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Tuesday, July 22, 2008


Pacific Lumber's Headwaters Forest Logging Plan Loses Big-Time at California Supreme Court

July 18, 2008

The California Supreme Court ruled in favor of the Environmental Protection Information Center (EPIC) today in a case stemming from the 1999 Headwaters Deal between the Pacific Lumber Co. and State and Federal governments.

In its ruling the Judges wrote they “reverse the judgment of the Court of Appeal and remand to that court with directions to reinstate the judgment of the trial court insofar as the latter concluded that the SYP (Sustained Yield Plan) and state Incidental Take Permit approvals were invalid.”


UPDATE: EPIC press release below.

California Supreme Court Sides with Environmentalists in Decades-Long Forest Dispute

SAN FRANCISCO – After decades of legal wrangling, environmentalists emerged victorious in a California Supreme Court case that promises improved protection for California’s endangered species and industrial forestlands.

Today’s ruling in Environmental Protection Information Center & Sierra Club v. Department of Forestry and Fire Protection, is the culmination of a challenge to the permits issued as part of the Headwaters Deal in 1999 and centered on endangered species protection and sustainable forestry mandates. It holds state agencies responsible for upholding these protections.

“This is a stunning victory for the environment and for holding government agencies accountable. When agencies won’t do their job and follow the law, the courts will not defer to them,” said Scott Greacen of EPIC. “The California Supreme Court clearly saw that CDF and the Department of Fish and Game weren’t following the law.”

California Supreme Court Justice Carlos Moreno, who wrote the court’s unanimous opinion, ruled that Pacific Lumber failed to turn in a “sustained yield plan” for its Humboldt-area holdings, as required by the Headwaters Agreement. The court also chastised the agency for approving a document that did not actually exist.

The court also ruled that the Department of Fish and Game broke the law by assuring Pacific Lumber that it would not need to do additional conservation if new species become endangered in the future.

The California Department of Fish & Game shouldn’t have agreed to the “No Surprises” provisions, which limited the timber company’s obligation to mitigate certain impacts on endangered species, including the effects of natural disasters. Instead, the court ruled, those who hold endangered species permits must work to “fully” protect these animals and plants, especially if their behavior enhances the effects of natural disasters on animal or plant life.

The state must approve adequate sustained yield plans to ensure companies have enough timber resources to protect wildlife and maintain the local economy, the court ruled.

EPIC and Sierra Club California first filed this challenge to Pacific Lumber Company’s unsustainable plans to endanger Humboldt’s economy and wildlife in March of 1999. In the meantime, Pacific Lumber has gone bankrupt, and its woodland holdings are being taken over by Mendocino Redwood Company, which promised to practice more sustainable harvest practices.

“The impact of this decision will outlast Pacific Lumber itself to create a significant legacy for California’s forests and endangered species,” predicted Paul Mason, Sierra Club California’s Deputy Director. “It requires timber companies and state agencies to protect both the working families and the endangered animals that depend on these woods for their survival.”

A copy of the decision can be found here.


July 17, 2008 California Supreme Court Ruling – Selected Quotes


A. SUMMARY (in the Court’s own words)

“We conclude that one of the challenges to Pacific Lumber’s Sustained Yield Plan (SYP), which, as explained below, is a kind of master plan for logging a large area, is valid, inasmuch as an identifiable plan was never approved. We also conclude, as explained below, that any resubmitted SYP should have an adequate analysis of individual planning watersheds, which the plan as originally approved did not contain. We further conclude that the state Incidental Take Permit, authorizing the capturing and killing of endangered and threatened species incidental to lawful activity, was deficient because it included overly broad “no surprises” clauses limiting in advance Pacific Lumber’s obligation to mitigate the impacts of its logging operations.” (P. 3)

“Petitioners contend there was no single, agreed-upon [Sustained Yield Plan] that has been approved, and that the CDF director’s approval of the SYP must therefore be invalid. We agree…. (E)ven Pacific Lumber and CDF do not appear to agree on what constitutes the final SYP.” (pgs. 34-36)


“There can be no question that approval of a final document that is usable by the government agencies and by the public in monitoring the SYP is required.” (p. 41)


“…the Legislature intended that a landowner bear no more — but also no less — than the costs incurred from the impact of its activity on listed species. To the extent that the changed and unforeseen circumstances provisions of the Incidental Take Permit exempt landowners from this obligation, they exceed DFG’s statutory authority under [California’s Endangered Species Act].” (p. 63)

“This language does not diminish the extent of a landowner’s obligation under
CESA, however, but merely provides that when that obligation can be met in several ways, the way most consistent with a landowner’s objectives should be chosen. It does not relieve the landowner of the obligation to fully mitigate its own impacts.” (p.65)


“The draft HCP established the minimum protective measures to be included in the final HCP — it was to serve as a floor, not a ceiling.” (p. 68)


State Supreme Court Orders New Headwaters Logging Plan

From Staff and Wire Service Reports

The California Supreme Court yesterday overturned approvals by two state agencies of plans for future timber harvesting in the Headwaters Forest on the North Coast of the state.

In what one of the plaintiffs called “a stunning victory,” the high court unanimously rejected the California Department of Forestry and Fire Protection’s approval of Pacific Lumber Co.’s “sustained yield plan” for logging more than 200,000 acres the company retained under the controversial Headwaters Agreement.

The agreement, brokered by Democratic U.S. Sen. Dianne Feinstein in 1996, requires Maxxam Incorporated, which acquired Pacific Lumber in 1986, to sell several thousand acres of environmentally sensitive old-growth redwoods to the government in exchange for permission to log its remaining acreage.

That permission, in turn, was conditioned upon preservation of habitat for the imperiled marbled murrelet and the northern spotted owl, prevention of excessive logging and protection of streams.

The Environmental Protection Information Center in Garberville, the Sierra Club and the United Steelworkers of America sued the state in 1999, 30 days after the state and federal governments signed the $480 million deal to buy the ancient redwood groves.

Violations Alleged

The groups charged that the agencies violated the Forest Practices Act, California Endangered Species Act and California Environmental Quality Act as well various provisions of the Fish and Game Code when they reviewed and approved the long-term logging plan and other permits.

In 2003, John Golden, a visiting superior court judge from Lake County, granted a writ of mandate sought by the petitioners but later allowed the company to proceed with logging pending the appeals court decision. Halting logging would place the entire Headwaters deal in jeopardy, Pacific Lumber warned.

In 2005, however, the First District Court of Appeal said the agency reviews were legally adequate.

But Justice Carlos Moreno, writing yesterday for the high court, said the SYP—a kind of master plan for logging a large area, which by law precedes the adoption of individual timber harvest plans—should not have been approved.

Unlike the Court of Appeal, the high court said it was error for the CDF, in its 1999 determination to approve the SYP, to treat a series of interrelated documents as a single, integrated plan.

Flawed Determiniation

That determination was flawed, Moreno wrote, because it referred to a draft which had been largely superseded by a later EIR; did not specify which portions of the draft it was treating as part of the final plan, what the relationship was between the draft and certain other documents referenced in the determination, or what the department meant in saying that it relied on “additional information provided by” other agencies, including the Department of Fish and Game.

The court also ordered the company, which is owned by Maxxam Inc. of Houston, Tex. to submit new plans addressing how it intended to log near watersheds. The justices said the Department of Fish and Game and the CDF wrongly agreed to protect Pacific Lumber from having to alter its endangered species protection plan if new animals become threatened.

The ruling has little immediate effect on Pacific Lumber’s logging activities in Humboldt County because the company has been operating under a different harvesting plan since a trial court judge first ruled against it in 2003.

The issues are further complicated because Pacific Lumber filed for bankruptcy protection last year in Texas. Last month, a bankruptcy judge there approved a plan, supported by environmentalists and local residents but opposed by some creditors, that would give control of the company to Ukiah-based Mendocino Redwood Co., which has promised to significantly slow tree-cutting. Officials with Mendocino Redwood didn’t return a call for comment.

Scott Greacen, head of the Environmental Protection Information Center, which along with the Sierra Club sued the state and Pacific Lumber, said the ruling will force the state to better consider endangered species protection when approving timber harvest plans.

“This is a stunning victory for the environment and for holding government agencies accountable,” Greacen said.

A spokesman for the Department of Fish and Game said agency lawyers were reviewing the complicated 87-page decision, which did side with the state and the company on a number of other issues, including finding that considering economic and employment issues for the next 10 years, rather than the four years argued in the lawsuits, was reasonable.

The Supreme Court sent the case back to Humboldt Superior Court to figure out what to do next.

The case is Environmental Protection Information Center v. California Department of Forestry and Fire Protection (Pacific Lumber Company), 08 S.O.S. 4221.


The Pacific Legal Foundation is not happy…

California Supreme Court Decision in EPIC

Yesterday the Calfornia Supreme Court issued a decision in Environmental Protection Information Center v. California Department of Forestry and Fire Protection. PLF filed an amicus brief in support of the Real Party in Interest Pacific Lumber Co. (PALCO). The case raised issues under a number of state environmental laws, including the California Endangered Species Act (CESA).

This case concerned an environmentalist challenge to several environmental planning documents pertaining to Pacific Lumber's proposed timber harvesting in the Headwaters Forest. PLF's AC brief argued that (1) the "no surprises" policy of the Department of Fish & Game (DFG)---which allows DFG to provide an incidental take statement under CESA that puts an absolute cap on the permittee's required mitigation---is consistent with CESA's requirement that the negative impacts of a proposed action be "fully mitigated," and (2) the common law public trust doctrine does not extend to nonaquatic habitat and species.

On the "no surprises" issue, the Court ruled that the incidental take statement was illegal because the mitigation cap applied even for harm that PALCO's own timber actions might cause, and not just the harm caused by third parties or acts of God. The Court definitely left open, however, the possibility of a valid no surprises permit that limits mitigation for harm not caused by the permittee's own actions.

On the public trust issue, the Court noted that there are two public trust doctrines in California, one common law (e.g., National Audubon Society v. Superior Court (Cal. 1983), aka the Mono Lake decision) and one statutory, Cal. Fish & Game Code 711.7 ("The fish and wildlife resources are held in trust for the people of the state by and through the department.") (N.B. it's a little misleading to call this a public trust doctrine; it's more the old ex ferae naturae doctrine, i.e., the sovereign owns all wildlife not reduced by capture). The Court rejected the environmentalists' public trust claims: although its reasoning is a little opaque, the Court seemed to articulate the rule that where an activity is alleged to violate the public trust, if there is an existing statutory obligation that is applicable, a court's analysis should be directed to the statute for determining whether any duty has been breached, rather than to the public trust doctrine.

On one major issue that PLF did not address, the Court overturned PALCO's sustained yield plan (governing its planned timber harvesting), on the grounds that "(1) that CDF did not properly approve an identifiable Sustained Yield Plan; (2) that any newly submitted Sustained Yield Plan must include an adequate analysis of the cumulative impacts of Pacific Lumber’s timber harvesting activities at the individual planning watershed level consistent with the Forest Practice Rules and sufficient to support Pacific Lumber’s long-term sustained yield estimate."

The L.A. Times's report, here, overstates the decision's impact.


Supreme Court rules in favor of EPIC in PALCO case

The Eureka Reporter, 7/18/2008

The California Supreme Court issued a ruling Thursday that ends a decade-long legal dispute that environmentalist groups say promises to improve protection for the state’s endangered species and industrial forestlands.

The Environmental Protection Information Center and Sierra Club California filed a legal challenge against the California Department of Forestry and Fire Protection and Pacific Lumber Co. related to the company’s harvest plans as part of the historic Headwaters Agreement approved in 1999.

A trial court ruled in favor of the groups, but was reversed by an appellate court before landing at the Supreme Court in 2006 where it has languished in part, because of a temporary stay in the matter during PALCO’s bankruptcy.

The environmental groups called the ruling a “stunning victory” that holds state agencies responsible for upholding protections whose impacts will outlast PALCO.

“When agencies won’t do their job and follow the law, the courts will not defer to them,” stated EPIC’s Scott Greacen in a news release. “The California Supreme Court clearly saw that (CAL FIRE) and the Department of Fish and Game weren’t following the law.”

In a unanimous opinion, the justices concluded that the environmental groups’ challenge was valid that an identifiable “Sustained Yield Plan” — a master plan for PALCO’s logging — was never approved.

“We further conclude that the state Incidental Take Permit, authorizing the capturing and killing of endangered and threatened species incidental to lawful activity, was deficient because it included overly broad “no-surprises” clauses limiting in advance Pacific Lumber’s obligation to mitigate the impacts of its logging operations,” the ruling stated.

Frank Bacik, vice president and legal counsel for PALCO, said Thursday that the ruling is a legal issue of interest to the state, but not so for PALCO.

“We don’t care about the SYP,” Bacik said, which he indicated was one of three viable options.

While the trial courts invalidated the entire SYP, Bacik said PALCO moved on years ago to an alternative method of demonstrating maximum sustained production under a valid parallel federal permit the state agreed to honor.

“There is never been a challenge to that,” Bacik said.


State Supreme Court gives new protection to endangered species

Commercial interests may be liable for unforeseen losses of wildlife, unanimous court rules.

By Maura Dolan, Los Angeles Times Staff Writer,0,5387802.story

July 18, 2008

SAN FRANCISCO -- The California Supreme Court gave new protection to the state's endangered species Thursday, ruling unanimously that developers, loggers and other commercial interests may be required to compensate for unforeseen wildlife losses.

The ruling, which affects both public works and private development, threw out a long-term logging plan approved by the state for 200,000 acres in Humboldt County, a plan that lower courts put on hold several years ago.

The state high court said the Department of Forestry had approved an "unidentifiable" plan that was still a work in progress and then delegated its completion to the logging company.

Justice Carlos R. Moreno, writing for the court, called the Forestry Department's action illegal and an abrogation of its duties.

The California Department of Forestry "failed to proceed according to law," Moreno wrote.

The decision grew out of lawsuits that followed the historic Headwaters Agreement, a 1996 pact between Pacific Lumber Co. and the state and federal governments. It was designed to resolve litigation and disputes over the logging of old-growth forests.

The battle between loggers and environmentalists centered on land that had been in timber production for 120 years and was home to the marbled murrelet, an endangered bird. After Pacific Lumber was acquired by Maxxam Inc. in 1996, Pacific began cutting down old-growth redwoods at a faster rate to offset Maxxam's debt. The deforestation led to litigation and huge protests.

The pact required Pacific Lumber to sell part of its land to the government for conservation and to obtain environmental permits.

Thursday's ruling ends a long-running battle over those permits but is not expected to unravel the pact. The decision established rules that the state must follow in approving large-scale logging plans or any major development that might endanger wildlife facing extinction.

Environmentalists and labor groups praised the ruling, saying it would help make the state more vigilant before granting permits for environmentally sensitive work.

The decision will help ensure that "landowners fully account for their impacts and the agencies today don't give away the store and bind the hands of future management requirements," said Paul Mason, deputy director of Sierra Club California.

The court said permits allowing companies to kill endangered and threatened species during the course of development should not make the industry immune from having to take future measures to compensate for unexpected wildlife losses.

Although companies need not compensate for species killed in natural disasters out of the industry's control, they must mitigate for wildlife losses when the company's conduct contributed to them or when a natural disaster makes the commercial activity more threatening to endangered wildlife, the court said.

"When natural disasters change baseline conditions, then logging activities that previously would not have had a significant impact on endangered species may now have such an impact," Moreno wrote.

Industry critics expressed fears that the ruling could deter companies from entering into voluntary conservation plans.

Paul Weiland, a land-use lawyer who represented the building industry in the case, said developers might be reluctant to sign an agreement that requires them to compensate for unforeseen losses of wildlife above and beyond what they have been required to spend for mitigation to get the permit.

Permits for the taking of endangered species can be in effect for several decades. Pacific's endangered species permit was for 50 years.

"The question is, who should bear that risk," Weiland said. "People are willing to take on a permit when they feel they understand the risk, but when the risk is unknowable, people are less inclined to do it."

Jonathan Weissglass, who represented the labor industry in the case, said the ruling would prevent agencies from signing off on uncompleted logging plans.

"If agencies were able to get away with what they did here, it would be a complete disaster," he said.

Scott Greacen, executive director of the Environmental Protection Information Center, a Humboldt County-based forestry conservation group, agreed.

"Clearly any sustained yield plan will have to reside in a single document," he said.

But he said the protection of endangered species was an even more important element of the ruling.

"The ruling means the state Department of Fish and Game can't tie its own hands and prevent itself from imposing mitigation in future years if circumstances change and require those measures to protect species," Greacen said.


Bankruptcy judge denies stay in PALCO case

By Nathan Rushton, Eureka Reporter

Published: Jul 16 2008,

A federal judge overseeing the Pacific Lumber Co.’s denied on Tuesday an emergency motion by a creditor group to put a stay in place while it appealed the plan the court approved last week that allows Mendocino Redwood Co. to rebuild the bankrupt timber company.

It was the latest in a string of unfavorable rulings for the Timber Noteholders, who are owed more than $700 million in loans to Scotia Pacific, and were seeking additional money they said they are due because of the devaluing of the 210,000 acres of SCOPAC lands they hold as collateral.

Judge Richard Schmidt did give the financiers enough wiggle room to potentially plead their case to a higher court.

Schmidt did grant the Noteholders its petition for a direct appeal to the Fifth Circuit Court of Appeals of his confirmation order for MRC and Marathon Structured Finance Fund’s reorganization plan, as well as left in place a 10-day stay granted last week that is set to expire July 25.

In addition to a bond in the amount of $176 million needed to provide security to the parties in the case, Schmidt said that if the court were to grant a stay pending an appeal, it would condition the stay on the Noteholders agreeing to facilitate a $30 million loan arrangement for PALCO and SCOPAC and the log discount program the Noteholders agreed to last week in lieu of a bond.

In his conclusions for denying the stay, Schmidt said the Noteholders attorneys didn’t meet the burden for proving to the court its necessity — noting that the issues the Noteholders intends to raise on appeal were already covered during the confirmation hearings.

And to their assertion that there would be irreparable injury to the Noteholders if the stay is not granted because the appeal might become moot if MRC was able to take over and effectively change the company before the appeal was settled, Schmidt said a majority of courts have ruled that’s not sufficient.

Schmidt said testimony during preceding hearings demonstrated other parties will be irreparably harmed if a stay is granted, including a risk that the MRC/Marathon plan could collapse or that put PALCO at risk of being liquidated by creditors recouping their tens of millions of dollars in outstanding loans.

Schmidt indicated that the public interest weighs strongly against a stay pending appeal, given the amount of support for the MRC/Marathon plan by North Coast residents and the bevy of federal, state and local wildlife and other government agencies.

In arriving at his figure for how much a bond should be, Schmidt wrote that he considered the risk that MRC/Marathon’s plan would not be consummated as a result of a stay pending appeal, as well as the impact to various parties in the case.

The Noteholders raising adequate capital to post a substantial bond was not the issue for Schmidt, according to his ruling.

“The Noteholders only asserted that a large bond would be the target for future damage claims that may not be meritorious,” Schmidt wrote. “The very purpose of the bond is to ensure payment of actual damages suffered as a result of a stay and this court will ensure that any such damages claims receive a fair and appropriate hearing.”

Schmidt determined that an appropriate bond amount for any stay pending an appeal of his confirmation order is $141 million, which he based on money due to unsecured creditors, litigation trust funding, various claims, administrative claims, employee bonus plan compensation, an estimated reduction of PALCO liquidation value and money for backlogged road work and potential fines.

Schmidt multiplied that number by 125 percent to reach the $176 million bond number to take into consideration additional risks from the increased harvesting Scotia Pacific executives intended above what MRC’s business model entailed, as well as the risk of losing more key employees, who have left in recent months.

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