The Headwaters Deal: Hurwitz's Final Play

Looking on the bright side, we can now count the Headwaters redwood groves in northern California as among the newly acquired treasures belonging to the American people. The bad news is, the treasures cost us way too much. Being the sort of stick 'em up businessman he is, Charles Hurwitz couldn't resist one last raising of the ante last weekend, and if you had to guess which one would be the first to blink, between Hurwitz and Interior Secretary Bruce Babbitt, chances are you wouldn't put money on Bruce.

Here's how the situation was in the last days of February. Under the deal brokered in the spring of 1998, largely by Senator Dianne Feinstein and former California wheeler-dealer John Garamendi, the federal government and the state of California pledged they would pay the Texas entrepreneur Hurwitz $480 million. In return for this sum--$250 million from the feds, $230 million from the Golden State--Hurwitz would turn over 10,000 acres of Pacific Lumber Company forest lands south of Eureka in California's Humboldt County, including the core area of the old-growth Headwaters grove.

This deal was a disgraceful and entirely unnecessary surrender to Hurwitz. The amount of money pledged to Hurwitz was four times the highest estimate of government appraisers figuring out what the timber is worth if converted into lumber. Environmental laws such as the Endangered Species Act, if enforced, would have stopped Hurwitz's fallers from cutting in most of the ancient groves, since they contain marbled murrelets and northern spotted owls, both under protection of the Act.

Another point: less than 40 per cent of the land that Hurwitz is turning over to the feds and the state of California is old growth. The rest is a patchwork of clearcuts and second-growth stands.

But the pliant federal negotiators, headed by Babbitt, never once rattled the formidable threat of the Endangered Species Act. Worse still, they granted Hurwitz a "habitat conservation plan" that will allow him to circumvent the Act and log freely across 210,000 acres of Pacific Lumber land in Humboldt and Mendocino counties.

For those waiting attentively for the other familiar shoe to drop, we should add that yes, Charles Hurwitz has been a generous contributor to the Democratic National Committee and also has had the prudence to retain two top Democratic lobbyists in Washington, Tommy Boggs and Vernon Jordan. (When you think about it, it's bad luck that Monica Lewinsky didn't end up working for Hurwitz. If only Vernon Jordan had called Hurwitz instead of Ronald Perleman, just think of the Republican searchlights that would have focused on the Headwaters deal. It would have fallen apart and the taxpayers would have saved nearly half a billion dollars!)

It's hard to imagine what Hurwitz could have hoped to improve in the deal settled last spring. Aside from the overvalued redwoods, the Houston-based tycoon won the right to incidental takings permits, allowing him to destroy the habitat of 36 wildlife species. He was able to successfully evade stringent standards for coho salmon streams and was able to continue logging on excessively steep slopes, despite oft-demonstrated landslide hazards like the one at Stafford that wiped out seven homes in January of 1997.

Under the deal Hurwitz was given the green light to log 136 million board feet of timber a year. To give a comparison, Oregon's Willamette National Forest has for years been reckoned as the most productive in the nation. It is 1.5 million acres in size, compared to the 210,000 acres of Pacific Lumber's forests. But the maximum cut allowed in the Willamette Forest these days is 60 million board feet, under half what Hurwitz won under the agreement signed last year.

But here's where Hurwitz's mettle as a businessman is well displayed. He knew he was facing timid men with no stomach for a fight. On Friday, February 26, against a deadline of midnight, March 1, Hurwitz said he would not go through with the deal unless the feds allowed him to cut more timber. Hurwitz obviously figured that the feds and Gray Davis, California's new Democratic Governor, were desperate for a deal. Clinton is endemically eager to hail any negotiation that he can invoke as an example of his presidential persuasiveness; Babbitt is ever anxious to boast of "win-win" solutions. Davis had no incentive to be a deal buster in a plot so laboriously contrived with the input of California's senior senator, Dianne Feinstein.

It went down to the wire, and when the dust settled, Hurwitz had extracted the right to cut another 45 million board feet a year, much of it apparently coming from lands that are crucial to the survival of the coho salmon. In the aftermath, Babbitt exulted that this settlement is "good for everyone. It allows the company to meet its economic goals and it will protect the species we need to protect under the Endangered Species Act." In Babbitt's equations corporate economic goals invariably triumph. Under his stewardship the Endangered Species Act has become a virtual dead letter and the Headwaters collapse demonstrated this sad fact yet again.