By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
By Jesse Marx
One of the most lucrative and environmentally destructive deals in the history of the forest products industry was closed recently with the unfurling of an enormous golden parachute for a $2 billion a year timber company courtesy of the federal treasury. On Feb. 21, the Clinton administration capitulated to the legal threats of the Louisiana-Pacific Corporation by agreeing to pay $250 million to settle a lawsuit over the federal government's cancellation last year of the company's long-term contract to log timber on the Tongass National Forest in Southeast Alaska.
The buyout may have been linked to the confirmation of Federico Pena, Clinton's choice as Secretary of Energy. The nomination had been held up by Alaskan Sen. Frank Murkowski, chairman of the Senate Committee on Energy and the Environment. Sources in the Senate say that Murkowski, who has been a virulent critic of the administration's environmental policies, threatened to block Pena's confirmation unless Clinton agreed to settle the Louisiana-Pacific lawsuit and guarantee higher levels of logging on the Tongass over the next five years. Pena's nomination was approved by Murkowski's committee the same week the Clinton administration announced the Louisiana-Pacific deal.
More than $140 million of the settlement will go directly into Louisiana-Pacific's corporate coffers. The remaining $110 million is scheduled to be distributed to local communities in Southeast Alaska for the retraining of nearly 400 workers laid off from the company's closed Ketchikan pulp mill, although this portion of the deal must await Congressional approval. In addition, the Forest Service agreed to provide Louisiana-Pacific with a steady flow of old-growth timber from the Tongass for the next three years. A large portion of that timber will come from ecologically significant stands of old-growth forest on Central Prince of Wales Island near Ketchikan, which the Forest Service's own biologists have said should not be logged because of adverse impacts on salmon and the rare marbled murrelet, a forest-nesting seabird.
The payoff caps a 40-year run in Southeast Alaska, where the company was granted exclusive rights to log off more than one million acres of temperate rain forest on the fog-enwrapped islands of the Tongass, America's largest national forest. The Ketchikan mill, owned for the past 25 years by Louisiana-Pacific, was the beneficiary of an extraordinary deal hatched by the Forest Service back in the late 1950s. As an inducement to create year-round jobs in remote Southeast Alaska, the Forest Service offered exclusive contracts to log old-growth timber off of the Tongass rain forest for minimal costs to any companies that would build pulp mills in Southeast Alaska and operate them year-round.
By 1954 two pulp mills had been built in the region, one in Ketchikan by the Ketchikan Pulp Company, formerly owned by the gold mining giant FMC, and one in Sitka, controlled by a consortium of Japanese companies, including Mitsubishi and Sumitomo, operating as the Alaska Pulp Company.
The Ketchikan mill produced a bizarre assortment of pulp products, including rayon, fiber for disposable diapers, nitrocellophane explosives, food fillers, and sponges. The Sitka mill mainly produced pulp for newsprint. After pulp prices took a nosedive in 1993, the Alaska Pulp Company closed its Sitka mill and the Forest Service terminated the company's contract. The Japanese-owned company then filed suit in federal claims court seeking nearly a billion dollars in damages. The Alaska Pulp Company suit remains unresolved.
According to informants inside the Portland, Oregon-based company, Louisiana-Pacific had been attempting to unload the Ketchikan pulp mill for at least the last two years. When Louisiana-Pacific could find no buyers, the company shut the mill down, blaming the closure on the Forest Service for failing to provide enough timber at cheap enough rates to keep the mill running. The company also repeatedly lashed out at environmentalists, charging that efforts to protect old-growth forest stand and wildlife on the 16-million acre Tongass forest had created "a climate of uncertainty" over future timber cut levels.
Yet most timber industry economists say that the real problem for Louisiana-Pacific had to do with the changing nature of the pulp market. Pulp prices, always erratic, have plunged to new lows over the past three years and, despite a few temporary spikes upward, have stayed depressed. Increased recycling, cheaper mills built in Mexico and China, and staggering environmental liabilities are only some of the factors undercutting the economic footing of aging pulps mills in the United States.
This situation was compounded for Louisiana-Pacific by the fact that the Ketchikan mill's equipment is outdated, inefficient to operate, and hazardous to workers and the environment. For nearly 40 years, the mill has flushed 5 million gallons of dioxin-laced wastewater into Ward Cove every day. Ward Cove, an inlet north of Ketchikan, was once a vibrant estuary filled with salmon, steelhead, humpback whales, and orca; now it's a toxic dead zone. The company has not had a valid air permit for the mill since 1990. In the last five years, the Ketchikan mill has been hit with more than $6 million in fines for violations of clean air and water laws. In 1994 FBI agents raided the company's offices and seized thousands of pages of documents. As a result of this investigation, Louisiana-Pacific was convicted on felony charges of falsifying pollution reporting data.