Pacific Lumber Company

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

The Pacific Lumber Company, officially abbreviated PALCO, was one of California's major logging and sawmill operations, located 28 miles (45 km) south of Eureka and 244 miles (393 km) north of San Francisco. The once storied company and its historically positive relationship with conservationists begun in the 1920s was altered drastically after a hostile takeover began in 1985. As a result, the company was transformed into a wholly owned subsidiary of Maxxam, Inc by 1986 and during its two final decades. The bulk of operations, including the historic company town of Scotia, California, remain adjacent to US 101 along the Eel River. Operations were split over several milling sites over the many years to mill logs from timber holdings exceeding well over 200,000 acres (890 km²)[1] in the Redwood and Douglas-Fir forests of Humboldt County. For generations, it was one of the largest private employers in the entire region, appropriately known as the Redwood Empire.

In January 2007 the company filed for bankruptcy protection. On July 29, 2008, the "Final Order" from US Bankruptcy attorney, Judge Richard Schmidt, led to the transfer of the assets of the bankrupt PALCO and all its subsidiaries to the Mendocino Redwood Company and Marathon Structured Finance. After 145 years as PALCO, the new company is known as the Humboldt Redwood Company.

Some of the affected parties, including Bank of New York Trust Company, filed an appeal, and on September 29, 2009, the Court of Appeals for the 5th Circuit modified this judgment.

Contents

Overview

The Pacific Lumber Company was started in 1863. Though it employed over 350 people in its final days in 2008, there were over 1,600 employees at the turn of the millennium.[2] The company itself is a tourist attraction that once welcomed visitors for a tour of the (now permanently closed) largest Redwood Mill ever constructed. The quaint town adjacent to the mill is still open to public visits. Pacific Lumber has been at the center of multiple controversies since a hostile takeover by Maxxam, Inc. (of Texas), that 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 that ensured sustainability. The company maintains that it is still a sustainable operation, but its policies and practices bear little resemblance to those before 1986. The tale of the company since then is that of constant legal battles, hearings, and lawsuits played out in courts that have involved environmental agencies and organizations as well as the State and Federal governments. 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 its holdings under more-restrictive practices. This in part led PALCO to file for bankruptcy in January 2007. 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.

History

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 (47,000 m3) 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 company[4] chose to rebuild, despite the fact that insurance covered only 25% of losses.

Early 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 comprises the core 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] In a decade, this move would cause the undoing of the venerable company and its practices and traditions.

Late 20th Century

By the 1980s, this huge lumber operation had absolutely no debt, holding a partially diversified portfolio that included a high-rise building in San Francisco and lucrative welding operation in the San Francisco Bay Area, all derived from the company's 100-year-plan based on sustained yield directed cutting and profits carefully spent to protect cash flow. 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 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]

1985 Hostile Takeover

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 A. Campbell, a man who had been one of his executive vice presidents.[4] 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 taxpayer's money.[11]

Clearcutting Introduced Under Maxxam

Between a desire to turn a higher profit and the need to start paying off the debt incurred from acquiring Pacific Lumber, Hurwitz's Maxxam replaced the sustainable growth policy of the previous owner-managers (primarily the Murphy family) with one of clearcutting.[12]

Protests and Resistance

On May 24, 1990, a bomb planted in the car of Earth First! activist Judi Bari exploded, sending her and fellow activist Darryl Cherney to the hospital. Judi and Darryl were on their way to a music and speaking event on the UC Santa Cruz campus, part of an organizing tour for Redwood Summer, which sought to inform the wider public about the tragedy unfolding in the Redwood Empire.

That explosion, and the subsequent misinformation attacks on Judi and Darryl by the FBI and Oakland police, would forever change the face of forest activism in the redwoods and elsewhere. The bomber was never found, because the FBI never conducted a serious investigation, choosing instead to accuse Judi Bari of planting the bomb under the driver's seat of her own car. A lawsuit filed by Judi against the FBI for violation of Constitutional rights was ultimately successful in 2002, vindicating Darryl and Judi, but coming five years after Judi's untimely death from breast cancer at the age of 47.

Redwood Summer, held in 1990, was a mass mobilization of students and others from across the United States to protest the deforestation of the redwood region in Northern California, which was being decimated by Maxxam. The mobilization was modeled after Mississippi Summer, a major organizing effort in the nation's civil rights movement in the South in the 1960s. A key architect and organizer of Redwood Summer was labor and environmental leader Judi Bari. The bomb which nearly killed her was preceded and followed by a smear campaign against Earth First!, carried out by the FBI, which tried to charge Darryl and Judi for the bombing, and tried to brand the deep ecology group Earth First! as a terrorist organization. This misinformation campaign was largely successful.

On September 17, 1998, David Chain, an Earth First! activist was struck by a falling tree while trying to stop logging in Pacific Lumber property.[13] He was killed instantly and died of massive head trauma. In response to his death, a Pacific Lumber Co. spokeperson said their logging crew did not see anybody in the area and were unaware of Chain's presence.[14] Earth First! said that the loggers had been deliberately felling huge trees, in a perpendicular manner rather than downhill,[15] in the protesters' direction.[16] One of the protesters also noted that the tree fellers were fully aware that they were there, as the activists had been "yelling at them, walking towards them, telling them 'Don't fall this tree'".[15] On a videotape supplied by Earth First!, Arlington Earl Ammons, the 52-year-old logger responsible for falling the tree that caused Chain's death can be heard shouting expletives and threatening the protesters.[15][17][18]

Beginning of a new millennium

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 and signed the order on July 8, 2008. The company's bond holders attempted to appeal, but on July 24, the appellate court in Louisiana refused to hear the case. Timber note holders stated that this will mean the Mendocino Redwood Company/ Marathon plan will be able to go forward, and many agree that any future court will be unlikely to undo it.[19]

Railroads

Pacific Lumber Company incorporated the Humboldt Bay and Eel River Railroad on 17 November 1882 to transport lumber from the Scotia sawmill to Humboldt Bay for loading aboard ships. The line was completed to Alton, California on 20 August 1885 where connection was made with the Eel River and Eureka Railroad for the remainder of the distance to Humboldt Bay. Rails were extended southward up the Eel River from Scotia to bring logs into the sawmill. Atchison, Topeka and Santa Fe Railway merged the Pacific Lumber Company railway into their subsidiary San Francisco and Northwestern Railway on 15 May 1903, although Pacific Lumber Company retained timber rights and the ability to use the line for their logging operations. The railway became part of the Northwestern Pacific Railroad on 8 January 1907.[20] Pacific Lumber Company built flatcars from wood and maintained a fleet of locomotives for moving logs from the woods into the mill and for switching cars for loading or unloading at the sawmill. Log trains of wooden flat cars ran to the Scotia mill through the 1970s from a log deck in Carlotta, California. Company switchers were stationed at Scotia until Northwestern Pacific Railroad discontinued service.

Locomotives

Number Builder Type Date Works number Notes
3 Pennsylvania Railroad 4-4-0 1886 1031 originally Pennsylvania Railroad #452; then Chicago, St. Louis and Pittsburgh Railroad #452; then Pittsburgh, Cincinnati, Chicago and St. Louis Railroad #8298; renumbered #298; renumbered #343; sold 1902 to Eel River and Eureka Railroad as #4[20]
2nd # 3 Baldwin Locomotive Works 2-6-2 1922 55248 formerly Humboldt Northern Railroad #3 purchased 1950; sold 1953[21]
9 Heisler Locomotive Works 2-truck Heisler locomotive 1920 1446 originally Mount Tamalpais and Muir Woods Railway #9; then Siskiyou Lumber Co. of Macdoel, CA; then Humboldt Northern Railroad #5; purchased 1950; retired 1953 and placed on display in Scotia.[21]
19 Baldwin Locomotive Works 0-6-0 Tank locomotive 1875 3739 purchased from Excelsior Redwood Company[21]
20 Marshutz & Cantrell 0-6-0 Tank locomotive 1882 purchased from Excelsior Redwood Company[21]
21 Rogers Locomotive and Machine Works 4-4-0 1881 [21]
22 Baldwin Locomotive Works 2-4-2 Tank locomotive 1887 8792 purchased as #2; renumbered[22]
23 Baldwin Locomotive Works 2-4-2 Tank locomotive 1886 8007 purchased as #1; renumbered; wrecked in 1938[21]
25 Baldwin Locomotive Works 2-4-2 Tank locomotive June 1904 24317 purchased as #5; renumbered; sold to Holmes-Eureka Lumber Company[22]
26 Lima Locomotive Works 2-truck Shay locomotive 14 July 1906 1615 purchased new; scrapped 1950[23]
27 Baldwin Locomotive Works 2-6-2 1909 33339 purchased new; scrapped 1955[21]
28 Lima Locomotive Works 2-truck Shay locomotive 24 February 1910 2268 purchased new; sold to Pelican Bay Lumber Company Algoma, Oregon[23]
29 Baldwin Locomotive Works 2-6-2 1910 34484 purchased new as a wood-burner; later converted to oil fuel; in 1986 placed on display in Eureka, California[22]
30 Baldwin Locomotive Works 2-6-2 1911 36173 purchased new; scrapped 1955[21]
31 Lima Locomotive Works 3-truck Shay locomotive 6 April 1911 2419 formerly California Western Railroad #10 purchased 1917; sold 1920[23]
32 H. K. Porter, Inc. 0-6-0 1920 6533 fireless sawmill switcher with steam reservoir periodically refilled from the sawmill boiler; sold 1921[21]
33 Climax Locomotive Works 3-truck Climax locomotive 1923 1633 original locomotive c/n 1592 built in 1921 was returned to builder and replaced; scrapped 1952[21]
34 Baldwin Locomotive Works 2-6-0 1913 39760 purchased 1921 from Ocean Shore Railroad; sold 1942 to Red River Lumber Company Westwood, California[21]
35 Baldwin Locomotive Works 2-8-2 1924 67538 purchased new; sold 1971[21]
36 Lima Locomotive Works 2-truck Shay locomotive 3 May 1907 1836 formerly Metropolitan Redwood Lumber Company #1; purchased October 1935; scrapped 1953[23]
37 American Locomotive Company 2-8-2 Tank locomotive 1924 660333 purchased 1935 from Sugar Pine Lumber Company; sold 1966[21]
38 Climax Locomotive Works 2-truck Climax locomotive 1922 1621 purchased 1938 from Holmes-Eureka Lumber Company; sold 1956[21]
101 GE Transportation Systems GE 80-ton switcher 1956 32395 purchased new, retired 1992; sold 1996[21]
102 GE Transportation Systems GE 80-ton switcher 1956 32413 purchased new, retired 1992; sold 1996[21]
103 GE Transportation Systems GE 80-ton switcher 1957 32414 purchased new, sold 1980[21]
104 Baldwin Locomotive Works Baldwin VO-1000 1945 71740 purchased 1962 from United States Army Transportation Corps; sold 1981[21]
105 Baldwin Locomotive Works Baldwin VO-1000 1945 71985 purchased 1964 from United States Navy; sold 1981[21]

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.[24]. 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 region's 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 (12,000 m2) 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 its 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 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.[25] 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.[26]

Notes

  1. ^ The Press Democrat, Partnership bidding for Pacific Lumber URL retrieved February 10, 2008
  2. ^ North Coast Journal, Don't Call it an HMO Url retrieved February 11, 2008.
  3. ^ PALCO, History: 1863-1889 Url retrieved February 10, 2008.
  4. ^ a b North Coast Journal, Scion Url retrieved February 10, 2008.
  5. ^ Save-the-Redwoods League, League Url retrieved February 24, 2008.
  6. ^ PALCO, History: 1890-1949 Url retrieved February 10, 2008.
  7. ^ Harris, David. 1997. The Last Stand: The War between Wall Street and Main Street over California's Ancient Redwoods. San Francisco. Sierra Club. Pages 16-18.
  8. ^ PALCO, History: 1950-1998 Url retrieved February 10, 2008.
  9. ^ North Coast Journal, Scion: What if Warren Murphy had won the battle for Pacific Lumber Co.? Url retrieved February 24, 2008.
  10. ^ North Coast Journal, Denial Made On Parking Url retrieved February 11, 2008.
  11. ^ Bay Area Coalition for Headwaters Forest, Pacific Lumber: It keeps heating up Url retrieved February 11, 2008.
  12. ^ Cobb, David (2008-06-12). "Maxxam's sordid history with Pacific Lumber". Times-Standard (MediaNews Group - Northern California Network). http://www.times-standard.com/opinion/ci_9560701. Retrieved 2010-11-16. 
  13. ^ The Associated Press (Sep 18, 1998). "Environmentalist hit, killed by falling tree". Ocala Star-Banner. http://news.google.com/newspapers?id=OedPAAAAIBAJ&sjid=aggEAAAAIBAJ&dq=david-chain&pg=2596%2C1154117. Retrieved 4 July 2011. 
  14. ^ "Anti-logging activist killed by falling tree". Milwaukee Journal Sentinel. Sep 18, 1998. http://news.google.com/newspapers?id=yOMdAAAAIBAJ&sjid=HC8EAAAAIBAJ&pg=1787%2C26487137. Retrieved 4 July 2011. 
  15. ^ a b c Seth Hettena (Sep 19, 1998). "Earth First! accuses loggers of targeting activists before accident". Moscow-Pullman Daily News. http://news.google.com/newspapers?id=F-8qAAAAIBAJ&sjid=qdAFAAAAIBAJ&pg=6463%2C1523519. Retrieved 4 July 2011. 
  16. ^ "Logging Protester Killed By Falling Redwood Tree". New York Times. Sep 19, 1998. http://www.nytimes.com/1998/09/19/us/national-news-briefs-logging-protester-killed-by-falling-redwood-tree.html. Retrieved 3 July 2011. 
  17. ^ The Death of David Chain. Does this sound like an accidental killing to you?, EF! Media Center, http://www.oocities.org/rainforest/vines/9901/death_david.html, retrieved 4 July 2011 
  18. ^ Seth Rosenfeld (March 14, 1999). "Death and anguish in the redwood wars". San Francisco Examiner. http://www.sfgate.com/cgi-bin/article.cgi?file=/examiner/archive/1999/03/14/NEWS14354.dtl. Retrieved 3 July 2011. 
  19. ^ "Appellate court rules in favor of Mendocino Redwood Company". The Eureka Reporter. http://www.eurekareporter.com/article/080724-appellate-court-rules-in-favor-of-mendocino-redwood-co. Retrieved July 24, 2008. 
  20. ^ a b Stindt, Fred A. (1978). The Northwestern Pacific Railroad: Redwood Empire Route (3rd Edition ed.). Kelseyville, California: Fred A. Stindt. pp. 40–41,126&136. ASIN: B0007F4A2M. 
  21. ^ a b c d e f g h i j k l m n o p q r s "The Pacific Lumber Company Locomotive Roster". Jeff Moore. http://www.wx4.org/to/foam/shortlines/pacificlumber/tpl_roster.html. Retrieved 2010-04-28. 
  22. ^ a b c Carranco, Lynwood (1982). Redwood Lumber Industry. Golden West Books. pp. 74,116&128–129. ISBN 0-87095-084-3. 
  23. ^ a b c d Koch, Michael (1971). The Shay Locomotive Titan of the Timber. The World Press. p. 418,422,433&436. 
  24. ^ Times-Standard, Bids in for Pacific Lumber's future URL retrieved February 10, 2008
  25. ^ "Appeal court upholds dismissal of fraud suit against PALCO". The Eureka Reporter. http://eurekareporter.com/article/080110-appeal-court-upholds-dismissal-of-fraud-suit-against-palco. 
  26. ^ Driscoll, John (December 22, 2007). "Judge opens door for Palco plans". Times-Standard. http://www.times-standard.com//ci_7786338?IADID=Search-www.times-standard.com-www.times-standard.com. 

References

External links