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Seeing the Forest for the Trees
By Jaimal Yogis | Photo: J. Perlman and R. Lutge Photography | September 20, 2010
For 150 years, California redwoods were plundered, martyred, horse-traded, and legislated to the point of near destruction. But now, implausibly, an epic convergence of whistle-blowers, tree huggers, loggers, and a family of billionaire merchants is rewriting the story of some of the world’s oldest living beings.
In Corpus Christi, the three parties who were vying for the company came down to Hurwitz, the bondholders who had underwritten Hurwitz’s loan and desperately wanted their money back, and a family of clothing merchants whose massive investment in redwoods would have surprised their neighbors in San Francisco.
Like their parents, Gap founders Doris and the late Don Fisher, the Fisher boys are Presidio Heights originals: hard-headed businessmen with singular passions that can take a philanthropic turn. All three grew up on Washington Street; played serious boyhood tennis; attended Princeton and the Stanford Graduate School of Business; worked for their dad; and are now well-liked billionaires, raising families near where they grew up. They meet regularly to discuss their shared philanthropy and investments, which are managed by John, the youngest son and the only one of the three who didn’t spend a chunk of his career working for Gap. Presumably to shield the family from the frenetic ups-and-downs in the value of Gap stock, where much of their wealth is still held, John looks for the longest of long-term investments: “businesses where being a family as opposed to a publicly traded company allows us to do things differently,” as he told this magazine in one of his rare interviews.
Robert Fisher, the oldest son, helped push the family into trees. He currently chairs Gap’s board and serves on the boards of the Natural Resources Defense Council and Conservation International, which works to keep the Amazon rain forest from disappearing. It was fly-fishing that made him a naturalist, and he now helicopters regularly to the family’s fishing ranch in the ponderosa forest south of Mount Shasta, next to Nature Conservancy land. “Being connected to the outdoors was something very important to us as a family,” John says. “But Bob’s connection is what attracted us to this investment area. He’s been very instrumental in helping us learn.”
The Fishers embarked on their first redwood venture in 1998, when they paid a reported $200 million to Louisiana Pacific for a massive Mendocino Coast redwood forest that had been devastated by clear-cuts and erosion—and learn they did. The family’s longtime friend Sandy Dean, chairman of the Mendocino concern (now the Mendocino Redwood Company, or MRC) and the former Pacific Lumber, served as their guide as they sought to make a buck and improve the land. “We can’t just go into the community and tell everyone that we’re fabulous,” John told the San Francisco Business Times in 1998. “We have to convince them that we’re part of the solution.” That didn’t happen right away, and the family’s operation drew a barrage of negative press from forest activists when it continued to cut some old growth. But soon enough, the company’s slow-cut practices earned respect from forestry scientists.
“Because we are a family, and because we’re local, we could allow the trees to grow over a long period of time and end up with a healthier forest,” John says. And it doesn’t hurt that the family has deep pockets, so they’ve been willing to invest cash in such projects as expensive bridges, rather than cheaper, environment-damaging culverts. “When you put in a bridge,” John says, “all of a sudden fish can move upstream, which means they can survive. It’s a funny thing, though: That also means you can’t harvest as many trees.” (To preserve the fish’s habitat, more trees bordering the river will be protected by law.) A philosophical free-marketer who has contributed to Republicans, John wryly acknowledges that such environmentalism costs him a lot of money, yet he remains committed to it anyway.
As the Pacific Lumber bankruptcy court date approached, the Fishers’ bid took on a life of its own: To many involved in the proceedings, it sometimes felt as if the Murphys themselves were returning on white horses. The Mendocino Board of Supervisors and eight environmental groups, including the Sierra Club and EPIC, endorsed the Fishers as owners—as did local congressman Mike Thompson and Governor Schwarzenegger. “People could look at what we’d done in Mendocino,” says Dean, “and that was a tangible track record. We could say, ‘Hey, we want to eliminate traditional clear-cutting, bring the old-growth policies here, use our transparent mode of operation, and maintain jobs at the sawmill in Scotia.’ That was a pretty compelling set of things to imagine after 21 years of conflict.” After the bidders submitted their plans, the bankruptcy judge awarded Pacific Lumber’s remaining 209,000 acres to the Fishers for half a billion dollars.
It was a momentous decision. It also confirmed for Wilson, who was waiting for his trial to begin, just how royally Hurwitz had screwed the government on both ends of the Headwaters deal. On the front end, the dollar amount was close to what taxpayers had paid Hurwitz for a section of the forest 30 times smaller. And when the Fishers brought in their timber appraisers to come up with a sustainable cut rate for the Hurwitz lands, they gave a figure of 55 million board feet a year. Hurwitz’s people had initially asked for 210 million, then settled for 179 million.
Now, in Oakland, Maranto and Wilson were ready to blow the whistle. On the stand, Maranto described how he had discovered the deception during his tour of the land. The plaintiffs also brought in independent forestry experts, including Paul Harper and Greg Bloomstrom, both of whom testified that Pacific Lumber’s inventory reports appeared manipulated, especially in regard to the tan-oak stocking. On Hurwitz’s part, Brosnahan’s team never denied that the company had used tan oaks in the stocking reports; they simply argued that doing so was perfectly legal. The jury would have to decide whether the company had knowingly defrauded the state and federal governments.
A final verdict was never reached—partly because the judge wouldn’t allow past cases regarding Pacific Lumber and Hurwitz into evidence, including anything from the bankruptcy proceeding. “I still don’t understand why,” Wilson says. Such restrictions made for intense days of testimony, with Brosnahan and Cotchett blustering at each other throughout; at one point, they nearly went nose-to-nose when Brosnahan thought Cotchett might be trying to slip in evidence that the judge had blocked. But after five days, Cotchett advised Wilson that with so many limits on what he could enter into evidence, the odds weren’t good that he could convince all 9 jurors (federal civil cases don’t require 12) beyond a reasonable doubt that the tan-oak situation was a scam and that it came from the top. Consoling himself that he’d forced Hurwitz to spend $20 million on the case, pushing him toward bankruptcy and the land toward the Fishers, Wilson and Maranto settled the case for $4 million from Pacific Lumber, which was distributed among Cotchett’s law firm and the state and federal governments.
The settlement was a big disappointment for Wilson—and for the Humboldt residents who had hoped to see Hurwitz pay hundreds of millions. One Humboldt blogger joked that “Chris Maranto and Richard Wilson, who had sought damages totaling more than $1 billion in the case, settled for two McDonald’s hamburger Happy Meals, one with no mustard and extra pickle, the other with apple slices instead of fries and a supersize beverage selection.” But though the case didn’t crush Hurwitz financially, it did reveal the travesty at the core of the Headwaters deal. It also helped usher in new owners who knew exactly whom to hire to run their revamped company.
If anyone in the redwood world garners more respect than Wilson or more buzz than National Geographic’s Fay, it’s Mike Jani, a gregarious Santa Cruz native who managed a small, family-owned timber company, Big Creek Lumber, in the area for decades. In 1999, Jani parted with that much beloved job to manage the Fishers’ Mendocino Redwood Company; eight years later, he left MRC to join their new operation, now known as Humboldt Redwood Company (HRC). That makes Jani, a low-key family man who likes to surf in his hometown as much as possible, the policymaker for more private redwood land than anyone in the world—and he’s shaking things up. He’s taking a process called selection management, or uneven-age management—until now generally practiced only by smallish landowners, such as Big Creek, and by individual conservation-minded foresters—to the biggest redwood plots in the world, many of which had been savaged for years.
Using a very careful model that removes less wood than the forest can grow every year, both HRC and MRC have been certified by the Forest Stewardship Council (FSC), a lengthy and rigorous process similar to LEED certification for architecture or USDA Organic for farming. It sounds childishly simple to add more wood than you take out. But if foresters had done that for the past 150 years, the notion that only 5 percent of the original redwood forest remains standing today would be a tragic plot point in a dystopian novel rather than reality. Since the formation of MRC, Jani has also managed the effort to restore the forests’ waterways, spending $14 million to keep sediment from entering the rivers. He sees signs that the salmon are coming back.
This “restoration forestry” was the topic of the day at a recent gathering in Redway, a tiny town next to Garberville, where about 40 redwood experts—foresters, old hippies, bearded sawmillers—had assembled for a conference called Redwood Futures, an exercise in consensus and trust building that felt like necessary therapy after years of battle. Jani, shaking hands and cracking jokes, was the only manager of a big timber company to attend. The very fact of his presence seemed to bring hope. “You got a guy responsible for 400,000 acres spending his Saturday in Redway,” said Art Harwood, a former sawmill executive and a Redwood Futures organizer. “What does that tell you?”
“The world is changing,” agreed Fay, also in town for the meet-up. “A lot of other people are definitely tipping toward restoration forestry”—a group that likely includes Jim Able, Ed Tunheim, Jim Greig, and Craig Blencowe, foresters who manage small (20- to 2,000-acre), private redwood timberlands in California. Their plan, like Jani’s, is to grow bigger trees and cut them out one by one, maintaining groves with every age of tree, and never taking more wood than the forest grows naturally. It’s a slower process, profitwise, but in theory, it will earn them more money over time. Indeed, recent research by rockstar forest scientist Stephen Sillett (he was made famous by Richard Preston’s 2007 bestseller, The Wild Trees), of Humboldt State University, shows that redwoods actually produce more and higher-quality wood each year for up to at least 1,500 years (that’s the oldest tree he measured). According to Chris Maranto’s calculations, a 100-year-old tree that was worth $195 in 1985 could bring in nearly 10 times that if you waited another 50 years to harvest it. Even taking inflation into account, the potential reward is huge.
But what about the rest of big timber, especially the Green Diamond Resource Company, which is nearly as large as MRC and HRC combined? Neither John Fisher nor Jani will pick on their competitors publicly. Says Fisher, “It’s not to say that if someone harvests their trees with a shorter rotation than we do, that’s wrong. It’s just different.” Green Diamond tries to market itself as eco-friendly, but Fay doesn’t buy it. The company has given more than 70 percent of its redwood acreage to clear-cutting, but by law, the cut areas have to be replanted with trees instead of left to grow back naturally—a method that the company claims is better for forest regeneration than Jani’s because the trees grow back faster in direct sunlight. But according to Fay, “The forest composition there is nothing like a redwood forest would have been.” When you clear-cut, he explains, you destroy so much of the habitat that the next generation of growth is more like a plantation forest than a real forest. EPIC agrees—and has made Green Diamond the new target of its protest campaign.
How to inspire the transition to sustainable forestry was a burning topic at the conference. The nation’s timber industry is in decline. Plunging home construction, fast-falling prices, the bad economy, and the high cost of meeting government regulations have all done damage, and much of our wood now comes from places with more lax regulatory environments, such as Indonesia, South America, and Canada. In this dark environment, where desperate companies might be inclined to cut faster, it seems that much more important to push all of big timber to adopt the Fisher business model rather than the liquidation model.
Jani says one big step will be getting hard data on different harvesting methods, since many industry folks aren’t convinced that selection management will be as lucrative down the line as he and others believe it will be—and, unfortunately, that type of research is in its infancy. Encouraging consumers to look for FSC-certified wood, installing a carbon-trading market to profit landowners who don’t cut their forests, and freeing up sustainable foresters from costly paperwork also have tremendous promise (see “Three Shifts That Will Rebuild the Redwoods,” below). Notably, though, after the debacle of the Headwaters deal, the idea of waiting around for the government—whether it’s Congress, the Department of Forestry, the regional water-quality boards, or the Air Resources Board—to regulate big timber into doing better is widely viewed as a nonstarter.