Groups seek stay on water board's Palco order

Eureka Times-Standard

Friday, March 25, 2005 -

Three environmental groups are going to the state water board to appeal last week's decision to allow the Pacific Lumber a total of three-quarters of its logging plans in Freshwater and Elk River this year.

The ruling by the North Coast Regional Water Quality Control Board cleared more logging than its staff recommended, a decision that was made arbitrarily, according to the groups petitioning the State Water Resources Control Board. They are seeking an emergency stay.

That "not only fails to relieve existing and ongoing harm," they write, "but rather forces the residents of these watershed to suffer new harm, which would not otherwise exist."

The Humboldt Watershed Council, the Environmental Protection Information Center and the Sierra Club said nearly 600 residents are effected by or trapped during flooding due to logging practices. The groups say residents could suffer $576,000 in lost work and a total of $3 million in future damages because of the regional board decision in coming years.

Palco has claimed the 75 percent figure may not be capable of staving off debt payments on a total $750 million. Two calls to Palco Thursday were not returned. It's unclear if the additional 25 percent acreage it was cleared to log would result in any stability for the company, which previously said all its plans in the watersheds would have to be approved to maintain solvency.

Late last week, Palco and subsidiary Britt Lumber Co. and the Bank of America amended its credit agreement through mid-April. Since the company didn't maintain requirements for debt service through the end of last year, it's in, or will be in, default.

The March 18 agreement will allow the company to company to borrow $3 million -- backed up by a $2 million cash deposit by parent company affiliate Maxxam Group Inc. and a reduction in the reserve available to borrow -- to help meet its timber note payments.

That carried a fee of $300,000, and makes the company pay a default rate on its notes equal to an additional $15 million a year.

Palco said it's seeking long-term amendments to cure the existing default beyond April 15. It's also continuing to seek approval for the remainder of its logging.

"There can be no assurance that either of these efforts will succeed," Palco wrote.

If they don't, the company wrote, it may have to lay off employees, shut down operations, sell assets or seek bankruptcy.