Hole in Headwaters
A Convoluted Tale of Political Intrigue

The following article was published in the Sacramento Bee on June 26, 2001.

"Headwaters Forest deal continues to echo in state government"

By Dan Walters

When state and federal officials, including Gov. Gray Davis, negotiated a $480 million purchase of old-growth redwoods on California's North Coast 2 1/2 years ago, it seemingly ended years of bitter political debate and confrontational demonstrations over the much-storied Headwaters Forest.

Not quite.

It was a terrific deal for Houston-based Maxxam Corp., which had taken over Pacific Lumber Co.'s extensive redwood holdings in Humboldt County. It gave up a tiny portion of its timberlands -- which probably could not be logged anyway -- but was paid half of what it had spent, in junk bonds, to acquire all of PL's 200,000-plus acres of timber in the first place.

One portion of the agreement essentially gave PL the right to extract around 200 million board feet of timber each year from its remaining lands. One timber stand the company wants to cut is a 705-acre parcel called the "hole in the Headwaters" because it's surrounded by trees protected under the Headwaters deal. And that plan is the genesis of a convoluted tale of political intrigue.

The North Coast Regional Water Control Board, which said runoff from past logging operations in the area was already creating sediment pollution of Elk River, criticized logging plans. And on March 28, Lee Michlin, executive director of the regional water board, ordered PL to monitor Elk River water quality before and during logging operations. PL executives were incensed, seeing it as a violation of state law giving the state Department of Forestry and Fire Protection primary oversight over timber cutting.

Shortly thereafter, Michlin was forced out of his position by a newly appointed regional board majority headed by Chairman Daniel Crowley, a Santa Rosa lawyer. One of Crowley's associates at the law firm is Doug Bosco, a former North Coast assemblyman and congressman who has emerged in recent years as an influential conduit to the Davis administration. Bosco has raised and contributed substantial amounts of money to the governor's $30 million campaign war chest and has been a lobbyist for PL, which also has contributed substantially to the governor.

After Michlin's departure, Craig Johnson became acting executive director and continued policies PL considered to be hostile, including a request to the Water Resources Control Board to intervene in the still-pending "hole in the Headwaters" logging plan. But Crowley then told the state board -- in a note on his law firm's stationery -- he was countermanding Johnson's request for intervention because it was "done without consulting me or the vice chairman.

[EPIC note: This did occur, but for a different logging plan than the Hole in Headwaters. The staff of the Regional Board requested a Head of Agency Appeal from the State Board on a California Department of Forestry's approval of a Pacific Lumber logging plan within the Shively Creek watershed.]

In the meantime, a group of Elk River landowners had joined forces with environmentalists to oppose the PL logging plan, and through its lawyer, the coalition began complaining about the apparent conflict of interest in Crowley's involvement with PL, given his law firm's connections with PL lobbyist Bosco. Crowley has denied any improper influence.

The conflict has generated reams of filings, and on Monday, three members of the state water board -- there are two vacancies -- began two days of hearings on PL's appeal of Michlin's March order. A Sacramento hearing room was filled with dozens of lawyers, bureaucrats, local residents and timber industry executives -- the latter because the case is seen as a potential regulatory precedent.

The board is dominated by Davis appointees, including former Assemblyman Richard Katz. And how it votes not only will determine this matter and the larger issue of who can intervene in logging cases, but also may reveal how far the administration will go to help interests that contribute heavily to the governor's campaign treasury.

State resource managers are still angry over a January 2000 meeting -- attended by PL's chief lawyer -- in which Susan Kennedy, one of Davis' top aides, reportedly told the bureaucrats to "back off" on their regulation of the company's logging plans. One attendee described it as "a public whipping," according to Public Employees for Environmental Responsibility, a group that protects whistle-blowers.



This article can be found online at www.wildcalifornia.org/publications/article-35