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Some Claim Palco Misled Board Over Water Quality Letter
(Times Standard) 01/29/2005

Supes duped?

Some claim Palco misled board over water quality letter

Andrew Bird

January 29, 2005

The Times-Standard

EUREKA -- Two members of the Humboldt County Board of Supervisors who voted to allow a last-minute agenda item on behalf of Pacific Lumber Co. now say they were misled about the need to take immediate action.

Jill Geist and John Woolley were among four county supervisors who voted at Tuesday's regular meeting to consider sending a letter in support of Palco to the North Coast Regional Water Quality Control Board.

Geist and Woolley said Friday they would not have voted to even consider the letter -- which escaped public scrutiny because it was not on the published agenda in accordance with state law -- had they known there was no need to send the letter immediately.

The letter, which was sent immediately upon approval, urges the water quality board to speed up its review of Palco's timber harvest plans.

A Palco representative, at Tuesday's meeting to make a pitch for the letter, told the supervisors the company had a spot on the water quality board's meeting agenda the following morning, when it would ask to have its timber harvest plans approved.

The Palco representative, Chris Manson, told the supervisors that the company wanted their letter before Wednesday's meeting to boost its position.

Woolley said Friday he took that to mean the Regional Water Quality Control Board would be taking action on Palco's timber harvest plans Wednesday morning.

"That's what I thought," Woolley said Friday.

Geist, too, said she thought the water quality board was going to take action.

"When I saw the letter (that Palco submitted for the supervisors' approval) I thought they had timber harvest plans pending approval," Geist said.

However, it turned out the water quality board had never intended to take any action on Palco's pending timber harvest plans at Wednesday's meeting.

Catherine Kuhlman, the North Coast Regional Water Quality Control Board's executive officer, said Tuesday that Palco had requested time on Wednesday's agenda to make a pitch, but that none of the company's timber harvest plans were on the agenda for approval.

Woolley said Friday if he had known this Tuesday, he wouldn't have agreed to add Palco's last-minute letter to the supervisors' agenda.

"I don't see it as an urgent item," Woolley said Friday.

Geist said she believes all the supervisors believed the water quality board was ready to take action Wednesday.

"If (the supervisors) had known it wasn't an item for decision, it would have been dealt with differently," Geist said Friday. "If I had known, I would have just made a motion to continue it."

It was Geist who made the motion to add Palco's request for the letter to Tuesday morning's agenda, along with two other supplemental items that were added late but included in final versions of the published agenda.

When it came time for the supervisors to vote whether to send the letter, Geist actually voted against it because, she said, she didn't feel it was proper for one government agency to put pressure on another.

Woolley and supervisors Jimmy Smith and Bonnie Neely voted in the majority to send the letter.

Supervisor Roger Rodoni, who leases land from Palco, dismissed himself from the Palco item with a statement that he wanted to avoid the appearance of conflict-of-interest.

However, it was Rodoni who Palco brought the letter to late on Monday.

Rodoni passed the letter to Smith, who introduced it as a last-minute item Tuesday morning.

Woolley said Friday he supports what the Water Quality Control Board is trying to do, "treat water quality issues on par with forestry issues," when it comes to approving timber harvest plans.

Woolley also said he has received a number of constituent calls over this issue, and is expecting some of them to speak about it at the supervisors' meeting on Tuesday.

"I'm interested in hearing more about it," he said.

The Board of Supervisors meets every Tuesday inside the Humboldt County Courthouse at 9 a.m.

However, the time for public comment on items not on that day's agenda is scheduled for 1:30 p.m.

As of late Friday, no item on the Palco letter had been added to the published agenda for Tuesday's meeting.

Rodoni, Smith, Neely and Palco's government relations director, Chuck Center, did not return phone calls to the Times-Standard on Friday.


Palco watch: Timber company's credit rating gets scrutinized

John Driscoll

January 29, 2005

The Times-Standard

Pacific Lumber Co.'s recent claims that it's teetering on bankruptcy appear to have touched off a flurry of concern among investors wondering if the company will default on its loans.

The timber notes issued by Scotia Pacific Co., which holds the company's timberlands, were placed on a credit watch by Standard and Poors on Thursday.

That follows stories in California newspapers in which the company said it would go bankrupt if it can't cut the timber it planned to in the next few months.

Standard and Poors is watching the situation to see if the notes should be downgraded from their already marginal status.

Scotia Pacific has relied on a line of credit to make interest payments on timber notes -- they total $750 million -- since July 2002. It has borrowed $46 million since that date, leaving only $10 million available.

The interest payment due in July 2005 is $28 million, which means Scotia Pacific will have to generate enough revenue to repay $18 million to the line of credit to make the interest payment in July, according to the Standard and Poors analysis.

Scotia Pacific gets its revenue by selling logs to Palco.

"In the event that Palco were to seek reorganization or other relief under the bankruptcy code," the analysis reads, "a delay or reduction in the payment of the timber notes may occur."

This newspaper has received calls in recent weeks from firms representing investors seeking information on Palco and Scotia Pacific's timber lands, which bondholders may take possession of if the company defaults on its loans. Whether the protections afforded to Palco's 220,000 acres through the 1999 Headwaters Agreement would go with that land is not clear.

Palco did not return the Times-Standard's phone calls for comment.

The heavily indebted company is pressing the North Coast Regional Water Quality Control Board to approve its logging plans. The board's staff are drafting permits to cover all of two watersheds, Elk River and Freshwater, and doesn't expect to have them ready until April.

Palco has said the approvals can't come later than the end of February to avoid layoffs. In documents submitted to the board, Palco said it plans to operate three sawmills and process some 91.1 million board feet of timber by the end of June. Some 32.6 million board feet it expects to come from the two watersheds by the end of April.

If the water board doesn't approve 12 logging plans -- beyond four already passed by the board -- by the end of February, it will shut its mills and lay off 450 workers, Palco CEO Robert Manne wrote in the documents.

Manne wrote that the board staff's "extremely tardy interest by you in our economic plight," shows poor cooperation between the agency and the company.

The board staff has said it had been frustrated with Palco's delay in submitting information needed to draw up the watershedwide guidelines.

Board member John Corbett said he could not comment on the matter because of its quasi-judiciary or judiciary nature.

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