Posted at 1:21 a.m. PST Tuesday, March 2, 1999

BY PAUL ROGERS
Mercury News Staff Writer

In a stunning last-minute reversal, the Pacific Lumber Co. and government negotiators late Monday night reached agreement on a $492 million deal to preserve the world's largest remaining groves of old-growth redwood trees in private ownership.

The agreement has the potential to end 15 years of bitter timber battles along California's north coast between environmentalists and Pacific Lumber, the 130-year-old logging company based 15 miles south of Eureka. Under the deal, the public will acquire more than 10,000 acres of redwoods and the company will accept a host of logging limits on the remainder of its lands for 50 years.

There were no details available at 12:30 a.m. today -- half an hour after an intractable midnight deadline from Congress had passed. But both sides praised the late developments.

``Three years ago we set out to preserve California's Headwaters forest -- the world's largest unprotected stand of old growth redwoods,'' said President Clinton in a statement. ``Today we achieved our goal.''

Papers were filed in the Humboldt County Courthouse at 11:58 p.m., according to the U.S. Department of Interior.

"These redwoods are a natural treasure, as much a part of our legacy as the world's great libraries and cathedrals,'' the president added.

Company officials were exhausted but elated.

``We have a deal,'' said Bob Irelan, a spokesman for Maxxam Inc. of Houston, the parent company of Pacific Lumber. ``We're very pleased.''

Irelan said the boards of Pacific Lumber and Maxxam voted unanimously at about 11:55 p.m. to approve the deal.

A true compromise

``The final agreement is truly a compromise,'' said Pacific Lumber Co. President John Campbell. ``Years of work went into this agreement but it was worth it.''

The deal came as a victory not only for the Clinton administration but for new California Gov. Gray Davis, who last week demanded a strict, 50-year contract holding the company to rigorous environmental standards.

``I'm delighted the Pacific Lumber Co. accepted this agreement,'' said Davis early this morning. ``Let me express my profound belief that preserving and protecting our environmental heritage is one of the great responsibilities of our generation.''

Some environmentalists were worried the deal might not go far enough.

``It seems that once again last-minute concessions and compromises may jeopardize the endangered species of Headwaters forest,'' said Keven Bundy, a spokesman for EPIC, The Environmental Protection Information Center in Garberville. ``We'll be reviewing the final documents and the legal means at our disposal.''

But other environmentalists were more upbeat.

``Remarkable,'' said Jay Watson, California-Nevada director of the Wilderness Society. ``I'm delighted that the emerald heart of the Headwaters Forest is going into public ownership. I hope this brings some closure to the issue. It's been a long and contentious road.'' A key sticking point in the desperate talks was a dispute over the volume of timber the company could remove on the bulk of its lands over the next decade.

The diplomatic logjam captured the attention of Vice President Al Gore during a visit through Oakland to discuss economic development.

``We think what was proposed is good for the American people, good for California, good for the environment and good for this company,'' Gore told the Associated Press. ``I hope they'll change their minds.''

State officials said they, too, were holding firm. ``The state's position has not and will not change in the final hours,'' said Steven Glazer, a spokesman for the California Resources Agency.

A flash point of controversy for more than a decade, the trees, some towering more than 300 feet tall, are the world's largest groves of old-growth redwood left in private ownership.

Battle began in '85

The timber battles began in 1985 when Texas financier Charles Hurwitz acquired Pacific Lumber in a hostile takeover. Hurwitz doubled the rate of logging to pay off nearly $900 million in junk bonds, sparking protests that resulted in more than 1,000 arrests and at least one fatality.

If the deal had collapsed, the ancient trees were not in danger of being cut immediately. They are protected by the federal Endangered Species Act because certain rare animals, including coho salmon and the marbled murrelet, a diminutive seabird, live among them. However, there would have been no public ownership, and a new round of timber wars between environmental activists and the company seemed certain to erupt with each timber plan the company attempted on its lands.

In a turn of events seemingly scripted as a Hollywood drama, attorneys representing the state government, federal government and Pacific Lumber Co. sat for much of the day in a title company office in Eureka, only a few blocks from the Humboldt County Courthouse, while other officials in Texas, Washington, D.C., and Sacramento argued over the telephone.

The attorneys carried armloads of escrow documents and legal papers. All were ready to be filed with the Humboldt County Recorder's Office before the stroke of midnight, in case the impasse could be broken. The state's $242 million share of the deal and the federal government's $250 million share also sat in an escrow account at the ready.

``People have put in so much work, they don't want to look back and say, `Suppose we would have made one last attempt,' '' said Tim Ahern, a spokesman for the U.S. Department of Interior.

Humboldt County Clerk and Recorder Carolyn Crnich was on call, ready to reopen the office after-hours on a moment's notice to beat the looming deadline.

``Our general office hours are until 5 p.m.,'' she said. ``However, considering the magnitude of this particular situation, we're going to make some special accommodation if we are asked to come in after business hours.''

What was at stake was one of the most expensive parkland deals in U.S. history, negotiated over three years of talks.

Under the terms of the deal, already approved by Congress and the state Legislature last year, the public will pay $492 million to buy 10,071 acres of redwood from Pacific Lumber, based in Scotia.

Roughly half is old-growth, with some trees dating back 2,000 years. Logging also will be banned in 12 ``lesser cathedrals'' totaling 7,000 acres. And a habitat-conservation plan to set rules for logging on the entire 211,000 acres of Pacific Lumber property for half a century will be imposed.

There appeared only the most remote chance that the deal could be salvaged before 11:59 p.m. Monday -- the iron-clad deadline from Congress when the $250 million federal share of the money expired.

Feinstein brokered deal

U.S. Sen. Dianne Feinstein, who brokered the deal, had said she would not seek it again.

Ironically, the company and the government lawyers even debated what ``midnight'' meant. There was some talk that the 11:59 p.m. deadline referred to Eastern Standard Time, but it appeared that those arguing it meant Pacific Standard Time -- three hours later -- had won out.

On Friday, Pacific Lumber President Campbell said government officials had imposed conditions that were too rigid on the habitat-conservation plan for the company's complete holdings.

``The terms insisted upon by the state and federal governments would have cut our operations nearly in half, forcing hundreds of employee layoffs,'' Campbell said. ``We could not agree to that.''

Of particular concern was a provision added in January by two agencies -- the U.S. Fish and Wildlife Service and the National Marine Fisheries Service. That section said that the company could not log within 30 feet on either side of ``Class 3 streams.'' Such streams are dry much of the year and only flow during wet weather. The limits -- which several prominent university salmon biologists said were critical in limiting siltation and erosion -- would have placed an additional area of between 17,000 acres and 23,000 acres off limits.

Campbell said the company needed a guarantee it could cut 210 million board feet of timber a year to remain profitable. But after the final stream limits were imposed, the state Department of Forestry and Fire Protection late last week released an estimate saying that only 136 million might be cut annually.

Trying to save the deal, federal fisheries officials wrote a letter Saturday to the state saying that 179 million was a more accurate estimate.

Earlier Monday, shares of Maxxam Inc. plummeted more than 18 percent on the news the deal could well collapse.

Maxxam shares fell 10 5/8 to at close 47 7/8. Trading volume was 11 times its three-month daily average. The deep drop gave Maxxam -- which also operates real estate investments and controls Kaiser Aluminum -- the second-biggest percentage loss of any stock traded Monday on the American Stock Exchange. At one point Monday morning, American Stock Exchange officials halted trading for two hours.