of 440 acres. Funding for both Forest Service purchases originated from the Land and Water Conservation Fund, which is derived from royalties paid by energy companies recovering publicly owned oil and gas on federal lands.

The acquisition protects the waters of Cedar Creek, which the Forest Service has designated as an "outstandingly remarkable stream." It flows into Lake Sinclair within the Oconee River watershed. Located in Putnam and Jones counties within the Cedar Creek Wildlife Management Area on the Oconee National Forest, this parcel is surrounded almost completely by Forest Service land. This second phase land transfer further consolidates public lands, thus helping significantly to reduce management costs and challenges, and protects miles of tributaries that benefit the water quality of Cedar Creek and the Oconee River. Several miles of boundary line and fourteen corners can be removed from national forest boundaries, thereby reducing maintenance costs by several thousand dollars annually.

"This important in-holding land acquisition protects the waters of Cedar Creek, enhances public recreational opportunities and enables more efficient and effective forest and habitat management through consolidation of forest lands," said Curt Soper, director of The Trust for Public Land’s Georgia/Alabama office. "The Trust for Public Land was pleased to assist the Forest Service in furthering the important public-benefit mission of managing our forest resources."

The Oconee National Forest, which now exceeds 117,000 acres, offers excellent canoeing, hiking, horseback riding, and hunting. It contains one of the most productive and diverse fisheries in the Georgia Piedmont and includes some of the best shoal bass fishing in the state. Additionally, bottomland hardwood stands of red oak, beech and tulip poplar support abundant wildlife, including turkey, beaver, wood duck, Swainson’s warbler and numerous other neotropical birds.


A Layman's Analysis Of Plum Creek Timber

Seekingalpha.com, April 18, 2012

As a recent retiree with 35 years in the timber industry, I have a strong interest in Timber REITS. I recently wrote an article explaining the history of Timber REITS and some of the factors that differentiate timber REITS from each other. This article offers an analysis of the biggest and probably best-known Timber REIT, Plum Creek Timber (PCL). Other Timber REITS include Potlatch (PCH), Rayonier (RYN), and Weyerhaeuser (WY). Pope Resources (POPE), an MLP, could also be added to this group.

I'll say right now that I'm not an accountant or financial analyst, nor do I play one on TV. However, I have been involved extensively in the managing, buying, and selling of millions of acres of timberland. My background is more in the operations end of the timber business. I understand this very well and will do my analysis from that perspective. Also, because I am a dividend growth investor, I'll be focused on the safety of Plum Creeks' dividend, which is $0.42 per quarter or about 4.1%. The data in this article comes from Plum Creeks' 2011 10K, Plum Creeks' website, the Charles Schwab website, and Google Finance.

Plum Creek owns 6.6 million acres of timberland in 19 states. The company generates income from these timberlands through the sale of logs, oil and gas leases, recreational leases, mineral extraction, real estate, and other miscellaneous uses. In addition, Plum Creek has a wholly owned taxable subsidiary that owns and operates two lumber mills, two plywood mills, two MDF mills, and two re-manufacturing mills. All of the mills are in Montana and Idaho.

The timberlands are divided into a Northern Region and a Southern Region. The Northern Region stretches from Maine to Oregon and includes the Lake States as well as the Inland West. The Southern Region encompasses all of the Southern states from Virginia through Texas. The Northern Region is actually composed of four very different geographic areas. All differ as to timber species, topography and markets. The Southern Region is more uniform as to species, topography and markets, although differences do exist. In the Southeast, Southern Pine trees can be grown from seedlings to harvest in 20 to 30 years; in the Pacific Northwest, this can be done in 35 to 45 years for Douglas-fir and Western Hemlock. In the Northeast and Lake States various hardwoods as well as pines, firs, and spruce take 45 to 70 years to mature, and in the Inland West Douglas-fir, larch, pines and spruce take 70 to 90 years. Although the two most important timber growing regions are the Southeast and the Pacific Northwest, the geographic diversity of Plum Creeks' ownership that includes all of the timber-growing regions in the country should be seen as a net positive.

Of the 6.6 million acres, Plum Creek has identified 900,000 acres as having HBU (higher and better use) values. Seven hundred thousand (700,000) of these acres are identified as having recreational value, 100,000 acres as having conservation value, and 100,000 acres as having development potential over the next 15 to 20 years. This seems reasonable as a percentage of the total acres owned. I would estimate that recreation and conservation acres should be worth 1.5 to 2 times timberland value and development land 5 to 10 times timberland value. In addition, 300,000 acres have been identified as non-strategic timberlands and will most likely be sold over the next few years. All told this represents about 18% of Plum Creeks' ownership.

In 2011, Plum Creek had a net income of $193 million, or $1.19 per share. Dividends were $272 million, or $1.68 per share. For dividend investors this may look alarming; however, timber companies have large non-cash expenses on their income statement for depletion, depreciation, and the book value of lands sold. If you look at the cash flows you see that $374 million or $2.30 per share in cash was generated when these non-cash expenses are added back in. Dividends accounted for 72% of cash flow from operations. This may still seem high until you take into account that 2011 was a year when timber harvest levels were down about 22% from 2007 levels due to low demand and low timber prices. Earnings were down 32% from 2007 and cash flow was down 28% from 2007. Real estate sales were also down. I would expect dividends to be safe as things should only improve over the next few years as the housing and real estate markets recover.

Of more concern to some is the amount of debt Plum Creek carries. At the end of 2011, Plum Creek had $2,773 million in debt. The debt-to-equity ratio is 2.2, debt to free cash flow is 1,718, and the coverage ratio is 2.4. (These numbers are from Google Finance.) That being said, Plum Creek had no trouble covering its debt obligations and paying dividends in 2011, a down year for the timber and real estate business as a whole. In fact, in addition to paying the dividend and servicing debt, Plum Creek spent $101 million on new timberland acquisitions in 2011. As the housing and real estate markets improve over the next few years, Plum Creek earnings and cash flow should improve and the company should have no trouble servicing or retiring some debt. Another source of funds to cover debt could be a large asset sale from the above-mentioned non-strategic timberlands.

Another way to look at this -- and I may lose some of you financial types here -- is that the $2,773 million in debt only represents about 36% of my estimate on the market value of Plum Creeks' timberland assets, or 31% of my estimate of the company's total assets. Using the acres by region from Plum Creeks' website, and my estimate of average timberland values by region, we get a timberland asset value of $7.7 billion. Add in another $924 million for the real estate value added and $300 million for the mills and you get a value of $8.9 billion for Plum Creeks' assets. These are my "best guess" estimates of asset value. I'm pretty comfortable with my timberland values; in fact, they may be conservative. I have somewhat less confidence in my real estate and mill values, although I do believe they are in the ballpark and only represent around 15% of the total value.

Region Acres (000) $/Acre Total (billion)

Southeast 3,368 $ 1,500 $ 5,052

Pacific NW 492 $ 2,500 $ 1,230

Inland West 899 $ 500 $ 450

Northeast 1,110 $ 500 $ 555

Lake States 770 $ 500 $ 385

Total 6,639 $ 1,156 $ 7,672

Real Estate 900 $ 1,027 $ 924

Mills $ 300

TOTAL $ 1,340 $ 8,896

My past experience says that timberland properties can safely carry debt in the 30% to 50% range of asset values. Plum Creeks' 36% seems safe by these standards. My take on this is that although the debt is high, it is also manageable.

Twenty-eight percent (28%) of the $2,773 million debt is $783 million owed to a joint venture formed by Plum Creek and the Campbell Group, a TIMO (Timberland Investment Management Organization) in 2008. This took a bit of creative financing to allow Plum Creek to get around some restrictive REIT rules pertaining to land sales. The joint venture allowed Campbell Group to place $783 million in a timberland investment and Plum Creek to sell 454,000 acres of timberland without really selling it. Plum Creek contributed the 454,000 acres to the joint venture and the Campbell Group contributed $783 million, $1,725 per acre. The joint venture then loaned Plum Creek the $783 million on a 10-year note. Plum Creek pays only interest annually with the principle dues in 10 years.

Plum Creek has a $705 million preferred interest in the joint venture as well as a 9% common interest. Here is where my lack of a financial background may fail me, but I believe the way it works is that Plum Creek receives payments from the joint venture for its share of the venture that just about covers the interest payments. Somewhere around 2015 to 2020, the joint venture will sell the property and Plum Creek's share of the proceeds will cover most or all of the $783 million note. So, the $783 note is not really debt as it will self-extinguish. That is, the net result is that Plum Creek will not need to use any current cash flow or new debt to pay off the loan to the joint venture. It looks just as if Plum Creek sold the land to Campbell Group in 2008. As Dennis Miller, a favorite comedian and commentator of mine, often says, "Of course, that's just my opinion. I could be wrong." I would appreciate any comments correcting me if this is the case.

So my bottom line is that Plum Creek Timber is a good investment for those interested in investing in timberlands and because of the 4.1% dividend, which is taxed as capital gains. As the housing and real estate markets improve, Plum Creek's cash flow should greatly improve and some debt could be paid down, dividends increased, or both. Full recovery of the housing market is still probably two to three years out.


Railroads, Republicans Muscling Out Amtrak

Forbes, March 15, 2012

America’s leading freight railroads are plotting their return to passenger service as Amtrak faces a threat from privatizing politicians in Congress, a former Amtrak CEO said in Chicago Wednesday.

"This is a difficult time for Amtrak," former Amtrak Chairman and CEO Tom Downs told about 70 people gathered at a rountable hosted by the Metropolitan Planning Council. "One branch of the Congress has said that it’s time to phase out Amtrak."

Republicans in the House of Representatives have pressed to cut Amtrak funding in the federal transportation bill, and Republican presidential candidate Mitt Romney recently said in a TV news interview that he would eliminate Amtrak’s subsidy, among other programs:

"Of course you get rid of Obamacare, that’s the easy one, but there are others: Planned Parenthood, we’re gonna get rid of that. The subsidy for Amtrak, I would eliminate that. The National Endowment for the Arts, the National Endowment for the Humanities, both excellent programs, but we can’t afford to borrow money to pay for these things."

As a result, Amtrak has not seized upon opportunities for expanding passenger service in the United States, said Downs, who now serves as chairman of the North American Board of Paris-based Veolia Transportation.

"I think the corporation [Amtrak] tends to be more conservative and risk averse when the atmosphere is perceived to be risky. So while there may be interest, I’m not sure there’s the right climate for them to be aggressive."

The private railroads, meanwhile, are not so shy.

"All of the Class Ones are now getting back into the the passenger rail service," Downs said, naming Union Pacific, Burlington Northern & Santa Fe, and Norfolk-Southern:

"The Union Pacific is going to be adamant about control of the railroad passenger service from Chicago to St. Louis," Downs said. The federal government is investing $2 billion to prepare that corridor, which requires the use of Union Pacific right-of-way, track, and equipment.

"The Burlington Northern Santa Fe has said that any real passenger service on their tracks is going to be run by Burlington Northern Santa Fe.

"And Norfolk-Southern is in somewhat the same position."

Downs led Amtrak from 1993-98. He has also served as executive director of the Federal Transit Administration, a White House fellow to the U.S. Dept. of Transportation, president of New York’s Tri Boro Bridge and Tunnel Authority, director of the District of Columbia Department of Transportation, among other roles.

Related Posts: U.S. Poised For Passenger Rail Boom



Moosehead project cleared by high court

LURC did not violate rules by allowing Plum Creek development, justices say

By David Sharp, Associated Press, Portland Press Herald, March 16, 2012

A state regulatory agency acted legally when it approved a massive residential development around Moosehead Lake, the Maine Supreme Judicial Court ruled Thursday, clearing the way for a project that critics say could spoil the character of the North Woods.

The Land Use Regulation Commission spent four years reviewing and approving the project, which delights some by conserving more than 360,000 acres but worries others with the prospect of sprawling subdivisions.

The plan limits housing development to 16,900 of the 400,000 acres, and supporters say it's better to have planned development with land set aside for conservation than scattered home construction.

"We feel like the conservation outcomes are fantastic," said Mike Tetreault, executive director for The Nature Conservancy in Maine, which helped to negotiate the conservation provisions of the plan.

All told, the rezoning for Seattle-based Plum Creek allows 821 house lots and two resorts with more than 1,200 housing units at Big Moose Mountain and Lilly Bay. It was approved in September 2009, nearly five years after the company announced plans to seek the rezoning for nearly 400,000 acres.

Critics said the commission violated its rules by allowing the zoning plan to be amended, and a Superior Court justice agreed that LURC should have reopened the proceedings for further comment.

In its unanimous decision, the Supreme Court said the commission did nothing wrong.

"We conclude that LURC did not violate its procedural rules and did not otherwise err by approving the rezoning petition and concept plan," Justice Jon Levy wrote.

The commission held public hearings on Plum Creek's rezoning plan in December 2007 and January 2008. There were 26 parties and nearly 170 witnesses during that phase of the process. More than 400 additional witnesses testified during four full days of hearings.

The commission developed amendments to Plum Creek's proposal based on the evidence presented at the hearings. Critics said there should have been additional hearings to address the changes.

Environmentalists were divided, with the Natural Resources Council of Maine, the Forest Ecology Network and Restore: The North Woods fighting the proposal in court, while The Nature Conservancy and the Forest Society of Maine supported the plan because of the conservation easements.

Lisa Pohlmann, executive director of the Natural Resources Council of Maine, said she still has concerns about the size and scale of the development. "It remains the largest development plan in the state's history and there remain many concerns," she said.

Before any construction can begin, Plum Creek will need additional permits from the commission, as well as customers. A Plum Creek spokeswoman noted that the economic climate has changed substantially since the development was first proposed, in late 2004.

"In terms of any development plans, those are long term in nature, so we will certainly begin to look at those opportunities, but we'll have to consider the existing marketing conditions," said Plum Creek spokeswoman Kathy Budinick from her office in Seattle.

First, Plum Creek will close the deal with The Nature Conservancy on the conservation easements, which will be held by the Forest Society of Maine. Plum Creek will continue to own the land, but The Nature Conservancy will raise $10 million for easements that ban development and limit logging.

Attorney General William Schneider said the court's decision is vindication for the late commission chairman Bart Harvey, who oversaw the proceedings before his death on Oct. 30, 2010, as well as the seven-member panel and hundreds of people who participated in the process.

Harvey "made it his highest priority to ensure the proceeding was transparent and scrupulously fair to all the participants," Schneider said.


Court Decision Paves Way for Massive Moosehead Development

By Susan Sharon, Maine Public Broadcasting Network, March 15, 2012

The Maine Supreme Court today gave the green light for the Plum Creek Timber Company to move forward with its conservation and development plan for the Mooshead Lake area. The decision means that within 45 days, nearly 400,000 acres of Maine forestlands will be permanently conserved. It also means that after seven years of waiting, the company can start the permitting process to develop parcels as it sees fit.

Maine's high court ruled unanimously that the Land Use Regulation Commission did not violate procedural rules when it considered final amendments to Plum Creek's rezoning plan without conducting an additional evidentiary hearing. That had been the complaint of several environmental groups.

A lower court judge had agreed with them. But the state appealed. And now the Maine Supreme Court has overturned that decision, paving the way for Plum Creek to begin work. Mark Doty of Plum Creek says his company is pleased to finally have the plan in place and grateful to the state for its support.

"Today's news is great but it is a very long-term plan," Doty says. "We'll get the conservation commitments in place as a first step and then consider market conditions for future development opportunities."

It's been a long and winding ride for the Plum Creek Timber Company, which first requested rezoning of the region in 2005. After multiple plan revisions, weeks of public testimony, hundreds of witnesses and reams of written comments, LURC approved the plan to develop 17,000 acres, including two resorts and hundreds of houselots in 2009. The Supreme Court's decision will almost immediately finalize a historic conservation easement.

"I am excited. I am relieved and I am ready to get going to close this conservation deal," says Mike Tetreault, the executive director of the Nature Conservancy in Maine, which will close a deal to protect 363,000 acres of working forest from development. Tetreault says the easement preserves recreation opportunities in the region, public access and keeps wood fiber flowing to Maine mills.

Its size is also significant. It's the largest contiguous conservation easement in the country. Maine is also home to the Pingree easement, which stretches across 762,000 acres, but they are scattered across the state. And now the two of them will wind up connected to each other and to other protected lands.

"These 363,000 acres sit right in the middle of a two-million acre swath that will now all be connected through conservation, starting in the St. John River, down through the West Branch of the Penobscot River, across Moosehead Lake, up into the Nahmahkanta Reserve, through the Debsconeag Lakes Wilderness and up into Baxter Park, and this was the central piece of that whole landscape," Tetreault says.

Gov. Paul LePage issued a written statement on the court's decision. He said it "affirms our belief that good land-use planning, conservation easements on working forests and expansion of the eco-economy in the Piscataquis and Somerset counties can be founded on common ground."

The governor commended Plum Creek, LURC, the conservation groups involved with the easement and the Greenville community on their achievement. Bruce Hanson is a longtime selectman from Greenville who says his board unanimously endorsed the project years ago. He views the court's decision as something positive for a region that has lost much of its forest products industry over the last few decades.

"I think it's great. I really do," Hanson says. "I was awful scared that they were going to turn it down. I just can't believe that they're going to do it, I guess. It's good. It's about time they let these people do what they gotta do and go on with their lives and we'll go on with ours."

Hanson is a maintenance worker for the school system in Greenville, which he says recently consolidated all its elementary and high school students into one building because of the exodus of students and families from the area. "So we can use anything we can get, let's put it that way," he says.

Not everyone is applauding. Several environmental groups, including the Forest Ecology Network and the Natural Resources Council of Maine, opposed the LURC process and its approval of the Plum Creek concept plan. Cathy Johnson, the North Woods project director for the NRCM, says her group is disappointed but respects the court's decision.

"Even though we're disappointed in the court's decision I think it's important for Maine people to realize that it was their active engagement in this whole process that made the final plan significantly better than what Plum Creek originally proposed," Johnson says. "And they can continue to participate in the process as Plum Creek comes forward with specific development plans."

If and when phases of the development plan are proposed by Plum Creek, they will be reviewed, there will be public input taken and each phase will have to be permitted. Mark Doty of Plum Creek says there's no doubt that the economy and market conditions have changed since 2005. The one thing the company wanted with the rezoning project was predictability in its planning process. And now, he says, it has that.


Plum Creek development gets OK from supreme court

By Kevin Miller, Bangor Daily News, March 15, 2012

Maine’s highest court on Thursday ruled that state regulators followed proper procedures when approving Plum Creek’s historic development plan for the Moosehead Lake region.

The state supreme court disagreed with a lower court that had ordered the Land Use Regulation Commission to hold additional hearings on Plum Creek’s proposal to rezone nearly 400,000 acres in the North Woods as part of the largest development plan in state history.

The court decision comes 2½ years after LURC approved Plum Creek’s 30-year concept plan and ostensibly clears the way for the company to move forward with plans for 975 house lots and two resorts near Maine’s largest lake.

"We believe the Supreme Court’s decision is the final one and the concept plan is in place as of today," Mark Doty, a spokesman for Plum Creek in Maine, said in an interview. But first, Doty said, the company will make permanent a 363,000-acre conservation deal that was key to winning LURC approval. The conservation plan has been in place on an interim basis pending the appeals process.

"Today’s news is great but it is a very long-term plan," Doty said. "So we will take care of the conservation [plan] and then consider the market conditions for future development opportunities. It’s been a long legal process and we have had our efforts on hold as we awaited the final outcome."

Thursday’s ruling could be the final blow to opposition to Plum Creek’s concept plan, although critics will have ample opportunities to challenge the company as it seeks permits for each individual subdivision or resort.

The Natural Resources Council of Maine, RESTORE: The North Woods and the Forest Ecology Network had quickly appealed LURC’s September 2009 decision, arguing the commission had erred by rewriting key aspects of Plum Creek’s plan. Instead, the appellants asserted that the commission should have rejected the plan, as submitted, if it did not meet LURC’s requirements for approval.

In April 2011, Maine Superior Court Justice Thomas Humphrey ordered LURC to reopen hearings on the issue but only on narrow procedural grounds. Humphrey said commissioners had violated their own rules by adopting a substantially rewritten rezoning application without holding another public hearing on the revisions.

The supreme court disagreed on Thursday and instead upheld LURC’s original vote.

"We conclude that LURC did not violate its procedural rules and did not otherwise err by approving the rezoning petition and concept plan," the court wrote.

Staff at NRCM, who were among the most vocal critics of Plum Creek’s various plans throughout the process, released a statement Thursday afternoon saying they were disappointed but respected the court’s decision. The organization hinted that it plans to stay involved.

"If Plum Creek decides to move forward with its real estate development, it will have to apply for specific permits, and the development would have to be reviewed and approved before construction could begin," the NRCM statement said. "We know that many Maine people have expressed concerns about Plum Creek’s development proposal; there will be additional opportunities for public comment if and when the company files permit applications."

Gov. Paul LePage, whose administration inherited the Plum Creek court battle, praised the court action.

"This court decision affirms our belief that good land-use planning, conservation easements on working forests and expansion of the eco-economy in the Piscataquis and Somerset counties can be founded on common ground," LePage said in a statement. "I commend Plum Creek, conservation groups engaged in the easement, LURC, the forest industry and the Greenville community on their achievement."


Plum Creek Foundation Announces Grants to Maine Organizations

Company news release, March 14, 2012

Seven organizations in Maine recently received grants totaling $23,875 from the Plum Creek Foundation.

"We are extremely pleased to continue our ongoing efforts in Maine and help support these organizations that have such diverse and admirable missions," said Mark Doty, community affairs manager for the Plum Creek. "Each of these organizations plays an important role in its local community and makes positive differences in the areas where we own land and our employees and contractors live."

The following organizations are the Maine recipients of Plum Creek Foundation's most recent grants, which are awarded quarterly:

* Center School Restoration Committee, Bowerbank: The $3,625 grant will be used to help restore the Center School, a historic building that was used as a school house from 1834 to the 1930s. The building is currently in use as Bowerbank's library and also houses the Bowerbank Historical Society.

* Heart of Maine Resource Conservation and Development Area, Bangor: The $2,500 grant will help this nonprofit organization in its efforts to create the Southern Somerset Local Foods Connection, a collection/distribution point for local agriculture products. The project aims to help teach local students and families the importance of fresh, local foods.

* Kennebec Valley Community College Foundation (KVCC), Fairfield: KVCC recently added an Associate of Applied Science degree in Energy Services Technology, and the $5,000 grant will help the college purchase equipment for an Energy Services Technology Lab. The program is helping to lead the path in developing a strong green energy workforce.

* Kingfield POPS, Kingfield: The Kingfield POPS will use the $2,500 grant to upgrade equipment for its 10th anniversary concert and set the stage for improved music programming in 2012.

* New England School of Metalwork (NESM), Auburn: The NESM recently designed one of the first mobile welding training centers in the country. The $5,000 grant from Plum Creek will help provide access to a unique vocational education opportunity in welding for youth and adults across the state of Maine.

* Nokomis Regional High School, Newport: A $3,000 grant will be used to provide equipment for the "Ultimate Outdoors," a new learning program that will emphasize the importance of academic achievement in the pursuit of "outdoor" related career paths. The program will serve the school's general student population and specifically target students at risk for academic failure.

* Town of Skowhegan, Skowhegan: The $2,250 grant will help develop and finalize the entrance of the Whitten Brook Conservation Area. The area will help preserve the town's environmental significance and educate youth about the importance of conservation through volunteering.

"The Plum Creek Foundation prides itself on community involvement, and we have been supporting Maine organizations since Plum Creek entered Maine in 1998," said Doty. "It's important to our local staff and our company to make a positive impact in the places where we live and work."

The mission of the Plum Creek Foundation is to provide philanthropic contributions to support and improve the general welfare of life in the communities that Plum Creek serves. The Foundation board meets quarterly to review applications submitted from organizations in the company's operating communities.



MacBlo retirees win battle: Company ordered to pay benefits; Judge also rules Weyerhaeuser must pay plaintiffs' lawyer costs

By Neal Hall, Vancouver Sun, March 14, 2012

Retired MacMillan Bloedel employees have won their court battle against the new company owner, Weyerhaeuser, which has been ordered to pay the full cost of retiree extended health and medical benefits.

The plaintiffs - Lorne K. Lacey, Kenneth James Miller, Raymond Morris, George E. Plant, and Mary Jane Walker - were salaried employees of MacBlo who retired between 1991 and 2000.

Back then, the employer's benefits package for retiring employees included continuing payment of B.C. Medical Services Plan premiums and extended health insurance benefits - fully paid by the company. MacBlo was sold to Weyerhaeuser in 1999.

On Jan. 1, 2010, Weyerhaeuser announced it was reducing its contribution to 50 per cent and that the retirees would be responsible for bearing any future cost increases. The plaintiffs sued for breach of contract.

At trial, a judge was told that the fully funded retirement health insurance benefits were not bargained for, but were introduced voluntarily by MacBlo management.

In 2009, Weyerhaeuser advised the retired MacBlo Canadian salaried employees that "in order to sustain the viability and affordability of our retiree plans," the company's contribution to extended health and MSP coverage would be frozen at 50 per cent of the costs as of Jan. 1, 2010, and that any future premium increases would be borne solely by the retirees.

The plaintiffs, in their legal action, claim that their entitlement to fully-funded retirement health benefits were a "vested" contractual right during the course of their employment. Some of the plaintiffs relied on terms of releases entered into when they were involuntarily retired upon the amalgamation of MacBlo and Weyerhaeuser.

The company's position was that all forms of retirement health benefits had been entirely at the discretion of the employer and was not a contractual or "vested" right.

B.C. Supreme Court Justice Anthony Saunders, in a decision Monday, found in favour of the retirees.

The judge concluded the retirees are entitled to continuing payment, by the company, of MSP premiums and extended health benefits for themselves and their spouses.

"The plaintiffs are entitled to damages in the amount of all premiums they have paid to MSP since their benefits were reduced by the defendants. The plaintiffs are further entitled to a refund of all premium assessments paid in respect of their extended health coverage."

The judge also ordered the company to pay the court costs of the retirees, handled by Vancouver lawyer John Rogers.

The full judgment is online at: http://bit.ly/ydBq1Y



DeFazio touts logging plan to help finance Oregon timber counties

By Eric Mortenson, The Oregonian, March 11, 2012

Private timber operations are still going on in Curry County and logs from federal lands are also being harvested but not at the rate to make up for budget shortfalls.

U.S. Rep. Peter DeFazio said his bipartisan proposal to designate some federal land for logging and a preliminary Senate vote to extend forest payments may provide breathing room for Oregon timber counties on the edge of insolvency.

DeFazio, a Democrat who represents the 4th District in southwest Oregon, has joined fellow Oregon Reps. Kurt Schrader, a Democrat, and Greg Walden, a Republican, to increase logging on what's called the Oregon & California Railroad land.

In a talk to the Portland City Club on Friday, DeFazio said half of the O&C land, containing the best old growth, would be left alone, preserved except for thinning or other work needed to keep the forest healthy. The other half would be logged over time; some of it on 60- to 80-year harvest rotations and some on 120-year rotations.

DeFazio said the O&C lands are "absolutely, statutorily unique." About 2.3 million acres of timber, scattered in checkerboard pattern over 18 counties, were granted to a railroad company. When the company failed, the federal government took the land back and put it under the control of the U.S. Bureau of Land Management.

Because the land was no longer on the tax rolls, the federal government pledged to share timber harvest revenue with counties. In the past 20 years, "gridlock" in the forest due to environmental restrictions and lawsuits has greatly reduced logging and timber sale money.

DeFazio noted that conservation groups have criticized his idea, but he said they will never be able to defend old growth against the current Congress and U.S. Supreme Court.

The situation is complicated by the loss of federal forest payments, intended to help counties that lost timber revenue from national forests managed by the U.S. Forest Service. The Senate last week gave preliminary approval to a plan that would restore funding at reduced levels for one year.

About a dozen Oregon counties face insolvency in a year or two if replacement funding isn't found. Curry County, in southwest Oregon, hopes to stave off collapse by putting a sales tax on the ballot.

DeFazio said the trouble could spread "county to county to county."

"If Curry goes down then Coos goes down, and if Coos goes down then Douglas and Lane go down, and if Douglas and Lane go down -- I say it probably doesn't stop until it gets to Multnomah," he said.

"I've been involved in the forest wars for 27 years," he said. "It started as a fight over old growth and it's going to end with preservation of old growth."

DeFazio also talked to the City Club about the country's transportation infrastructure.

"I'm going to talk about America falling apart," he began.

He said the "legacy system" of transportation infrastructure, largely built during the Eisenhower administration in the 1950s, needs extensive work. He said 150,000 bridges need repair or replacement. Forty percent of the highway system road surface has failed, DeFazio said, and there is a $60 billion backlog of work needed for existing transit systems.

The country is spending a fraction of what China, India and Brazil spend for transportation system improvements, he said.

Maintaining and improving transportation infrastructure, the systems that move people and goods, has traditionally been a bipartisan effort, DeFazio said.

"Well, it is a problem now," he said.

Some Republicans in Congress have adopted a "devolution" view that the federal government has no role in a coordinated national transportation system, that it should "devolve" to the states. He said about 80 members of the House have "bought into this nonsense."


Buffett Poised to Win Bet on U.S. With Burlington

By Natalie Doss, Bloomberg, February 29, 2012

When Warren Buffett bought North America’s second-biggest railroad, he called it an "all-in wager" on the U.S. economy. It’s turning out to be a pretty good bet on the oil industry, too.

Burlington Northern Santa Fe’s track network puts it among the best situated of its peers to meet shipping demand for fracking sand, pipe and crude in the northern U.S. Bakken region, where oil production has more than tripled since 2008, according to data compiled by Bloomberg.

Gains in mineral and chemical carloads helped Burlington Northern pay a $1 billion distribution to Buffett’s Berkshire Hathaway Inc. (BRK/B) last month. The railroad is the busiest in the U.S. in 2012 by traffic, positioning it to build on a 16 percent jump in 2011 sales that helped narrow the revenue lead of Union Pacific (UNP) Corp., which lacks tracks into the Bakken area.

"It’s kind of like if somebody discovers gold in your backyard but not your neighbor’s," said John Anderson, advisory director at Greenbriar Equity Group, a private-equity firm based in Rye, New York, focused on the transportation industry. "It’s just good luck."

Drilling in the Bakken region in Montana and North Dakota is increasing because of improvements in hydraulic fracturing, a technology that uses sand and other chemicals to hold open fissures in shale formations to extract oil. With no pipelines in place yet, railroads are taking oil to refineries and delivering materials such as pipe and specialized fracking sand.

North Dakota

Burlington Northern has "been lucky" to some degree, Tony Hatch, an independent rail analyst in New York, said in an interview. "They’ve got a big presence in North Dakota, which was probably not something that was probably in the forefront in their mind two or three years ago as a competitive advantage."

That’s adding to the benefits Buffett received when he spent $26.5 billion to acquire the 77.5 percent of Fort Worth, Texas-based Burlington Northern that Berkshire didn’t already own. Buffett, 81, called the deal an "all-in wager" on the U.S. economy when he announced it in 2009.

He negotiated his biggest-ever purchase so Berkshire could benefit from demand for shipping on routes in the U.S. West. The deal has helped boost Omaha, Nebraska-based Berkshire’s profit in the past two years as a recovering economy pushed Burlington Northern’s revenue to $19.5 billion in 2011.

Burlington Northern "has benefitted from the shale play probably more than Union Pacific," said Lee Klaskow, a Bloomberg Industries analyst in Skillman, New Jersey.

Two Railroads

The railroad serves about 30 percent of U.S. oil refineries, Klaskow said in an interview. It’s also one of only two major carriers, along with Canadian Pacific Railway Ltd. (CP), with tracks into the region. That means Burlington Northern can pick up shipments from drillers and take them to the refineries across its 32,000-mile (51,500-kilometer) system.

Having a "full service" approach contrasts with Union Pacific’s need to exchange carloads with Burlington Northern or Canadian Pacific to move petroleum to refineries on its network, Klaskow said. Freight that stays on one railroad’s system for the full trip is typically more profitable.

Oil and gas-field servicing are "exploding very healthily" for Burlington Northern, said Paul Bingham, economics practice leader at consultant CDM Smith in Arlington, Virginia. "In the west I think the BN disproportionately benefits from that."

Fourth-quarter net income advanced 41 percent, Burlington Northern said this week in a filing. Buffett didn’t respond to a request for comment e-mailed to his assistant, Carrie Kizer.

Fracking Fallout

The increase in fracking has hurt another Buffett bet: $2 billion in bonds of Energy Future Holdings Corp. He wrote down the investment by more than $1 billion as lower gas prices pressured the power company and told shareholders in a Feb. 25 letter that the investment is at risk of losing all value.

Investors following Buffett’s lead on railroads have outperformed the broader U.S. market.

The Standard & Poor’s 500 Railroads Index (S5RAIL), a gauge of Burlington Northern’s three publicly traded peers, surged 80 percent through yesterday from Nov. 2, 2009, the day before Buffett agreed to buy the carrier. The S&P 500 rose 31 percent in the same period.

Canadian Pacific’s shares were up 57 percent since then in Toronto. Its largest shareholder, Pershing Square Capital Management LP’s William Ackman, has cited Bakken access as one of the railroad’s potential advantages as he pushes for a management change.

Trade Group’s Data

Association of American Railroads data offer glimpses of Burlington Northern’s drilling-related traffic.

Fourth-quarter originated carloads of non-metallic minerals and products grew about 15 percent, while chemicals climbed 5.4 percent. Fracking sand and petroleum are included in the latter two categories, according to the Washington-based trade group.

The railroad doesn’t report oil cargo as a category, and Krista York-Woolley, a spokeswoman, said Burlington Northern doesn’t break down volumes by shipping locations.

Burlington Northern is leading the North American industry in originated carloads of all kinds in 2012, with a four-week moving average of almost 165,000 through Feb. 18. That compares with about 140,000 for Union Pacific, according to data compiled by Bloomberg Industries.

Union Pacific’s chemical volumes also are rising because fracking technology is boosting natural-gas drilling. Chemicals are Union Pacific’s second-biggest commodity by volume, after coal. And its route system blunts the disadvantages of not serving the Bakken region directly, said Tom Lange, a spokesman for the Omaha-based railroad.

Gulf Coast Access

"The majority of Bakken crude shipments ultimately are delivered by Union Pacific to the Gulf Coast refineries," Lange said yesterday by e-mail. "Other railroads interchange with us in Kansas City and St. Louis."

The revenue lead for the largest U.S. railroad over Burlington Northern dwindled to only $9 million in 2011 from more than $2 billion in 2003. Sales growth at Burlington Northern has been faster since then, and it eclipsed Union Pacific sales in 2008 for the first time since at least 1987.

Burlington Northern has a "bigger position in what I think in the next cycle will be faster-growing elements -- intermodal, the Bakken, international grain," Hatch said. "If you just woke any rail analyst in 1990 or 2000 and said, ‘Best franchise?’ They’d have said Union Pacific. I think it’s closer now."


Former Helenan to take helm of national Wilderness Society

By Eve Byron, Helena Independent Record, March 6, 2012

Jamie Williams, a former Helena resident, has been tapped to lead The Wilderness Society as the national organization's new president.

Williams was state director for The Nature Conservancy in Montana from 1998 until 2007, when he and his wife moved to Colorado. Williams then was promoted to that organization's director of landscape conservation for North America, where he led the effort to protect large landscapes, primarily in the western United States.

He's best known in Montana for his work in the Blackfoot and Swan river valleys, where Williams helped with the Crown of the Continent project. That work involved a $500 million deal with Plum Creek Timber to purchase about 300,000 acres. He's also worked on large projects in the Centennial and Madison valleys.

One of the Blackfoot Valley ranchers who worked with him on the project is Jim Stone, who said he appreciated Williams' effort.

"Jamie has been a huge help to our community's effort to conserve the Blackfoot Valley because he took the time to listen and work with us on a common vision for landscape conservation," said Stone, a member of Blackfoot Challenge.

"I have full confidence that he will lead The Wilderness Society with the same kind of collaborative spirit to help local communities like ours sustain special places through strong partnerships."

Williams said he'll take the "80/20 rule" that he learned from Stone and others with him to The Wilderness Society.

"They'd tell me you work on the 80 percent you can agree upon and leave the other 20 percent at the door," Williams said. "Montana is amazing for the people first, and foremost, and what they have been able to achieve for their communities because they build bridges with others. That's the spirit I want with The Wilderness Society.

The Wilderness Society is a leading public lands conservation organization, founded in 1935 and now with more than 500,000 members and supporters.

The Wilderness Society noted Williams' wide range of experience as one reason that he rose above the other candidates for the position. In addition to his work at The Nature Conservancy, Williams is a founder of The Montana Association of Land Trusts.

"In our search for a new president, Jamie Williams was far and away the best candidate, with a track record of outstanding achievement and a well-earned reputation for succeeding in every endeavor," said Doug Walker, The Wilderness Society's governing council chair.

Williams will replace Bill Meadows, who announced his resignation last fall.

Originally from Oklahoma, Williams received a bachelor's degree in American studies from Yale University and a master's degree in environmental studies from the Yale School of Forestry and Environmental Studies.


Proposed Washington port to ship Powder River Basin coal

By Erik Olson, [Longview WA] Daily News, February 24, 2012

LONGVIEW, Wash. -- A company is proposing to build a $600 million terminal in southwest Washington to export 44 million metric tons of Powder River Basin coal to Asia each year, a total that would make it the largest such facility in North America.

The terminal would be a major shot in the arm for the the area's construction industry but will certainly face stiff opposition from conservation and neighborhood groups.

Millennium Bulk Terminals wants to transport coal from mines in Montana and Wyoming, where Millennium's majority owner, Australia-based Ambre Energy, owns a coal mine.

St. Louis-based Arch Coal, the second largest coal company in the United States, owns a 38 percent share in Millennium and several mines in Wyoming.

The coal would be shipped from the terminal's location just west of Longview to China, Korea and other Asian countries with a big demand for more energy.

"The whole (region) is growing, and all the systems have to grow to accommodate it," Millenium Chief Executive Ken Miller said.

The Millennium terminal, on the Washington side of the mouth of the Columbia River, would be nearly the same size as the proposed Gateway Pacific Terminal at Cherry Point near Bellingham, Wash. Developer SSA Marine hopes to export 48 million tons of coal at Cherry Point.

Two other coal terminals have been proposed in the Columbia River system, both at Port Westward near Clatskanie, Wash. Texas-based Kinder Morgan's $200 million terminal would export 15 tons of coal annually, according to the Port of St. Helens. Another Ambre Energy subsidiary, Pacific Transloading, wants to move 8 million tons annually, hauled in by barge from Port Morrow in north central Oregon.

The West Coast's largest current coal terminal, Westshore at Roberts Bank in British Columbia, Canada, has an annual export capacity of 29 million tons.

Millenium submitted an application for the long-anticipated project to the Cowlitz County planning department Thursday morning.

The terminal would employ several thousand workers during construction and 300 total jobs while in operation, company officials say. Over a 30-year period, the terminal would generate $235 million in state and local tax revenue, according to the company's economic analysis.

However, the terminal could snarl vehicle traffic at railroad crossings through Longview's industrial corridor. Eight, mile-long trains a day would deliver coal to Longview from the Powder River Basin, meaning a total 16 train trips daily.

Company officials have previously acknowledged that the existing rail corridor is completely inadequate to cope with a coal terminal of the size proposed Thursday. They say they are working with Burlington Northern Santa Fe to expand rail lines but haven't completed a plan.

Millennium expects to complete an environmental study of the terminal proposal in 18 to 24 months. It will include a transportation analysis.

Millennium must obtain a shoreline building permit from Cowlitz County commissioners, permits from the U.S. Army Corps of Engineers for a new dock and clean air permits from state or regional agencies.

Although it was widely expected that Millennium would submit the application, the sheer scope or the project dwarfs its earlier plans, which the company withdrew a year ago.

In the fall of 2010, county commissioners approved Millennium's permit to export only 5.7 million tons from an existing dock, and area conservation groups immediately appealed to a state review board.

But in February 2011, internal emails from Ambre officials revealed the company was exploring exporting as much as 60 million tons of coal. Following a public outcry, the company withdrew the permit application but vowed to resubmit a more complete application at a later date.

Millennium said it is prepared to face strong opposition this time around.

A company has submitted an application to build a $600 million terminal on Washington's Pacific coast to export 44 million metric tons of Powder River Basin coal each year, a total that would make it the largest such facility in North America.

The terminal would be a major shot in the arm for the area's construction industry but will certainly face stiff opposition from conservation and neighborhood groups.

Millennium Bulk Terminals wants to transport coal from the Powder River Basin in Montana and Wyoming, where Millennium's majority owner, Australia-based Ambre Energy, owns a coal mine. St. Louis-based Arch Coal, the second largest coal company in the United States, owns a 38 percent share in Millennium.

The coal would be shipped from Longview to China, South Korea and other Asian countries with a big demand for more energy.

"The whole (region) is growing, and all the systems have to grow to accommodate it," said Millenium Chief Executive Miller Ken Miller.

The company submitted an application for the long-anticipated project to the Cowlitz County planning department Thursday morning.

The Millennium terminal would be nearly the same size as the proposed Gateway Pacific Terminal at Cherry Point near Bellingham. Developer SSA Marine hopes to export 48 million tons of coal at Cherry Point.

The West Coast's largest current coal terminal, Westshore at Roberts Bank in British Columbia, has an annual export capacity of 29 million tons.

Two other coal terminals have been proposed in the Columbia River system, both at Port Westward near Clatskanie. Texas-based Kinder Morgan's $200 million terminal would export 15 tons of coal annually, according to the Port of St. Helens. Another Ambre Energy subsidiary, Pacific Transloading, wants to move 8 million tons annually, hauled in by barge from Port Morrow in north central Oregon

When fully built, the Millenium terminal would employ 135 full-time workers and create 165 indirect jobs, for a total of 300. Company officials say they expect to create 2,650 direct and indirect jobs during construction over an 18-to-24 month period - expressing hopes they would be mostly local - and are negotiating with the International Longshore and Warehouse Union to work at the dock.

Over a 30-year period, the terminal would generate $235 million in state and local tax revenue, according to the company's economic analysis.

The terminal would employ thousands while under construction, hundreds while in operation, and generate $235 million in state and local tax revenue over a 30-year period, according to the company's economic analysis.

But the terminal could snarl vehicle traffic at railroad crossings through Longview's industrial corridor. Eight, mile-long trains a day would deliver coal to Longview from the Powder River Basin in Montana and Wyoming, meaning a total 16 train trips daily.

Company officials have previously acknowledged that the existing rail corridor is completely inadequate to cope with a coal terminal of the size proposed Thursday. They say they are working with Burlington Northern Santa Fe to expand rail lines but haven't completed a plan.

Millennium expects to complete an environmental study of the terminal proposal in 18 to 24 months. It will include a transportation analysis.

Although it was widely expected that Millennium would submit the application, the sheer scope or the project dwarfs its earlier plans for a 5.7 million ton terminal, which the company withdrew a year ago.

Millennium must first obtain a shoreline building permit from Cowlitz County commissioners, permits from the U.S. Army Corps of Engineers for a new dock and clean air permits from state or regional agencies.

In the fall of 2010, county commissioners approved Millennium's permit to export 5.7 million tons from the existing dock, and area conservation groups immediately appealed to a state review board. But in February 2011, internal emails from Ambre officials revealed the company was exploring exporting as much as 60 million tons of coal. Following a public outcry, the company withdrew the permit application but vowed to resubmit a more complete application at a later date.

Millennium said it is prepared to face strong opposition this time around.

"We would expect questions to be raised," Miller said.


Massive rail expansion in works to accommodate coal project

By Erik Olson, [Longview WA] Daily News, February 23, 2012

Local government planners are developing a $200 million rail expansion plan to accommodate thousands of unit trains expected annually to go the proposed Millennium coal terminal west of Longview.

The plan likely includes a new vehicular road overpass near the intersection of Oregon Way and Industrial Way, a possible second rail crossing over the Cowlitz River and a possible second line of tracks through the Port of Longview industrial corridor to handle mile-long trains bound for the EGT grain terminal and Millennium.

In addition, planners hope to divert longer trains serving the coal terminal through port property so they won’t block busy arterial streets at the south end of Longview.

The expansion plan "is a whopper. It’s a biggie," Rosemary Siipola, transportation manager for the Cowlitz-Wahkiakum Council of Governments, said Thursday.

The COG is spending $4 million in state and federal grant money to develop the full plan, expected to be completed in 2014, Siipola said. The agency hopes to complete the entire project in four to five years, a year or two before Millennium would finish building its terminal.

The project will be funded by those who will benefit from it, including Millennium, the Port of Longview, Weyerhaeuser Co., Longview Fibre Paper & Packaging, local governments and other industries, she said. The COG has not obtained funding for the rail improvements, she said.

Although the expansion project is gaining attention because Millennium filed permits to build the $600 million terminal Thursday, Siipola said it would likely have been needed to handle future industrial growth anyway.

"Our whole thing is modernizing this whole network for the region. It’s not for one or two users," Siipola said.

According to Millennium, the terminal would handle eight mile-long trains per day once the terminal is fully built, creating 16 train trips in and out of the terminal per day.

The rail line leading to the Millennium site cuts across Third Avenue, Oregon Way, California Way and Industrial Way near the Weyerhaeuser Co. mill. Siipola said the COG is hoping to limit rail traffic on this line to shorter trains that won’t block traffic for very long, and direct mile-long unit trains through port property, where they won’t block arterial roads.

At the main Weyerhaeuser mill gate at the intersection of Washington Way and Industrial Way, the COG is looking at building another overpass for vehicles entering and leaving the mill, she said.

Without that overpass, trains headed for the terminal would blocking cars and trucks headed into the mill. Anthony Chavez, a Weyerhaeuser spokesman, said company officials have kept in close touch with Millennium to head off potential problems.

"We’re hopeful that we can reach an agreement so that the unit trains will have minimal impact on our operations," he said.


Buffett’s Burlington Northern Deal Is Focus of U.S. Hearing

By Lisa Caruso, Bloomberg, February 17, 2012

Berkshire Hathaway Inc.’s 2010 acquisition of Burlington Northern Santa Fe, the second-largest U.S. railroad by revenue, will be the subject of a hearing on railroad shippers’ concerns that they will be asked to cover the deal’s costs.

Burlington Northern has asked the U.S. Surface Transportation Board to include the amount of money that Berkshire Hathaway paid over book value for the railroad when calculating the minimum freight rate that shippers can contest. Including the $8.1 billion premium would raise the minimum rate that the board would consider unreasonable for the railroad’s customers to pay.

The hearing will be March 22 in Washington, the board said today in an e-mailed statement. The fact that the hearing has been scheduled may indicate the agency wants to help shippers, said Chip Nottingham, a former board chairman.

"I think the board wants to grant some type of relief to the shipper community," Nottingham, who served as chairman from 2006 to 2009, said in a phone interview. It will have to "figure out how do we make sure that the rate dispute- resolution process is still open and available and functioning to everybody."

The hearing will be used to gather information, Dennis Watson, a spokesman for the board, said in an e-mail.

Suann Lundsberg, a spokeswoman for Burlington Northern, didn’t immediately respond to a phone call requesting comment.

Warren Buffett is chairman and chief executive officer at Berkshire Hathaway.

Suing the Board

No matter what the board decides, it will probably be sued, said Nottingham, a partner in the federal affairs group of the Richmond, Virginia-based law firm Williams Mullen.

The Western Coal Traffic League charges that Fort Worth, Texas-based Burlington Northern is trying to make customers cover Berkshire’s acquisition costs through its rates, and make it more difficult for them to challenge rates with the U.S. board. The group represents coal-fired electric plants west of the Mississippi River.

The group urged the Washington-based railroad regulator to examine the matter in May 2011.

"This is all being done to set the stage and make things better for future battles that we don’t know about," Tony Hatch, a New York-based railroad analyst, said of the shippers’ challenge.


Lawrence A. Selzer to Join Plum Creek Board of Directors

Business Wire, February 13, 2012

Plum Creek Timber Company, Inc. announced today that Lawrence A. Selzer has joined the company's board of directors.

Selzer is president and chief executive officer of The Conservation Fund, one of the nation's top-ranked environmental nonprofit organizations. Since 1985, the Fund has protected nearly 7 million acres of wild havens, working lands and vibrant communities across 50 states.

Prior to serving in his current position, Selzer led the Fund's efforts to integrate economic and environmental goals, launching the Fund's training, leadership and climate programs, mitigation banking efforts and its Natural Capital Investment Fund. He has also conducted research on marine mammal and seabird populations for the Manomet Center for Conservation Science.

"Larry's deep experience with and commitment to conservation and the environment make him an excellent addition to our board," said Rick Holley, president and chief executive officer. "His expertise will be valuable as Plum Creek continues its longstanding commitment to conservation and the environment." Since 1989, the company has committed more than 1.4 million acres of land to conservation outcomes across the United States.

Selzer earned a Bachelor of Science degree in environmental studies from Wesleyan University and a Masters of Business Administration from the University of Virginia. He serves on the boards of the American Bird Conservancy, The Outdoor Foundation and The Sustainable Forestry Initiative; and has previously served on the board of The Wildlife Habitat Council and on the National Academies' Transportation Research Board.

Selzer is the ninth independent member of Plum Creek's board, which is comprised of ten individuals.

Plum Creek is the largest and most geographically diverse private landowner in the nation with approximately 6.6 million acres of timberlands in major timber producing regions of the United States and wood products manufacturing facilities in the Northwest. For more information, visit www.plumcreek.com .


High-speed rail's coming battle: Powerful land owners

By Brian Joseph, Orange County Register, February 3, 2012

If you want to build a rail line between Anaheim and San Francisco, people are going to have to get out of the way.


The proposed California High-Speed Rail would require a lot of land, meaning thousands of California families and businesses will have to move if the project is ever built.

At completion, the project calls for 800 miles of track crossing through 18 counties. The state authority planning the project doesn't know at this point how much private land it needs or what property acquisition will cost, but it plans to buy whatever parcels are necessary at fair market value.

Using preliminary and alternate rail alignments, The Orange County Register traced the proposed track through three counties (Fresno, Kern and Merced) and partway through a fourth (Los Angeles) and found some 2,000 affected properties with roughly 1,300 different owners.

Many of the affected property owners are people and businesses you've never heard of. Some, however, are high-profile: land developers and campaign contributors, big businesses and Central Valley farms. Many are sure to be unhappy about losing their land.

For a project that has already known its fair share of conflict, land acquisition is almost certainly high-speed rail's next source of discord.

"It's not going to be pretty," said Elizabeth Goldstein Alexis, co-founder of Californians Advocating Responsible Rail Design, a Palo Alto group monitoring the high-speed rail project. "Some people are going to be happy with the buyout. Others are not going to go quietly into the night."

Many of the properties needed for the project have yet to be determined, but according to current planning documents, the California High-Speed Rail Authority is eyeing land owned or used by an array of noteworthy interests, including:

• More than four dozen properties in Merced and Kern counties owned by BNSF Railway, including 30 parcels originally held by one of BNSF's predecessors, the Atchison, Topeka & Santa Fe Railway. Today, BNSF is one of the largest railroad networks in North America and is a subsidiary of Warren Buffett's Berkshire Hathaway investment company.

• The site of a Smart & Final warehouse store near Fresno's Chinatown district, assessed at nearly $1 million. The Smart & Final chain contains 250 grocery and foodservice stores in six Western states and northern Mexico.

• Parcels in Merced and Kern counties owned by Pacific Gas and Electric Co., one of the largest natural gas and electric utilities in the United States.

• Undeveloped farm land in Shafter owned by Farmland Reserve Inc., the agricultural investment arm of the Church of Jesus Christ of Latter-day Saints.

• The Fresno distribution center of C&S Wholesale Grocers, "the largest wholesale grocery supply company in the U.S." That property has a total assessed value of more than $8 million.

Most of these businesses were not eager to talk to the Register about the coming rail line. But the state will have to negotiate, individually, for the rights to all of the lands. Ultimately, the state can buy whatever land it wants through the power of eminent domain. But a wealthy or motivated land owner unwilling to deal can stretch out the process for months or longer.

If enough of the land owners fight the project "at strategically chosen places along the route they could tie it up probably a year," said John H. Blake, a real estate attorney in Redwood City. "It could be less, it could be more, depending on the nature of the issue and how seriously the court takes it."


The fight over land acquisition is the next battle awaiting high-speed rail if it can survive a torrent of opposition in Sacramento and Washington. For months now, the future of the project has remained in the balance as politicians on both sides of the aisle have questioned the project's viability and costs, though Gov. Jerry Brown has signaled his strong support.

From April 2010 through May 2011, the California High-Speed Rail Authority was the subject of three scathing reports that criticized its ridership projections, its accounting practices and its management. State lawmakers and project opponents accused the authority of being unrealistic in its cost projections.

At the beginning of November, the authority responded to its critics by releasing a sober business plan, which was praised for its frank assessments and practical figures but raised eyebrows over a revised $98 billion price tag.

Since then, new obstacles have emerged.

In mid-November, Republicans in the U.S. House of Representatives eliminated future funding for high-speed rail in California. Then Kings County sued to stop the authority from going forward with its initial plan to build a 130-mile stretch of track from Fresno to Bakersfield, which isn't long enough to accommodate high-speed trains.

Then the Legislative Analyst's Office said the rail authority's plans are still too speculative to deserve state money. Then the high-speed rail's Peer Review Group, chaired by Orange County Transportation Authority Director Will Kempton, told lawmakers they shouldn't authorize funding for the project. Then the state auditor released another scathing report, saying the authority's "funding situation has become increasingly risky."

There's a chance the Legislature will balk this year when it's asked to appropriate $2.7 billion in bond funds for the high-speed rail. The bonds have already been authorized by voters, but the Legislature still controls their purse strings.

During his State of the State address in January, Brown urged legislators' approval and compared critics of the project to critics of the Interstate Highway System and even the Panama Canal.

"The critics were wrong then," Brown said, "and they're wrong now."


Stretched over 270,000 acres between Bakersfield and Los Angeles, Tejon Ranch is just too big for the high-speed rail to avoid. The historic ranch, which was founded as a Mexican land grant in 1843, is the largest contiguous piece of private property in California. Its 422 square miles encompass farming and ranching operations, a commercial/industrial center and a proposed resort community in the Tehachapi Mountains.

The Tejon Ranch Co. has spent more than a decade planning the resort. Called Tejon Mountain Village, it is envisioned as an idyllic place for a second home or a restful vacation, with 3,450 homes, up to 750 hotel rooms, a couple of 18-hole golf courses and 75 miles of trails for hiking, biking and horseback riding.

"We don't believe that mixes well with a high-speed rail," said Barry Zoeller, vice president of corporate communications and marketing.

The high-speed rail faced a big problem with the Tejon Ranch Co. In May, the California High-Speed Rail Authority announced it would explore the I-5 corridor at the Grapevine as a route between Bakersfield and Los Angeles. Under that plan, the high-speed rail would have passed right by the mountain resort.

Zoeller pledged that "should (high-speed rail officials) make the decision to move ahead with the Grapevine alignment, they would find a strong opponent in the Tejon Ranch Co."

Last month, the authority decided to abandon the Grapevine idea and instead go with a route farther east, near highways 58 and 14. That route also crosses Tejon Ranch property, but the company doesn't oppose it.

The high-speed rail may have avoided a showdown with the Tejon Ranch Co., but the case illustrates the sort of battles the project could face as it moves into the property acquisition phase.

Rachel Wall, spokeswoman for the California High-Speed Rail Authority, said the agency knows it has an "enormous responsibility" to protect the rights of land owners as it acquires property for the project. To do that, the authority will follow a modified land acquisition process developed by Caltrans that Wall said will provide owners with ample opportunities to assert their rights.

The authority has also factored into its schedule the potential for land owners to slow down the process during the land acquisition phase. Wall said the authority is prepared for all the contingencies it may face, but acknowledges, "There's certainly a lot of work to do."


Farmers are expected to be among the high-speed rail's biggest opponents if the project ever reaches the land-acquisition stage. No matter what alignment is eventually chosen, the rail will pass through prime agricultural land in the Central Valley, some of which has been tilled by the same families for generations.

To the agricultural communities affected, the high-speed rail feels like an attack on their world and their bottom line, said Anja Raudabaugh, executive director of the Madera County Farm Bureau, which is concerned about the high-speed rail having an excessive impact on agricultural lands.

"If you change these farmers' way of life, they're going to squawk," Raudabaugh said. But this is about more than convenience, or even tradition. There "is a monetary cost," she said.

First, there is the cost of the land itself. Much of the land targeted by the high-speed rail in the San Joaquin Valley is precious for its physical properties, Raudabaugh said. The soil there is unusually high in nitrogen and phosphorous, which yields pomegranates, pistachios and almonds of a quality that can't be duplicated elsewhere, she said. For farmers, no amount of money can replace such special land.

Then there's the cost of farming around the high-speed rail. Unlike a regular train, the tracks of the high-speed rail will be walled off from the surrounding environment by fences or barriers to prevent cars, people or animals from crossing in front of 220 mph train. The alternative is gruesome: In April 2008, a German high-speed train traveling 124 mph struck a herd of sheep, which caused the train to derail and injured 19 passengers (and killed 20 sheep).

To avoid such an accident, the only way you'll be able to cross the California High-Speed Rail is at designated crossings. That's not a small matter for farmers, who make numerous trips across their fields in a single day. If the rail line cuts through your property, you'll have to drive four to seven miles out of the way just to get to other side of your field, estimates Frank Oliveira, general partner of MEL's Farms, a Kings County farming operation. The high-speed rail is eyeing land on five properties owned by MEL's, Oliveira said.

"They're going to be tearing up everybody's farms and make them not profitable," he said.

Oliveira said farmers are upset about the project because few in state government seem to recognize its impact on the agriculture community. Construction of the rail line will ruin carefully planned farms with laser-leveled fields and buried irrigation systems, he said.

The authority may tell farmers it only wants a 100-foot strip of their land, but Oliveira said that could ultimately cost farmers 170 feet of usable land because farmers also need space to reverse their tractors. The farmers are angry because they feel the state isn't listening to them, Oliveira said.

Wall, the spokeswoman for the high-speed rail authority, said planners will try "as much as possible" to address the impacts on farms during the design process.


Not everyone fears the train, however. For some, the California High-Speed Rail represents the hope for a better future. And at least one community was willing to fight for it.

In July, Palmdale filed a suit in federal court to prevent the California High-Speed Rail Authority from moving forward with the Grapevine plan, which would have bypassed the city. Palmdale officials desperately want a high-speed rail stop in their city for the economic activity it's thought to bring.

"The majority of people I have heard from are in support of the high-speed rail," said Palmdale Chamber of Commerce CEO Stacia Nemeth, when asked if even Palmdale's affected land owners are in favor of the project. "There's a lot of job potential there."

The federal suit was dismissed in September, and the California High-Speed Rail Authority has since abandoned the Grapevine option, but until the very end, the city indicated it was willing to keep fighting. Residents there say they want the high-speed rail to come to their city of 152,000.

"I don't see how it couldn't benefit us," said Marsha Furman, a 27-year resident of Palmdale who is active in community affairs.

Furman said she's never heard affected land owners in Palmdale complain about losing their property to the project. "We see the high-speed rail as just another opportunity to see what the Antelope Valley has to offer," she said.

Residents and officials believe a high-speed rail station will help Palmdale by attracting new businesses and boosting local tourism. It's also thought that Palmdale residents will use the high-speed rail for daily commutes to jobs in Los Angeles or Bakersfield. A faster commute home means the people who already live in Palmdale will have more opportunities to spend their money locally.

"Having a station here, I know it would improve the area economically," said Bill Pappas, a resident of Palmdale since 1990.

For Palmdale, the fight may be over. But for land owners in the path of the high-speed rail, the fight may be just beginning.

Contact the writer: 916-449-6046 or bjoseph@ocregister.com


Quadrant homeowners' kids can take ‘toxic soup’ claim to jury

Supreme Court rules children not covered by parents’ contracts

By Levi Pulkkinen, Seattle Post-Intelligencer, January 5, 2012

In a mixed decision, the state Supreme Court has ruled against a group of Quadrant Corp.-built homeowners who claim poor construction has left their new houses unlivable.

Issuing its decision Thursday, the high court found that an arbitration clause written into purchase and sale agreements signed by Quadrant homebuyers mandates their claims go before a private arbitrator, not a public court. The justices did not weigh in on the homebuyers’ claims that shoddy construction left the homes with a number of problems, including hazardous mold described by a plaintiff’s expert as "toxic soup."

Five of the court’s nine justices did, however, agree the homeowners’ children are not bound by the arbitration clause. That finding essentially cleared the way for the children’s claims that they were sickened by their parents' homes to go to a jury if a settlement is not reached.

Following on the heels of another set of lawsuits that ended in a confidential settlement, a group of homeowners brought a civil action four years ago against the Weyerhaeuser Co. subsidiary claiming that construction on the homes – built at the height of the housing boom – was dangerously rushed. The choice they're left with, they claim, is whether to live with sick kids or abandon their new homes.

Thursday’s decision, though, centered on whether Quadrant homeowners gave up their right to a public trial when they signed closing documents that included a clause mandating private, out-of-court arbitration to resolve problems with the homes. Such arbitration is often preferred by defendants in civil cases, in part because any information uncovered by plaintiffs does not become part of the public record.

A King County Superior Court judge initially ruled that the suits could go forward, but that decision was largely reversed by the state Court of Appeals. Backing the appellate court, all nine state Supreme Court justices found the contract requires that an arbitrator hear the case with regard to the homeowners, or at least decide whether their complaints should be heard by an arbitrator.

A majority of justices found that the homeowners’ children are not bound by the contracts signed by their parents.

"Without doubt, Quadrant owed the children an independent duty that does not arise from the purchase and sale agreement," Justice Debra Stephens said in the majority opinion. "The children assert personal injury claims, the precise scope of which the trial court will decide, but which are not grounded in the contract. …

"True, the parents are obliged to arbitrate their tort claims along with their contract claims, but this is because the arbitration agreement in the contract they signed says so. It does not follow that nonsignatories are bound to arbitrate tort claims that do not arise out of the contract."

Four justices opined that the children should also have to go through arbitration because of the form of the initial complaint. In an odd, as-yet unexplained turn, the opinion signed by the four-justice minority is described as the lead opinion in the case.

Nonetheless, homeowners’ attorney Lory Lybeck described the decision as a victory for the children, and a mixed result for their parents.

"It’s a win for these kids, and all the other kids who might come along and have a contract enforced on them that they didn’t have anything to do with," Lybeck said Thursday.

Attorneys for Quadrant declined to comment on the decision.

Speaking previously, Lybeck described his clients’ case as a "public health issue," which Quadrant is intent on keeping private.

"All that Quadrant is asking for is to kick this out of a public forum so they can have a secret resolution to these claims," Lybeck said.

For its part, Quadrant previously called the claims "unfounded," then contended that the company had not had an opportunity to inspect the houses. A company spokesperson went on to describe arbitration as "a fair and expeditious way to resolve these claims."

"We believe arbitration is the correct course, but either way, we believe the larger claims are unfounded and we will continue to vigorously defend the facts," the Quadrant spokesperson said in 2010. "We stand ready to provide remedy to the plaintiffs at any time."

The owners allege that Quadrant, the state's largest single-family homebuilder, sold thousands of houses around Western Washington without paying adequate attention to quality control. Further, the owners claim Quadrant concealed defects within the homes from prospective buyers before hustling them through an accelerated purchase process.

In court documents, attorneys for the homeowners allege that "widespread, shoddy construction" in Quadrant homes has left an unknown number of customers with "sick houses."

The homeowners contend that mold growing in the houses -- flowering, they claim, because rushed construction schedules didn't leave time to dry out wet building materials -- is circulated through poorly designed, badly built heating systems, poisoning occupants.

During the boom years, Quadrant boasted that its homes were built on a 54-day schedule. Time-lapse photography available on the company website showed a two-story home springing from bare ground, finishing with a new owner backing a U-Haul truck into the driveway.

When mold was found, one Quadrant production manager said during a deposition filed in the suit, it was sponged with a bleach solution and scrubbed before the home was finished. The company didn't tell prospective buyers when mold was found, the production manager said in court documents; like other issues arising during construction, the builder didn't feel it necessary to notify buyers of a problem that had been solved.

Reviewing the claims by 27 residents of Quadrant homes, industrial hygienist Michelle Copeland found that each case involved "the issue of unhealthy air arising from the same common set of conditions including inadequate air flow and air exchange within the home and excessive moisture resulting in the growth and accumulation of mold."

"These common conditions combine to create an unhealthy and 'toxic soup' affecting the air quality in the homes," Copeland said in a Feb. 21, 2008, declaration filed in King County Superior Court.

Quadrant has claimed their own industrial hygienist found no problems in one home alleged to have serious defects.

In a letter, Quadrant attorney Michael R. Scott said industrial hygienist Coreen Robbins found "no basis for concern about the indoor air quality" of the home. The Quadrant attorney went on to offer to settle the claim by making the "recommended repairs" to the home free of charge if the plaintiff agreed to drop the lawsuit.

Reviewing a decision by King County Superior Court Judge Chris Washington to allow the litigation to move forward, the state Court of Appeals for Division One reversed Washington's ruling in October 2009 and found that the arbitration cause was valid.

Arguing on behalf of Quadrant, an attorney said the homeowners' complaints should be handled through out-of-court arbitration, as he alleges the sale agreements signed by the buyers requires. Such a move would place the litigation outside the county court system and would remain largely private.

Lybeck said previously that he's heard from more than a dozen other Quadrant home buyers with concerns similar to those voiced by his clients.

Writing in the unanimous portion of the lead opinion, Justice Pro Tem Gerry Alexander said the arbitration clause appears to be integral to the purchase and sale agreements – PSAs – signed by homebuyers. As such, it could not be thrown out without invalidating the entire agreement.

"Homeowners testified in pretrial proceedings that Quadrant told them the terms of the PSA were not negotiable and that they had to agree to all of the terms, including the arbitration clause, in order to purchase a Quadrant home," Alexander wrote. "They also claimed that they were denied the opportunity to review and question the terms of the agreements before signing them, they were subjected to ‘high-pressure sales tactics,’ and had they been told the truth, they ‘would never have agreed to purchase a Quadrant home, let alone enter a purchase and sale agreement to buy a Quadrant home that contained an arbitration clause.’ …

"The homeowners have framed their claims pertaining to the arbitration clause and the PSA in a way that renders the two inseparable. In our view, one could decide whether the arbitration clause is unenforceable only by deciding whether the PSA as a whole is unenforceable."

Thursday’s decision means other homeowners who signed similar contracts will have to go through private arbitration or settle with Quadrant. Their children, though, are most likely not bound by the same contract, and would be eligible to have lawsuits filed on their behalf.

Lybeck said he plans to talk with his clients about the decision, then move forward toward a resolution. If no agreement can be made, he said, the children will "have their day in court."

Alexander, who recently retired, was joined in finding that the homeowners’ children should be bound by their parents’ agreement by Chief Justice Barbara Madsen, Justice James M. Johnson and Justice Susan Owens.

Justices Stephens, Tom Chambers, Mary E. Fairhurst, Charles W. Johnson and Charles Wiggins found that the children are not covered by the arbitration agreement. All the justices agreed an arbitrator should hear the homeowners claims.

Read the lead opinion here, or the concurrence/dissent here.



Railroads & Clearcuts homepage