Tedium and Action in Corpus Christi

Just as for Shakepeare’s Prospero “Our little life is rounded with a sleep”, so too is the intense drama of the later stages of this bankruptcy proceeding surrounded by a tedium– bursts of glory in the middle of sludge-like hours of inaction where only a robust exercise of will keeps one from visibly napping. I don’t know how the lawyers or the Judge, for that matter, stay awake. (Do they teach a course in Law School about staying awake while bored silly?)

The Tuesday morning testimony of the Indentured Trustee, Chris Mathews, had a humdrum quality sparked only by the curiosity one could mount to see just how partisan a dignified witness could let himself be. He was a man unused to being on public display and showed it. He became more animated only on the subject of Beal and an auction. This was a person clearly enamored, like his fellow note-holder reps, with the notion that only an auction could reveal fair market value—a ‘free market’ approach by which alone could the value of timberland or anything else, I suppose, be righteously established.

Not apparently calculated into these equations is how the practice of forestry in Humboldt County manifests a refined and far more threatening aspect of the concept of “buyer beware”. If it weren’t for the potential damage that a dumb buyer would likely end up doing in our watersheds, we would gladly let the bidders hammer away at their own thumbs. We have an obligation, though, to our well-being to do more than just take our chances with whatever comes down the line.

No matter how badly someone might not want to think of themselves as another Hurwitz, they will walk right into his still-warm shoes if their expectations, and the price they pay, do not allow management consonant with Humboldt ecology, society and history. It is hard to emphasize this fact too much. It was the smooth operation of the free market that brought us the go-go eighties and financial tricksters like Charles Hurwitz and now we know how rationale that process was in terms of its effect on real watersheds and real communities. Like they say, love is blind.

As mentioned earlier, we had returned from lunch, that first of four scheduled hearing days, prepared to sit through the more or less symbolic exercise of PL/Scopac/Maxxam. trying to sell their plan to the Court. They were to present witnesses in support of the administrative dead zone their reorganization plans had become. It was like trying to resuscitate a zombie but it was their turn in the confirmation trial and as the debtors still in possession, they had standing

It was to be PL’s last stab at what the Maxxam Team has truly excelled, literally the trademark of their survival—litigation. The standard elements of this enterprise were gathered; the squad of first-rate lawyers, the expert witnesses nervous outside their professional purview, the PL brass, also slightly at loose ends in the courtroom, the lawyers’ native habitat but not theirs

It was different this time only in scale. All the brass was there, George O’Brien, Gary Clark, Frank Basic, Jeff Barrett. The lawyers were now at full battalion strength. It was a veritable armada, an invasion fleet, the attorneys like sleek, protective destroyers circling the lumbering PL Executive battleships with their big guns, the aircraft carriers with the consulting experts like dive bombers ready to drop their deadly charges of impenetrable data. It was a seasoned attack force on its last mission under the PL flag, steaming toward glorious if tedious battle, obeying a fearsome battle plan that had worked so well so many times on the past.

The only problem was that this time the island they were preparing to invade had long ago been taken. And then, as if to add insult to injury, what had already been reduced to nothing more than a symbolic exercise was suddenly to be cut short. Few in the courtroom were aware of the pathos of the moment or maybe didn’t really care, but by Thursday, we now know, the solid tripartite phalanx of Maxxam’s teams would be broken and shattered, the leadership in disarray, not knowing who exactly they worked for or what their instructions. I suppose there are many workers out there who would say to their ‘maybe’ bosses, “Join the crowd.”

Shelby Jordan, Counsel to the Palco debtors delivered the shock. He led off the afternoon session with his announcement of an impending deal with MRC/Marathon and the possibility of it rendering the PL presentation unnecessary. The Judge granted a continuance until the next morning, Wednesday.

Some in the courtroom were delighted, a delight based on a combination of getting out of school early and the thrill at the possibility that the whole trial could be over by the end of the week, hopefully with an outcome that we could all live with This would have saved a lot of people the time and expense involved in coming back to Corpus Christi. When all was said and done, who really wanted to put in more time than necessary sitting on those handsome but torturous benches just to the watch the PL juggernaut march toward nowhere?

So we came into the Courtroom for the second day, Wednesday, filled with anticipation, ready for a dose of real drama, an antidote to the background level of tedium. We were again let down. Jordan apologetically told the Judge that the parties had been negotiating most of the night but that the deal was not yet complete. The continuance and unnecessary surrender of Tuesday afternoon’s session had not been a waste, he claimed. Headway had been made. It was taking more time than they’d hoped. For sure they’d have something by the end of the day.

There were niggling suspicions on several fronts. Could this be another twist in Maxxam’s oft applied strategy of obfuscation and delay? Were they leading MRC/Marathon on? Were they going to end up back, stronger again, still in the game? For we who for years have felt the bite of Maxxam’s manipulative tactics—common practice, no doubt in some circles—not to be suspicious would be foolhardy. “Fool me once” and all that. Only time would tell.

So we were back to what we had hoped was to be avoided a day of testimony by PL’s expert witnesses and cross-examination. Of all the four days, this was the one where the effort to stay awake hurt the most. The combination of forest jargon, sleight of hand economics and bankruptcy procedural discussion that were parts of the PL effort to sell the unsellable was entertaining if at all only to the well-rested. There were few in the room who could claim to be that. Some had been up most of the night feverishly working on the new “deal” coming down the line.

The expert witnesses were forest valuation professionals, Kim Isles, Don Reimers and Jim Yerges. A fourth witness, Tom Lumsen’s expertise was in corporate finance valuations. His job was to figure out the true cost of various transactions for his clients, few of which had been timber firms. For PL he was to calculate the value to the company’s pending law suit against the State for breach of contract and other violations related to the HCP and the Water Board’s added environmental restrictions.

It was with the three forestry boys that the bankruptcy attorneys proved their mettle. The questions they asked about the practice of forestry and forest economics were of such an informed and complex nature that it could lead one to think that in a pinch one could hire the lawyers to do the forest valuation work themselves. This is one of the appeals of the practice of bankruptcy law. You have to become relatively expert at whole new occupations every case. Many involved in this hearing admitted, though, that forestry was a lot more interesting than most of the other businesses they had to deal with. Imagine the fight to keep you eyes open during a bankruptcy proceeding for, let’s say, a financial services corporation.

(A note on attorney expertise: earlier it had been stated that the lawyers as a whole did an excellent job of learning the basics of forestry and forest economics. It was impressive. There were moments, though, when this capacity for quick study went astray. Pontificating with great certainty on subjects one has only half-understood can reverse progress or at least waste a lot of time.)

The Reimers plan was central because it seems that it was built in good part on one of the more preposterous confabulations related to future value that had been run out during the hearings. It was an idea that for all its absurdity the other two experts seemed to take dead seriously, too.

It is this: you plant genetically improved redwood cultivars over approximately 25% of the Mattole-Bear River unit and maybe a few other other places in 2008 or ’09. In the year 2046 when these trees “mature’ your harvest rate over the entirety of PL lands jumps from the previous 40 year average of around 90 million board feet./year to 165 million. And 99% of that harvest is redwood.

Besides the huge unjustified economic leaps that seem to be required to make this concept work, there is a major ecological issue here. There may be leeway in indigenous mixed stands to emphasize in a replanting program a more commercially valuable species that already exists in the native stands. It’s done frequently and often with good results, but there are limits to what levels of change ecosystems will tolerate without loss of productivity. In this case, the unit they’re talking about is very large and also almost entirely Douglas fir and tan oak ground. To alter species composition so entirely is outright dangerous from the point of view of both biodiversity and guaranteeing return on investment.

There are, of course, solid reasons of biology and climate that the Mattole and Bear River are Doug fir and tan oak. They’ve thrived there for many generations, unimproved and unrepentant. It is high country, hot and dry I[n the summer. You might get a decent stand of redwoods going, but you just as likely might not, and in the process you might lose your opportunity to regenerate a stand of Douglas fir with some value.

This is a radical experiment the results of which are entirely unpredictable. If all or most of the redwood fails or fails to thrive, there goes your plan and those future profits on which you’ve built your calculations of present value. Trying to bank on it today as Mr. Reimers recommends, is a little like betting that the New York Yankees will be win the World Series in 2046 if they moved to, lets say, Corpus Christy, Texas today.

Mr. Lumsen’s contribution to the rational process of establishing value was equally lacking in modesty. He set out to determine what were the combined losses suffered by Scopac and Palco due to the reduction of the allowable cut by new post-HCP regulations of the California Water Quality Board. These losses were to the potential volume of timber that could have been cut in Freshwater and Elk River. The figure Lumsen settle on was approximately

$ 630 million. That’s what he figured the State should owe the company if the State loses the lawsuit. This is far more than the cost of public acquisition of the Headwaters Forest was10 years ago and more than the whole Company is worth now.

A corollary calculation Lumsen made is that without the new regulations Scopac could have harvested 154 million Brd. Ft./year for several more years instead of the paltry 80 to 100 that has since been established as their target. (Remember, MRC plans to cut only 53 million per year the first 10 years if they are confirmed.) This Lumsen is a guy you want calculating the worth of your assexzts, except maybe for tax purposes.

Even if all the regulatory agencies together would have tolerated this, which is very unlikely, Freshwater and Elk River where some of the highest value inventory resides would be producing even more sediment than the already aroused citizenry in the neighborhood could possibly tolerate. The litigation they would no doubt launch would burden Scopac or whoever owns the land with bills for ‘professional services’ (i.e. lawyers and expert witnesses) dwarfing even those for the bankruptcy we are sitting through. The only way the bills could be paid would be to cut trees that are no longer there.

Welcome to the world of Rational Forest Planning. Sounds sustainable to me. Altogether Lumsen and the other witnesses provided a level of expertise that, if accepted and made the basis of management strategy, would guarantee our continued trajectory toward a steep cliff. It’s exaggerations were consistently grand and entirely unachievable. They served, at least, as a reminder of why we need another kind of deal in the woods, one based on candor and modesty. Just the qualities least regularly available among the billionaires who are competing for this property. Can the next one do better? Couldn’t they just all buy Baseball teams instead? I hear there might be one for sale in a few years in Corpus Christi.

So the Company, in its last great show, proved true to its history, propound-ing the irrational in the service of the unjustifiable. The background level of tedium this process and it pointless testimony and cross-examination produced in the courtroom that day was also true to form. That tedium, though, would have been instantly blown away had anyone realized who the group of people were that walked quietly into the courtroom late in the day and took seats in the audience.

Red Emerson, California’s largest private landowner and head of Sierra Pacific Industries had come unannounced and unrecognized to Corpus Christi with his son, Mark and several advisors. Part of this team, San Francisco-based forest investment consultant, Jim Rinehart and another attorney, had arrived the day before. In the hall after the day’s proceeding, Sandy Dean of MRC greeted the whole entourage with a warmth that might have taken an effort to muster. The odds that Thursday was going to be less dull had just improved considerably.

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2 Responses to “Tedium and Action in Corpus Christi”

  1. Hardware IT Blog » Blog Archive » Tedium and Action in Corpus Christi Says:

    […] Talk To Action: […]

  2. Farmer Says:

    PL has already planted several areas with Redwood in the Mattole and Bear River. I think it’s a terrible idea. Responsibly managing the existing stands/species with light selective logging and staying out of the remaining Oldgrowth seems the best to me. Sadly, I wouldn’t be at all surprised if Mendocino Redwood Company went for the redwood plantation strategy.

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