Water official offers slashed harvest to PL

By John Driscoll
The Times-Standard
2/26/05

Regional water officials split the baby Friday, deciding to permit half of the Pacific Lumber Co.'s plans to log in Freshwater Creek and Elk River.

The decision, which follows Palco's warnings of looming bankruptcy and a heated public workshop Wednesday, was not favorably viewed by the company or residents of the watersheds who say they've been flooded out, seen property damage and been endangered because of the company's logging practices.

Palco had applied for permits to log on 1,100 acres over the two watersheds. The North Coast Regional Water Quality Control Board's executive officer, Catherine Kuhlman, said she's prepared to approve half of that figure -- which is half the yearly limit set by the California Department of Forestry.

"Staff inspections this week have assured me that excess sediment will not run off from those operations," Kuhlman said in a statement.

The Times-Standard could not reach Kuhlman late in the day Friday to ask how she arrived at her decision.

Palco voiced disapproval at Kuhlman's ruling and said it will continue to negotiate with the board to gain more permits. The company said it was also disappointing that Kuhlman did not entertain its suggestions to build flood walls, clear creek beds and channels to quickly alleviate flooding or provide drinking water to residents whose water supplies have been fouled.

"We are not prepared at this time to comment on how the water board's action will financially impact the company," said Chuck Center, Palco's government relations director.

Humboldt Watershed Council President Mark Lovelace said he was extremely disappointed in the decision.

"At this point, we're looking at our options," he said.

The water board staff, Lovelace said, did not have the information it needed on landslides to guide the decision-making process, a critical component in determining how logging would continue to affect the streams. In the end, he said, the figure Kuhlman approved was not credible.

Whether the amount of logging cleared by the board staff will keep Palco solvent is yet to be seen. Palco had previously claimed it needed most or all of its plans to keep mills open and make debt payments. The water board said it will hear Palco's request for more logging plan approvals at its March 16 meeting in Santa Rosa.

The company's claims of nearing bankruptcy have had investors on edge. Some analysts are not sure it would be the worst thing for the highly leveraged company.

Kevin Starke, an analyst for Imperial Capital in Beverly Hills, which represents some of the company's bond holders, said reorganization could allow the company to shed its huge debt and then subsist on a lower level of harvest.

"There are obviously valuable assets here," Starke said, speaking of the timber held by Scotia Pacific. "The question is, do they yield enough timber for debt service?"