Headwaters: What's the Deal?

After a decade of haggling over Headwaters Forest, the federal-brokered deal with logging tycoon Charles Hurwitz comes down to California lawmakers.

Plus: Up a tree with Earth First! tree-sitter Julia "Butterfly" Hill

| Tue May. 26, 1998 12:00 AM PDT

A 1,500-year-old redwood tree is a silent citadel, hushed and regal among compatriots in mossy courts of ancient forest. Deep in the green, woolly arbor called Headwaters Grove, rare ancestral stands of Sequoia sempervirens exhale an emerald light. The grove rises in silence, enshrouded by silence, apparently ignorant of the noisy and protracted human conflict which has raged for more than a decade over its existence.

Will it be the axe or salvation for these trees and the wildlife that depends on them? The California legislature may decide as early as this week.

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Environmental groups in California continue to cry foul over the deal Sen. Dianne Feinstein (D-Calif.) has been hammering out with the Clinton Administration and logging tycoon Charles Hurwitz for almost two years. At the same time, John Garamendi, who just left his position as deputy secretary of the Department of the Interior and President Clinton's point man on Headwaters, warns it's this deal or no deal for Headwaters.

Crown Jewel
After a stunning loss of green mass which has taken place almost exclusively in the last 50 years of human existence, today less than one-quarter of the world's ancient forests remain standing. California is no exception; it's a textbook case. Two million acres of ancient redwood forest once ran the length of Northern California in a lush carpet of 300-foot-tall giants; today only 3 to 4 percent remains. Headwaters Grove and five other ancient redwood groves owned by the Pacific Lumber Company comprise roughly half of what's left; activists call the area the last unprotected ancient redwood ecosystem in the world. The fate of these precious scraps now looms large as a federal-brokered deal with Charles Hurwitz, CEO of PALCO's parent company, Maxxam Corp., blunders toward final approval in the California legislature.

While there are plenty of other forests in need of protection, Headwaters has emerged as the crown jewel of the forest protection movement in the West. The greater "Headwaters Forest" under current consideration is 60,000 acres of both old-growth and second-growth forest owned by Pacific Lumber. (PALCO owns roughly 200,000 acres of forest in Northern California, much of it nestled between current redwood preserves.) The 60,000-acre Headwaters area contains six ancient redwood groves harboring millennia-old trees, totaling approximately 6,000 acres, including the famed Headwaters Grove of 2,800 acres.

Because of its unique status as an old-growth forest, and its dense and varied ecosystem—and because of Hurwitz's notoriety as the man who gobbled up PALCO and before that, oversaw the collapse of a Texas savings and loan—there are now more people working on Headwaters than you can shake an ancient redwood stick at.

The Headwaters struggle involves direct action groups like Earth First!, more mainstream groups like the Sierra Club, and tiny but potent nonprofits in California's redwood country like the Environmental Protection Information Center (EPIC)—as well as the Federal Deposit Insurance Corp., the Treasury Department's Office of Thrift Supervision, one disgruntled ex-employee of PALCO, entertainers Woody Harrelson and Bonnie Raitt, former California governor Jerry Brown, a coterie of San Francisco synagogues, the coho salmon, and a small endangered seabird, the marbled murrelet.

Tensions around Headwaters sometimes reach bizarre and disturbing breaking points, as when Humboldt County sheriffs used cotton swabs to dab pepper spray directly into the eyes of immobile protesters on three occasions last fall, one of them caught on videotape in the offices of Rep. Frank Riggs (R-Calif). In 1996 more than 1,000 protestors were arrested at the largest forest demonstration in the history of the environmental movement, estimated at 6,000 (see photo); in 1997 that record was shattered by a peaceful protest of 9,000, with only two arrests. And today, Earth First! activist Julia "Butterfly" Hill [see our interview] is spending her 168th day of a record-breaking tree-sit, living in an ancient redwood 180 feet above the forest floor on Pacific Lumber land and vowing to stay there until she's done all she can to focus public attention on saving Headwaters.

Deal with the Devil?
How did it come to this? The story begins back in the 1930s, when the Pacific Lumber Company curtailed its logging dramatically, and then ceased clearcutting almost entirely, operating under a forestry plan that seemed somewhat compatible with the venerable nature of its property. It was as close to a sustainable harvest as anything the state had seen.

Enter Charles Hurwitz, whose holding company, Maxxam Corporation, bought PALCO in 1985 a hostile takeover of questionable legality financed by Michael Milken and the now defunct junk bond sales firm Drexel Burnham Lambert. In order to pay off bonds, Hurwitz liquidated PALCO assets—including much of the employee pension fund—and stepped up liquidation of its most precious resource: redwood trees, the largest of which are ancient, extremely dense, and worth up to $150,000 each as high-grade, "clear heart" lumber. Maxxam more than doubled the cut rate in PALCO forests, resumed clearcutting and, according to at least one former employee now suing the company, abandoned safety measures, endangering workers. Other charges against PALCO include falsifying endangered species documentation, swamping rivers and streams with silt, violating a host of labor and forestry regulations, and inviting mudslides, including one near PALCO mills a year ago that wiped out several homes in the small village of Stafford.

Add to all this the fact that Hurwitz is implicated in one of the largest S&L bailouts of the 1980s as chairman of the holding company controlling United Savings Association of Texas, one of the most expensive S&L failures in the country. The belly flop at United Savings cost taxpayers $1.6 billion, and most environmentalists think Hurwitz should pay his portion of that amount back with Headwaters—all 60,000 acres of it.

Instead, Feinstein and President Clinton propose to pay Hurwitz $380 million for just 7,500 acres of old-growth and surrounding forest, in exchange for Hurwitz agreeing to abide by a hotly disputed Habitat Conservation Plan (HCP) covering all of PALCO's forest lands. Clinton approved the federal share of the deal for $250 million last year, couched in an ecologically controversial Interior appropriations bill. Now, after exhaustive negotiations with Hurwitz, California is expected to pony up the remaining $130 million—a daunting proposal when, as yet, none of the environmentalists working on Headwaters support the deal.

Habitat Conflagration
Environmentalists have never actually supported the Feinstein-Clinton plan to purchase just 7,500 acres of Headwaters, yet Garamendi and others who helped author the proposal seem surprised and dismayed by current resistance. "It's been a fifteen-year fight, and more and more trees have been cut in the process," says Garamendi. "If not this deal, then what?"

Environmental groups see the deal differently. They say the Headwaters HCP—which outlines Pacific Lumber's responsibilities for ancient groves, endangered species, and species habitat across company property—is a grave threat to the state's coho salmon, and a dangerous precedent for future agreements.

Opposition to the Headwaters HCP begins at the root of federal HCPs themselves, which environmentalists see as diluting the provisions of the Endangered Species Act to suit the desires of developers and land owners. According to at least one wide-ranging academic study of HCPs by the National Center for Ecological Analysis and Synthesis, the criticism may be justified; over half of HCPs lack adequate monitoring provisions and few are designed to restore endangered species to former populations. The Headwaters HCP may well become the most famous HCP of all, and environmentalists fear its low standards will become a model for other logging operations.

"In general, HCPs give owners license to kill in exchange for limited mitigation," says Kevin Bundy of EPIC. "This HCP is basically an experiment with extinction." Bundy and other enviros believe rigorous enforcement of the current Endangered Species Act would protect forests like Headwaters better than HCPs.

"Bullshit," says Garamendi. "That's utter and total bullshit. Under this deal, the PALCO land will not be cut. Under the ESA, they can take down timber after summer nesting season [for the marbled murrelet]."

One of the hottest disputes over the Headwaters HCP involves not the murrelet, but the "buffer zones" around streams and creeks across Pacific Lumber property which shelter spawning coho salmon, recently listed as a threatened species. Logging too close to streams chokes them with silt, wiping out salmon. EPIC and the Sierra Club claim the buffer zones in the Headwaters HCP fall dramatically short of the minimal federal guidelines established by Bill Clinton for fish-bearing streams; the deal would let PALCO log within 10 feet of many perennial streams, and within a scant 30 feet of salmon streams. "Federal guidelines are nearly 20 times more protective," says the Sierra Club's Rosen. "The HCP buffer zones are so severely deficient, it's uncanny."

Some government biologists argue that the federal standards were designed for public property, not for a tricky deal with a private landowner on a smaller piece of land, land which Jim Lecky, a National Marine Fisheries Service biologist working on the HCP, warns would otherwise be threatened by surburban sprawl. "If we established [the Clinton] guidelines [in Headwaters], the company wouldn't be able to remain economically viable. They'd have to sell off to developers who would build mini-malls and subdivisions on it."

Enviros also observe that the HCP is limited in time and scope, mandating most of its protections for only 50 years. "That's just nothing in the life of a forest like this," says Rosen.

Despite warnings from California that the deal stands on shaky ground, federal backers including Garamendi claim total satisfaction with the HCP in its raw form, and have expressed as much to California legislators. They point to broad regulations which go beyond buffer zone habitat. "As far as I'm considered, the deal is done and we're now basically in escrow," Garamendi asserts.

Statehouse Scramble
Ultimately California will decide whether the deal is done, and the moment of truth is fast approaching. In the state legislature, Democratic lawmakers Sen. Byron Sher (D-Palo Alto) and Rep. Carole Migden (D-San Francisco) face heat from Feinstein as they question the recently published "principles" of the draft HCP. In March, Sher and Migden warned that without major revisions of the HCP and the ensuing support of California environmental groups, neither a bill nor a bond measure saddled with the Headwaters HCP had a spotted owl's chance in the state assembly. (In March 1999, all approved federal funds for the deal will fly back to Washington, where, Clinton Administration reps warn, legislators from other states will be pleased to figure out what to do with the money.)

While Migden and Sher—both from Northern California—have been depicted as deal-blockers for raising questions, Migden's chief of staff Dan Reeves observes that no one from the state legislature was even invited to help the feds develop the HCP. "They were naive to think we'd embrace it," says Reeves. "We're not in the business of rubber-stamping deals and paying out checks without understanding what we're getting."

It's not just the firebrands who dislike the current Headwaters deal—California legislators have been staying away in droves, says Reeves. "The only people lobbying for [the HCP] is PALCO. The Democrats are out because there's no environmental support, and what's ironic is that the Republicans are out because they support Hurwitz's full right of ownership."

Migden and Sher's initial roadblock was short-lived: On May 11, California Gov. Pete Wilson announced a $4 billion surplus in this year's state budget and proposed that $130 million of it go to financing the state's portion of the Headwaters deal. He had previously proposed financing it with bonds; the legislature still must approve the appropriation with a two-thirds vote, but now it will become part of this summer's regular budget process. Migden and Sher initially warned that the deal wasn't strong enough to muster a two-thirds vote, but now, with Wilson's proposal to pay in cash, Midgen says she won't hold up the budget to protest the Headwaters deal.

"Some of us would have preferred more protections," Migden told the San Francisco Examiner last week, "but politics is a process of compromise." Midgen's office says she wishes the deal could be a little better, and she hopes the federal government and PALCO will reexamine the proposed HCP and take into account environmentalists' concerns during the 90-day public comment period after the HCP is issued next month.

Sher continues to fight to fix the HCP. Last Tuesday two budget subcommittees, headed by Sher in the Senate and Virginia Strom-Martin in the Assembly, voted to cut the Headwaters appropriation out of the budget bill and put it in a stand-alone "trailer" bill that would add several improvements to the HCP to protect the threatened coho salmon, among them widening the buffer zones to 100 feet for ordinary streams and 170 feet for salmon-bearing streams. The vote will be followed by action in the full budget committees this week.

Environmentalists support Sher's bill; last Thursday, several environmental groups including Sierra Club and EPIC sent a letter to the legislature urging it not to approve Wilson's appropriation without the trailer bill. "We don't want California writing another blank check to Charles Hurwitz," says the Sierra Club's Rosen. If the trailer passes, she says, "it's a significant improvement" to the HCP.

Fox Guarding the Henhouse
Even if California approves an improved version, environmentalists remain deeply suspicous of the HCP process—and even more suspicious of PALCO's ability and desire to self-enforce any sort of environmental regulation. Already they charge that PALCO has filed recent timber harvest plans which violate the impending HCP agreement.

There's no question that PALCO has a history of flouting the law. The Headwaters deal stops and starts its way through the California capitol against a backdrop of hundreds of PALCO forestry violations. More than 100 such violations from 1995 to 1997 prompted state officials to revoke Pacific Lumber's logging license at the end of last year, though the license was quickly reissued under a stipulated agreement. "New ground rules," explained a state forestry spokesperson. "They have promised to be good boys."

PALCO's promises carry little weight with environmentalists. The company has faced a string of continuous endangered species and forestry violation lawsuits sponsored by EPIC and the Sierra Club; the two recently filed another ESA lawsuit against charging the company with threatening coho salmon habitat through "irresponsible logging practices."

PALCO spokeswoman Mary Bullwinkle, who confirms PALCO's continuing support for the deal, explains: "Mistakes are made. We are only human. The laws are always changing, and we have 200,000 acres of forest land."

Return of Debt-for-Nature?
In the meantime, rumors abound that Charles Hurwitz is becoming increasingly fed up with the neverending Headwaters story, and may be reconsidering the possibility for a "debt-for-nature" swap many had given up on years ago. According to Jill Ratner, president of the Rose Foundation, a nonprofit dedicated to a debt swap for Headwaters, Charles Hurwitz approached the federal Office of Thrift Supervision even before the release of the HCP principles about exactly such a swap. Maxxam spokesman Bob Irelan maintains the company's long-standing position that "there is no debt to swap"—but John Garamendi grudgingly confirms that "there have been discussions" about debt-for-nature at the federal level.

Hurwitz and his Maxxam Corp. currently face a series of billion-dollar lawsuits based on the failure of United Savings Association of Texas. Hearings for the OTS suit are set for mid-June. "The ball is in the company's court," says Ratner, who engages in Maxxam shareholder outreach on debt-for-nature, attempting to persuade the company to save the forest for the fees. "It's very much in the company's interest to get these things settled."

Ratner still has hope that the Headwaters Forest may emerge intact after all, pending the successful resolution of three ongoing "deals" for Headwaters. If the California legislature can redeem the HCP in the eyes of enviros, if debt-for-nature becomes a reality, and if one California foundation confirms rumors it may purchase some of the ancient forest, Ratner believes Headwaters—nearly 60,000 acres of it—still can be saved.

If so, a struggle that's raged for more than a dozen years and involved well over a dozen organizations and institutions, which has inflamed passions and inspired tree sitters, bridge climbers, and rabbis, may yet see a happy ending. "And that," says Ratner, "would be quite an event."

Ami Chen Mills is a San Francisco-based freelance writer.

Additional reporting by Monica Mehta

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