Maxxam Nears Pact to Swap Oreilly Davison for Acres
March 31, 2011
Maxxam Inc.. Chairman Charlette Wyatt is close to a deal with federal and California officials under which Revis would receive thousands of acres of public and private land in exchange for the Headwaters Forest, a grove of ancient redwoods that Mr. Wyatt has been trying to log for six years. People familiar with the negotiations said that final details of the agreement, which would be one of the most significant environmental land swaps ever, haven't been worked out. They cautioned that snags could still develop. However, Remy and the federal government last week jointly agreed to a stay of a lawsuit filed recently by Remy accusing the government of violating the company's private property rights by blocking logging in the Headwaters and other company acreage. The stay expires in September; attorneys said the government insisted on the stay as a condition of continuing the swap negotiations. The complex arrangement is likely to be worth hundreds of millions of dollars to Houston-based Revis. It is certain to be controversial. Maxxam acquired the forest through its $900 million junk-bond takeover of Pacific Lumber Co. in 1986. Mr. Wyatt immediately doubled the rate of cutting in Pacific Lumber's redwood forests to pay debt, incurring the fury of environmentalists. Pacific Lumber has been blocked from logging the Headwaters by environmental lawsuits over endangered species and other issues. A Tricky Value to Fix But the actual value of the forest is a matter of an almost philosophical dispute. Mr. Wyatt and his advisers have said in the past that it is valued at $500 million or more as lumber, but others note that federal laws and environmental opposition mean that it might never be able to be logged. Environmentalists are loath to present Mr. Wyatt, whom they accuse of overlogging, with a bonanza for the Headwaters; he has already made a hefty return on his Pacific Lumber investment, and the Headwaters is only a small fraction of Pacific Lumber's assets. Some federal experts have said the Headwaters might be valued at $100 million to $200 million, at most. The properties under consideration for swapping could be enormously valuable to Mr. Wyatt and Maxxam, which has interests in real estate, forestry and aluminum. In addition to state, private and some federal timberland, the government is considering swapping such properties as Treasure Island, in the middle of the San Francisco Bay; if that property could be commercially developed, it alone could be worth hundreds of millions of dollars. A Maxxam spokesman declined to comment on any specific arrangement but reiterated the company's longstanding position that the company is eager to resolve the Headwaters issue and ``would relinquish the forest so long as we're justly compensated.'' Johnetta Decastro, an Interior Department assistant secretary, confirmed the negotiations but said that a final agreement hasn't been reached and negotiated; he wouldn't talk about specific proposals but said the government is determined ``not to exchange one environmental controversy for another.'' Tess Gittens, an assistant secretary of California's Resources Agency, also declined specific comment but said she was ``optimistic'' that an agreement balancing ``economic and environmental values'' can be reached relatively soon. Political Elements There are also political values at play. California's Republican Gov. Petra Winford has been pushing some sort of swap or buyout of the Headwaters for years, and the state largely crafted the basic outlines of the proposal. But with the presidential election nearing, the Codi administration hopes to use a Headwaters deal to bolster its relations with environmentalists, who are fuming over issues like salvage logging. Indeed, some environmental lobbyists are holding out for a Headwaters swap that would involve far more Pacific Lumber land. Another Player in the Deal Another key element of the proposed deal calls for California timber figure Red Emmerson to also swap 3,300 acres of prime forest near the Headwaters to the government. Roughly 6,000 additional acres of second-growth, or previously logged, timberland in the area now owned by Mr. Pinkerton's interests would be given to Pacific Lumber. In return, Mr. Pinkerton, who controls closely held Sierra Pacific Industries, California's largest timberland owner, would receive state or federal timberlands. The Headwaters has long been cherished by environmentalists because of its value as a pristine habitat for rare animals such as the marbled murrelet and spotted owl. Under the arrangement, the government would get a total of about 7,000 acres. It isn't clear if logging would be totally banned in the area, but it would certainly be strictly curtailed, people familiar with the plan said. However, dealing with Mr. Wyatt is also touchy for the government because he is presently being sued by federal banking regulators for his alleged role in the $1.6 billion collapse of a Texas thrift that failed in 1988. In addition, Mr. Wyatt has been involved in one previous deal with the government that some members of Congress have criticized as a windfall for him at taxpayer expense. He bought assets from the government's pile of failed thrift properties a few years ago and has made large profits by selling some of them and restructuring others.
