The Feds Blinked on Redwood Swap

The Headwaters redwood forest covers 76,000 acres near Eureka. The trees there are among the grandest specimens of Sequoia sempervirens, some at 300 feet tall and up to 2,000 years old. For nearly a century, the forest was managed in a responsible fashion by the locally based Pacific Lumber Co., which had harvested the timber so prudently that tens of thousands of acres of old growth remained from the 180,000 acres that the company had originally acquired.

To the eyes of a 1980s corporate raider, these redwood trees were little more than an nonperforming asset. In 1986, the Houston-based corporate raider Charles Hurwitz, seasoned after attacks on the Simplicity Pattern Co. and United Savings & Loan of Texas, captured Pacific Lumber with the help of Michael Milken and Ivan Boesky. When Hurwitz pounced, Pacific Lumber was debt-free. The takeover left the company--renamed Maxxam--with $700 million in high-interest debt.

As he moved to liquidate the Headwaters forest, Hurwitz faced opposition in a form he had not previously encountered: the radical environmentalists of Northern California. Earth First! demonstrators perched in the trees, and lawyers recruited by Garberville’s Environmental Protection Information Center delayed action.

Meanwhile, Hurwitz faced pressure on another front. His role in the $1.6-billion collapse of the Texas S&L; prompted the Federal Deposit Insurance Corp. to charge him with mismanagement, and the Office of Thrift Supervision alleged that he had engaged in unsound business practices, to the ruin of the bank. He faces potential liabilities of more than $750 million.

Environmentalists have been pushing for a “debt-for-nature” swap. Hurwitz would surrender up to 60,000 acres of redwood forest to the federal government. In return, he would be relieved of his $750-million obligation.

Hurwitz has been playing a skillful game of brinkmanship. He has threatened to “salvage log” Headwaters, beginning Sept. 15. Under court-approved criteria, Hurwitz would be able to haul out fallen giants. No standing trees could be cut. But the notion of Hurwitz’s heavy machinery crashing through Headwaters has been enough to send some green groups into a panicky search for compromise.

Hurwitz issued an ultimatum to the federal government. Since he had been denied the right to log, he would sue the Interior Department for $700 million on the ground that the regulators had “taken” his property rights. The feds blinked.

The Clinton administration has sent out Deputy Interior Secretary John Garamendi to meet with Hurwitz and other Maxxam officials to hammer out a deal. The contours of the bargain are that Hurwitz would relinquish to the feds 4,500 acres of Maxxam property to form a 7,000-acre “core area” of Headwaters. In exchange he would receive federal lands of equivalent value and all federal claims against him would be dropped. Hurwitz also wants exemptions from the Endangered Species Act (which the feds will no doubt give him) in logging the rest of the forest. One of the proposals floated by San Francisco Mayor Willie Brown is that the federal government would give Hurwitz development rights on Treasure Island in San Francisco Bay.

This incredible surrender has campaign-year Democratic politics written all over it. The Clinton administration gets good PR in its efforts to capture the all-important environmental vote. Garamendi amasses political capital for another gubernatorial bid in California. Brown gets high-profile development on Treasure Island. Hurwitz laughs all the way to the bank.

All of these hopes naturally depend on surrender being sold as victory. Standing ready to provide this gloss is Save the Redwoods League, which has said it approves the deal, although it is being fiercely opposed by EPIC and the Sierra Club.

Why didn’t the government go after Hurwitz, hold his feet to the fire and win the 60,000-acre forest as a priceless addition to the public domain? The answer lies in bipartisan consensus of Republicans and Democrats to let the savings and loan debacle vanish down the memory hole.

Among those infuriated at the emerging fix is Dan Hamburg, former representative for the 1st Congressional District (in which Headwaters lies) and now Ralph Nader’s vice presidential running mate. “Clinton never saw a deal he didn’t like two of,” Hamburg fumes. Noting that Clinton and Hurwitz had been photographed together at a fund-raiser in Houston, Hamburg says that if the administration had ever been interested in saving the whole Headwaters forest, it would have acted on his plan in 1993, when Democrats controlled Congress. His bill died and now a phony deal will destroy Headwaters--unless public uproar turns the tide.