Pacific Lumber Company

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PALCO (The Pacific Lumber Company)
Type	Subsidiary
Founded	1863
Headquarters	Scotia, California, USA
Key people	George O'Brien CEO; Frank Bacik, Vice President and General Counsel; Michael Claes, Spokesman
Industry	logging, milling
Products	forest products
Owner	Maxxam Inc of Texas
Employees	350
Website	PALCO

The Pacific Lumber Company, officially abbreviated as PALCO, is a wholly owned subsidiary of Maxxam Inc. It is one of California's major logging and sawmill operations. The bulk of operations, including the historic company town of Scotia, California, are located 28 miles (45 km) south of Eureka and 244 miles (393 km) north of San Francisco. Situated on US 101 along the Eel River, this large landholder manages timber holdings of nearly 210,000 acres (890 km²)^[1] in the Redwood and Douglas Fir forests of Humboldt County. It is one of the largest private employers in the region, appropriately known as the Redwood Empire.

The company filed for bankruptcy protection in January 2007. A Texas bankruptcy court considered reorganization options early in 2008. On June 6, 2008 the judge preliminarily decided to confirm the Mendocino Redwood Company option for reorganization. The largely popular decision may be confirmed, but could also lead bondholders of Maxxam PALCO debt to file for an appeal depending on the outcome of several issues.

Contents 1 Overview 2 History 2.1 19th Century 2.2 20th Century 2.3 Late 20th Century 2.4 Beginning of a new millennium 3 Environmental issues 4 Notes 5 References 6 See also 7 External links

[edit] Overview

The Pacific Lumber Company was started in 1863. It employs over 350 people, but this figure is down from a height of over 1,600 employees at the turn of the millennium.^[2] The company, itself, has been a tourist attraction which had welcomed visitors for a tour of the (now permanently closed) largest Redwood Mill ever constructed. The quaint town located adjacent to the mill is still available to public visits. Pacific Lumber has been at the center of multiple controversies since a hostile takeover by Maxxam Inc (of Texas), which was completed in 1986, changing its status from stable employer to one of controversy, and finally instability. The controversy is partly a result of a departure from long-standing management practices which ensured sustainability. The company maintains that it is still a sustainable operation, but the policy and manner bears little resemblance to the practices before 1986. The tale of the company since then is that of constant legal battles, hearings and lawsuits played out in courts, which involved environmental agencies and organizations as well as the State and Federal government. 1999 saw the sale of thousands of acres of land to become the Headwaters Forest Reserve. In that agreement strict rules were put into place requiring the company to manage their holdings under more restrictive practices. This in part led PALCO to file for bankruptcy in January 2007. In 2008 plans are being considered to bring the company out of bankruptcy. This process, though held in a Texas Bankruptcy Court, has many players from Wall Street to Humboldt County. Even the Governor of California has written the court stating the importance of this company to all of California.

[edit] History

[edit] 19th Century

Pacific Lumber or PL (as locals have known it for generations) began during the heat of the US Civil War in 1863 when A. W. McPherson and Henry Wetherbee purchased 6,000 acres (24 km²) of timberland on California's Eel River at the rate of $1.25 per acre. Over the ensuing 20 years they added more partners and began significant logging by 1882, at the present main site and town, which was originally known as Forestville. by 1888, the company became the largest in Humboldt County, with 300 employees and lumber shipments exceeding 20,000,000 board feet annually. By this time the town name was changed to Scotia and it boasted a Western Union telegraph station, church, post office, and school.^[3] In 1895, the company suffered a major setback as the entire town burned, suffering $400,000 in losses ($8,000,000 in today's terms). The Murphy family, by then the controllers of the great company^[4] chose to rebuild, despite the fact that insurance covered only 25% of losses.

[edit] 20th Century

Through the rebuilding of San Francisco after the 1906 San Francisco earthquake, World War I, and numerous floods on the Eel River, the company came into the modern age. By 1920 the company had 1,500 employees and 65,000 acres (260 km²) of timberland. Beginning in the same decade, company management began participating in the preservation movement, primarily as a result of pressure from the Save-the-Redwoods League in San Francisco.^[5] Portions of prior PL holdings including the Rockefeller Forest, the world's largest remaining contiguous old growth Redwood Forest to survive, now comprise the majority of Humboldt Redwoods State Park. Further developments included recycling of sawdust into the world's first Presto logs.^[6]

In 1931 Stanwood Murphy became president of the company. His unique foresight led to a drastic change in practices from the industry standard of clear cutting to a "selective cut" system of logging. This meant that the company would limit cutting to a maximum of 70 percent of the mature trees in a stand, leaving the younger, most vigorous trees to hold the soil and seed a new generation of forest. He also instituted the concept of "sustainable yield," which directed planners to never cut more than the company's forests could replace by new growth in any year. These practices were hailed as revolutionary and he and his direct heirs ran the company in this manner for the next 55 years.^[7]

By the 1950s, PALCO efforts to make Scotia a comfortable place to live and raise a family provided the following in the company town: affordable employee housing, stores, a school, a hospital, a skating rink, and a theatre. Under the Murphy family, the company implemented an employee pension plan, and provided free life insurance. By 1961, academic scholarships were also provided to students who were children of company employees. In 1975, PALCO was listed on the New York Stock Exchange.^[8]

[edit] Late 20th Century

By the 1980s this huge lumber operation had absolutely no debt. In addition it held a partially diversified portfolio, including a high rise in San Francisco and a lucrative welding operation in the San Francisco Bay Area. A 100 year plan based on sustained yield directed cutting. These long term plans consequently and purposely led to a relatively low profit annually, which unwittingly were about to make the company vulnerable to "new" acquisition practices from Wall Street. The last Murphy to run the then fabled company under these circumstances reflected on what it was like to run such a stable enterprise with sound environmental practices: "We were the good guys. It was fun, it was easy — it was a great life."^[9]

On September 30, 1985 the venerable Pacific Lumber Company, having maneuvered through more than a century of business peaks and valleys, was taken over as a result of stock purchases culminating on September 27, 1985. The Murphy family (the largest minority stock holders at the time) and countless previous stockholders, mostly company employees, were relieved of their stock as a result of a hostile takeover by Charles Hurwitz and his Maxxam, Inc corporation of Texas.^[10] On February 26, 1986, the day after the completed takeover, Warren Murphy resigned, turning over the company to John Campbell, a man who had been one of his executive vice presidents.^[11] However, despite indisputable changes in the tenor and management of the company, its last major holding of contiguous old growth forest was ultimately preserved as environmental groups and various auspices of government worked to seek a deal that inevitably led to the creation of the Headwaters Forest in 1999 in exchange for $480 million in taxpayers money.^[12]

[edit] Beginning of a new millennium

In January 2007, PALCO sought Bankruptcy protection in a court in Texas. Efforts to move the trial to California failed. The case is officially named "Scotia Pacific Co. LLC, 07-20027, U.S. Bankruptcy Court, Southern District of Corpus Christi, Texas." This company name was created by Maxxam as they set up a shell parent company in Texas just prior to filing for bankruptcy. In early April 2008 the bankruptcy judge, Richard Schmidt, is scheduled to make a decision based on 5 plans before the court which are designed to bring the company out of bankruptcy. He has indicated that two of three plans submitted by the company itself are "not confirmable" and is likely to throw them out. The lack of interest in the unprecedented three plans submitted by the company is shared by a majority of the creditors not related the the shell company.^[13]

[edit] Environmental issues

The company has recently considered selling 6,000 acres (24 km²) of mostly old growth redwoods for $300 million to protect the marbled murrelet, spotted owl, and other old growth dwellers.^[14]. As required by regulatory authorities, buffer zones have been further developed around rivers to prevent erosion and maintain animal habitats, but the Eel River, the regions major waterway, has been considerably damaged as a result of more than 150 years of logging activity, not all of which is the result of PALCO operations. In 1999 PALCO agreed to American activist Julia Butterfly Hill's requests to create a 3 acre buffer zone around a 600 year old growth redwood named Luna in exchange for leaving the tree, as she had been living in it for just over two years. Though someone vandalized the tree during the process, it survives to the present. In 2003, the Company was sued civilly, by the District Attorney of Humboldt County, for fraud and violations of the California Business and Professions Code. The suit was predicated on the allegation that PALCO had affirmatively represented that it's timber operations would have a similar environmental impact across all of its land holdings, when in fact there were wide variances and effects on differing watershed environments. The suit was ultimately dismissed by a California Superior Court Judge, but was later appealed to the California Court of Appeal. In January of 2008, the California court of Appeal for the 1st district upheld the trial court's dismissal of the litigation, and the suit is for all practical purposes over.*[1] During the pendency of this litigation MAXXAM filed for Bankruptcy. Reports indicate that the family that owns the GAP Stores who are already investors in timber lands in Mendocino county, just south of Humboldt county have submitted a proposal to take over PALCO to the Bankruptcy court in Corpus Christie, TX. Environmentalists hailed the move as being a vast improvement on the increased logging approach by Charles Hurwitz and MAXXAM.*[2]

[edit] Notes

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[edit] References

• The Last Stand: The War between Wall Street and Main Street over California's Ancient Redwoods. San Francisco. Sierra Club.

[edit] See also

• Scotia - Pacific Lumber's company town and its California headquarters

[edit] External links

• Pacific Lumber Company Website
• North Coast Journal - at least 380 articles on the developments within and surrounding PALCO.
• San Francisco Chronicle - multiple stories and editorials related to PALCO.
• Pacific Lumber's environmental record
• Critique of PALCO's environmental program