Failing forestry: The $1 billion lawsuit that could decide the
fate of Oregon’s state forests
By Ted Sickinger| The Oregonian/OregonLive
October 27, 2019
Twelve people in Linn County are about to decide, for all Oregonians, how we value state forests.
It’s not about selling them, but how the state balances the need for logging
revenues against other social and environmental benefits the forests produce.
In a trial that started Thursday, jurors are considering whether the state breached a contract it made with 15 rural counties in 1941, and if so, how much it owes them.
Eighty years ago, counties began deeding 600,000 acres of burned, logged and unproductive forests to the state. In return, the state agreed to rehabilitate them, protect them from wildfire and share logging revenues. Today, the 15 “trust land counties” receive two-thirds of all state timber sale revenues – money they depend on to fund public services.
But 14 of those counties now claim the state has shortchanged them for two decades, since the Oregon Department of Forestry adopted new forest management rules. Counties claim they’re owed $1 billion because Oregon failed to maximize logging on the land.
Depending on who you listen to, the lawsuit is either a land grab financed by the timber industry, or an effort by rural counties to get what they were promised before radical environmentalists took over the state.
For the troubled forestry department, it’s a major management distraction and a financial drain that’s already cost $2 million.
Legally, the lawsuit turns on one question: What did legislators mean eight decades ago when they enshrined in statute that the forest lands should be managed “to secure the greatest permanent value of such lands to the state of Oregon.”
Practically, it’s about whether 729,000 acres of state forests should be operated more like tree farms or managed to provide a broader set of benefits, including habitat for fish and wildlife, clean air and water, scenery and recreation.
If Oregon loses – and the litigation and appeals could go on for years – it could be hugely consequential, both in terms of the physical impact on forests that belong to all Oregonians, as well as the wealth transfer to a few counties by taxpayers around the state.
A settlement is possible. But last-ditch mediation this summer produced no agreement, and the state has shown no signs of caving to date.
Both the governor’s office and the forestry department declined to comment on the suit. But the agency is developing a new forest management plan, one designed to deliver a broad set of environmental and social benefits. Officials say that plan isn’t likely to increase logging levels.
The 14 counties can live with that, as long as taxpayers elsewhere pay up.
“We’re not telling them they have to manage (the state forests) differently,” said John DiLorenzo, the counties’ lawyer, whose Portland firm stands to earn 15 percent of any monetary award. “But we’re telling them that if they manage in a way that violates the contract, they owe us money.”
Hampton Lumber sources most of the logs for its Tillamook Mill within a 100-mile radius. Up to 35% comes off the Astoria, Tillamook and Forest Grove state forest districts, which together comprise about 600,000 acres. ThatÕs less than 3% of all forest land in the state, but for mills in Northwest Oregon, they are a critical and steady source of supply. September, 2019 Beth Nakamura/Staff Mills rely on state timber
It’s well into the first shift at Hampton Lumber’s mill in Tillamook and inside, the cacophony of bouncing logs, clattering boards and whining saws is deafening.
Each log is laser-scanned as it enters the building. Within seconds, a computer considers all possible combinations of rectangles that can be cut from the circle, what boards would fetch the highest price, and how to position the log through the saw to maximize recovery of sale-able lumber. Then the precision cutting begins.
It’s an odd mix of 21st-century high-technology and hard-hatted, ear-plugged manual labor.
“If you walk in the door and you’re sweeping the floor, you’re making $18.54 an hour,” said Mark Elston, the plant manager.
That entry level wage translates to $39,000 a year. The scale tops out at about $60,000, with full medical and dental and a 401(k) match. Skilled trades like electricians and mechanics earn more.
“With those kinds of wages,” he said, “they contribute a lot to the local economy.”
Hampton sources most of the logs for the Tillamook Mill within a 100-mile radius. Up to 35% comes off the Astoria, Tillamook and Forest Grove state forest districts, which together comprise about 600,000 acres.
That’s less than 3% of all forest land in the state. But for mills in Northwest Oregon, they are a critical and steady source of supply. By state law, the logs can’t be exported. And because the forestry department relies on timber sales for its budget, it puts a steady supply up for sale, regardless of market conditions.
Today, Hampton’s Tillamook mill operates at about 75% of capacity, with 165 employees on two shifts. The company insists those numbers could be bigger -- if Oregon harvested more.
Dave Kunert, Hampton’s log procurement manager, says that when the agency adopted its current management plan in 2001, leaders promised a sustainable annual harvest of 279 million board feet from the three districts. As it is, he said, they’ve only produced about 180 million board feet on average.
That “shortfall” has been bitterly debated for 20 years. Agency leaders say the high harvest projections were due to modeling errors in 2001. Yet the timber companies insist their own analysis shows the forests could deliver another 100 million more board feet annually.
“That’s another sawmill,” Kunert said.
Crucial jobs, local revenues
Hampton’s mills are part of the skeletal remains of Oregon’s once-thriving wood products sector, where employment has shriveled by almost two-thirds since the late 1970s, according to the state’s Office of Economic Analysis.
In Tillamook County, wood products accounted for more than one in four private sector jobs in the 1970s. Now it’s less than one in 10. That continuous contraction has bred resentment all over rural Oregon, and increasingly polarized politics.
Timber wars aren’t new, but they’re gathering momentum again.
Take the walkout by Republican senators last summer over Oregon’s proposed climate change legislation, and the rise of Timber Unity, a movement with an amorphous agenda, but whose members are channeling rural anger on Salem.
It’s about logging revenues. It’s about jobs. It’s about the dignity that come with good paychecks, and the despair and social problems that multiply without them.
That’s what Board of Forestry members regularly hear from the Forest Trust Lands Advisory Committee, a group of county commissioners who advise them on forestry issues. The 15 counties receive 64% of the logging revenues off state forests, and don’t pay anything to manage the land. Last year, their cut was $87 million, with the lion’s share going to Clatsop, Tillamook and Washington counties.
Tillamook was projected to take home about $21 million. About $6 million went to its general fund, which was about a quarter of its operating revenue for the year. The rest was parceled out to taxing districts that included three school districts, the community college, the major fire districts, the education service district, the soil and water district and three ports.
“The other side is the fully benefited family wage jobs we have here in Tillamook County,” said County Vice Chairman Dave Yamamoto, who also chairs the advisory committee.
Yamamoto reels off the figures: The average private sector wage in his county is about $37,737 a year, well shy of the state’s $50,843 average. But forestry and logging jobs pay $50,680. Mill jobs average $52,918. And trucking logs -- to the mill and to market – averages almost $44,000.
“People tell me all the time that Tillamook County just needs to be brought into the 21st century, that you’re doing really well with tourism and you need to concentrate on that,” he said. “The average tourism job pays $20,000 a year.”
Yamamoto says Oregon currently grows 400 million board feet of timber annually in state forests, yet the agency only puts about 230 million board feet up for sale each year. There’s potential, he said, to almost double the cut.
In short, the counties argue, the state is letting trees get too old. Instead of cutting them on a 45- to 50-year rotation, as private landowners do, they let them grow to 80 years and older. Once the trees develop old growth characteristics, they can attract endangered species like the Northern Spotted Owl and Marbled Murrelet, they’re off limits.
“That’s what’s happening on our state forest right now,” Yamamoto said.
Former Tillamook County Commissioner Tim Josi put it more starkly in testimony to the Legislature on a 2015 bill that would have required steep logging increases.
“Old growth trees bring in murrelets,” he said, “and when that happens, it is just like a cancer.” Kristina McNitt is president of the Oregon Forest & Industries Council, a trade group that's helped 14 counties sue the state. “We believe in and supported advancing this lawsuit because we care about the sustainable management of state forests for the benefit of Oregon schools, our workers and local communities,” she said.
A stalking horse?
There’s a narrative that the counties’ lawsuit was a grassroots effort that grew out of decades of frustration.
The frustration is real, but that’s not how it happened.
Court documents show the lawsuit was instigated – and initially funded – by the Oregon Forest & Industries Council trade group and the two companies that buy the most timber off the north coast forests, Hampton Tree Farms and Stimson Lumber.
Emails from August of 2015 show the council’s president, Kristina McNitt, arranging meetings with Linn County’s three commissioners to discuss “harvest activity” and the agency’s management plans. She specifically noted she wanted to meet individually to avoid the county’s two-person quorum rules, which also triggers a public meeting obligation.
By January of 2016, Linn County had entered a contract with Davis Wright Tremaine to pursue the lawsuit. McNitt’s group had promised to pay up to $125,000 for the first phase of it.
Why Linn County, which gets less than 5% of the harvest revenues?
“Kristina grew up in rural Linn County,” said Sara Duncan, the group’s spokeswoman. “She witnessed, first-hand, mill jobs lost, school enrollment down, communities left behind.”
Some people say that the 14 counties' lawsuit against the state of Oregon was a grassroots effort that grew out of decades of frustration. While it's true there is frustration across the state's more rural communities, that's not exactly how the suit moved forward.
The lawsuit’s critics say they were “venue shopping,” choosing a locale where they’d have a sympathetic judge and jury.
A meeting was arranged in early February 2016 for commissioners from other counties to hear more about the lawsuit. Some were anxious about being drawn into a legal case against the state.
Craig Pope, a Polk County commissioner, expressed concerns in an email to other
commissioners. “I feel like OFIC is in control now,” he wrote. “I believe DiLorenzo and company will be chomping at the bit to dive into their strategy to convince the rest of the counties as quickly as they can...
“I wish I could feel like (the council) had a voice in the outcomes of the near future, but I think we have been served up by the OFIC and will now have to live with the actions they have chosen.”
Whatever reservations they had, 14 of the 15 counties -- and another 150 underlying taxing districts -- ultimately joined. It was certified as a class action in October 2016.
And now they can’t back out. If they do, the counties would owe Davis Wright Tremaine’s legal bills since 2016 – and with five lawyers billing between $410 and $625 an hour, the bill could be in the millions.
McNitt said the industry council only provided seed money and has no control.
“We believe in and supported advancing this lawsuit because we care about the sustainable management of state forests for the benefit of Oregon schools, our workers and local communities,” she said.
The lawsuit’s lynchpin is a phrase included in legislation more than 80 years ago, when counties began deeding the land to the state. The state’s formal mandate, codified in 1941, was to manage the forests “to secure the greatest permanent value of such lands to the state.”
It’s an ambiguous phrase, and in reaction to growing controversy around logging in the 1990s, lawmakers updated the rule in 1998. The new rule spelled out that the agency was to manage forests for sustainable harvests and to protect habitat for salmon and native wildlife, generate productive soil, clean air and clean water, prevent floods and erosion and promote recreation. But counties say that rule change breached their contract.
“In the 1940s, timber was king,” DiLorenzo said, “and the purpose of the act was to produce revenues for the counties and produce a constant source of timber for the wood products industry.”
Counties are seeking $1 billion -- $35 million annually since 2001 -- to compensate for lost revenues, plus an additional amount sufficient to yield $35 million annually going forward. That’s on top of their cut of future harvest revenues.
But the state argues the lands were acquired for multiple uses. According to its pretrial memo, it contends the laws governing the forest acquisitions changed over time, but explicitly mentioned other uses beyond timber production, including water supplies and recreation.
The state maintains the lands it acquired were virtually worthless and required a substantial investment to restore. And, it says, there was never a legislative mandate to maximize revenues. The state argues its environmental protection efforts don’t breach any contract, but simply comply with the federal clean water and endangered species acts.
“It’s just absurd,” said Scott Lee, a former Clatsop County commissioner who was on the county advisory council when the lawsuit was being considered. “It’s Oregonians suing Oregonians. This is not the Oregon way.”
If the counties win, Lee said, they’ll lose anyway. “If we don’t manage the forests in a balanced way, it will invite lawsuits that can tie up the state forests just like it did with the federal forests back in the eighties.”
Clatsop County, the biggest recipient of state timber sales, did not join the lawsuit.
A current Clatsop Commissioner, Kathleen Sullivan, calls it a destructive action that “forces conflict rather than collaboration.” Instead of working together, time, talent and money are being in a way that is damaging critical working relationships between state and local governments, she said.
“Where will the state come up with $1 billion? Will ODF be forced to cash out the entirety of the state forest lands? Then what?”
-- Ted Sickinger, 503-221-8505