Trading Away the West Home


Part 1 / The Corporations

Copyright © 1998 The Seattle Times Company

Posted at 12:57 p.m. PDT; Sunday, September 27, 1998

Government land trades leave questions about how public fared

Background and Related Info.

by Deborah Nelson, Jim Simon, Eric Nalder and Danny Westneat
Seattle Times staff reporters

First part of a series

HUCKLEBERRY MOUNTAIN, King County - Logging roads zigzag through the shadeless stubble of clear-cuts, past rotting piles of timber waste, to the last remnants of the Douglas-fir forest that once covered this mountain.

Still lush and fragrant, it's one of the few refuges along the middle Green River for a stunning array of animals and plants that survived the cutting all around them: mountain beavers, bald eagles, elk, woodpeckers, lichens of all colors and milky patches of fringed pinesap.

"An island of diversity," a U.S. Forest Service botanist wrote in a memo, "and important to protect."

Yet, rather than protect this verdant 7 square miles, the Forest Service recently traded it away - to Weyerhaeuser, which has begun to shave it down.

In exchange, taxpayers will get a lot more land than they're giving up. But most of that acreage, scattered across five counties, is logged over, strewn with debris and so hostile to new growth that one forestry expert said: "No one wants it."

The deal was made under a program that gives federal agencies the power to trade public land for private, as long as it's in the public's interest.

But a Seattle Times investigation has found that the public often doesn't stand much of a chance in these transactions, which are routinely manipulated by special interests behind closed doors. The manipulators include not only large companies such as Weyerhaeuser, but also land speculators, politicians, even environmental groups.

Private parties often propose the deals, select and pay the people who analyze them, then quietly negotiate the details with low-level bureaucrats vested with the authority to literally move mountains from public to private ownership.

By law, the public is to have plenty of opportunity for input. But in practice, deals are often struck before questions can be raised. The formal request for public comment becomes little more than a minister's call for objections at a wedding.

Just within the Forest Service and the Bureau of Land Management, more than 1.5 million acres have changed hands in the past five years, and deals involving 700,000 more acres are pending.

The Times examined dozens of exchanges, finding example after example in which the public came up short either during the process or in the end result:

-- In Colorado, a developer threatened to build houses in a Rocky Mountain wilderness unless the government traded him land near a posh ski resort. The Forest Service complied, and he turned around and sold his new land for a $3 million profit.

-- In Arizona, a Bureau of Reclamation appraiser documented that the public was about to be cheated out of at least $8 million in a trade with a developer. The appraiser was fired and the deal sailed through.

-- In Nevada, an environmental group brokered a deal that put thousands of acres of public property on the edge of booming Las Vegas into the hands of developers. In the process, the developers made money, the environmental group made money and the taxpayers lost $6 million.

-- In Arkansas, Weyerhaeuser and the Forest Service carried out one of the largest land trades of the century without doing an appraisal to see whether it was a good deal for taxpayers.

Even the best trades are controversial, because they require agencies to give up land in order to get land. Yet they're often the only means to acquire desirable property, because Congress rarely authorizes money to buy land. The budget for land acquisition in 1999 is less than one-tenth what it was 20 years ago, even adjusted for inflation.

Land exchanges have long helped put important natural landmarks, from Mount St. Helens to the Everglades, into public ownership and have preserved wilderness throughout the West. But all along, spectacular scenery sometimes served as trade bait for dubious deals.

At the turn of the century, Northern Pacific Railroad capitalized on interest in making Mount Rainier a national park by persuading Congress to trade prime timberland acre-for-acre for the company's barren holdings on the mountain.

In the 1990s, the trade bait is pristine mountain wilderness in Colorado, grizzly-bear habitat in western Wyoming, 1,000-year-old redwoods in Northern California.

"Usually there's some imminent threat of destruction," said Janine Blaeloch of the Western Land Exchange Project, a critic of the program. "And there's this cavalier attitude among agency staff about giving away huge pieces of public land."

As a result, she contends, "not only are we giving away land, but we're losing millions of dollars in the process."

The Seattle Times didn't have to travel far to find a major trade with major questions. An in-depth look at the Huckleberry exchange found plenty of disturbing details.

"Seven to one," Weyerhaeuser spokesman Frank Mendizabal explained, poking the air for emphasis. "That's what this exchange is all about: seven to one."

Mendizabal was referring to the fact that Weyerhaeuser swapped 7 acres of land to the Forest Service for every acre of Huckleberry Mountain it got in return.

The trade eliminates miles of messy, intermingled ownership, a checkerboard pattern created 134 years ago when Congress - trying to encourage westward development - gave the Northern Pacific every other mile of land within the right-of-way of the new track it laid from the Great Lakes to Puget Sound.

Over the years, the railroad sold off many of its sections to timber companies, especially Weyerhaeuser. The sections in between became part of the national-forest system, setting the stage for decades of wheeling and dealing between the government and timber giants.

The Huckleberry exchange, completed in March, is the most recent swap of these checkerboard lands.

Officials at the local Forest Service headquarters in Mountlake Terrace presented it as a slam-dunk for the public: 4,300 acres on Huckleberry Mountain for 30,000 acres of Weyerhaeuser land. The deal won the endorsement of the Sierra Club and was heralded as a national model by the Forest Service.

"I have never seen an exchange so much in the public interest as this one," said Dennis Bschor, the Mount Baker-Snoqualmie National Forest supervisor who approved the deal in late 1996.

But a close look reveals a more complex and troubling deal. The numbers that look so good on paper don't fare well in the field.

The Forest Service's appraisal of the Weyerhaeuser exchange valued each side's land at $45.5 million. But it failed to fully account for the poor quality of Weyerhaeuser's parcels, a factor that independent experts say could have reduced the value as much as $10 million.

More than half the Weyerhaeuser acres - 18,000 of the 30,000 - fall into the timber industry's lowest rating for growing trees, according to the company's own records. Some is high-elevation clear-cut planted with seedlings that struggle to grow inches a year. An additional 3,000 acres are too hostile to grow trees at all.

"It's higher-elevation land," acknowledged Ed Van Zandt, Weyerhaeuser's lead negotiator for the exchange. "Usually the higher the elevation is, the poorer the land is for growing trees."

Over hundreds of years, trees had managed to grow there. But once they were cut, Weyerhaeuser had no use for the land.

"We're a tree-growing company," said Van Zandt. "The better the site, the more attractive the land for Weyerhaeuser."

"Attractive" is not a word that comes to mind on a tour of the land that Weyerhaeuser gave the public. The rolling landscape wears a 5-o'clock shadow of young trees planted after clear-cutting, to comply with state forest rules. It's punctuated with stands of strange, stunted trees on fire-scorched earth.

Shorn mountainsides are crisscrossed with logging roads that give way to slides, create wildlife barriers and channel runoff into rivers and streams. The Forest Service says it will cost $2 million to remove the most damaging roads. Outside experts say it likely will cost more.

Some of the land is recycled from an earlier Forest Service exchange: 1,000 acres along Interstate 90 given to Weyerhaeuser in the 1980s. Now it's coming back to the public, minus the trees. Worse yet, the company shaved the land clean using methods so damaging to the environment that they've since been outlawed.

Forest Service officials say the most important acreage, ecologically speaking, lies along the Greenwater River, which the agency hopes to nurse back to health after decades of damage from logging. However, the agency's own analysis says progress will be limited by continued logging of private lands elsewhere on the river.

The official reports say Weyerhaeuser traded 3,300 acres of mature forest. But that's mostly the sum of many small, isolated patches. A reporter in search of the old trees had to clamber over rockslides, scale steep slopes, traverse deep ravines and venture into clouds to find the scattered forest remnants.

"What's left is what they couldn't get to or what wasn't worth getting out," said Doug Black, a Forest Service timber specialist. "There's old-growth in pockets - no large contiguous blocks. It's scattered."

The best of the plantations traded to the public are stands of 30-year-old fir trees, where a walk through the woods has the feel of a pleasant stroll through a nursery. Missing is the dense mix of trees found in older, natural forests - the diversity that scientists say is crucial to support a variety of animals and plants.

In fact, there's a greater mix in the forest re-created at Weyerhaeuser's corporate headquarters in Federal Way than in the replanted lands it gave the Forest Service.

In contrast with the Weyerhaeuser land, Huckleberry Mountain hosts a thick mix of Douglas, silver, grand and noble firs; mountain and western hemlocks; white pines and red cedar. Hikers on a historic Indian trail are greeted with a symphony of whoops and whistles from animals that thrive in old-forest habitat.

Laura Potash, a Forest Service botanist who argued to save parts of the Huckleberry forest, said preserving such habitat is important for more than aesthetics. Even obscure species of plants might play an important role in the big scheme of things. The yew trees found in wild forests were routinely discarded as commercially worthless - until researchers discovered they're the source of a powerful drug for treating ovarian and breast cancer.

The public's new land will also provide old-forest habitat - in another century or two. Scientists from other government agencies say the Forest Service glossed over what happens in the interim, when an area with so little wild forest loses so much of what's left.

In fact, there is so little old-growth left in the area that the agency could not log most of Huckleberry Mountain under current federal restrictions. But that didn't bar the Forest Service from trading the forest to a timber company for logging.

Doing away with checkerboards

The man who headed the negotiation team for the Forest Service in the Huckleberry trade is quick to defend it.

The exchange wasn't about saving old forest or getting more of it, Everett White insists. It was aimed at improving land management by eliminating the checkerboard pattern of ownership.

With the swap, Forest Service employees could apply a green marker to dozens of the beige squares representing Weyerhaeuser ownership on agency maps. That will make it easier to separate logging from conservation and recreation.

But that begs a question: If better land management was the intent of the exchange, why didn't the Forest Service make the trade before the logging roads were built and the trees cut off Weyerhaeuser's land?

Half of those trees were cut in the past two decades, many of them just before the company's first overture to the Forest Service in the early 1980s. And the cutting continued: Records show Weyerhaeuser was caught logging well into trade negotiations, after it was supposed to have stopped.

Weyerhaeuser's Van Zandt acknowledged that from a land-management standpoint, it would have made sense to trade before the land was logged. But from the company's perspective, "there was no incentive." Blaeloch, of the Western Land Exchange Project, put it in harsher terms: "Why would someone trade something worth so much money, when they knew they could get away with taking the value out of it first and then trade it?"

White sees no problem with that.

"I'm probably one of the few people in the Forest Service who thinks it's better to get land than trees," he said.

White came through the timber-sales division of the Forest Service when old-growth was something to be cut sooner rather than later, and the revenue stream from logging trees was a bigger concern than the fish-bearing streams that depended on those trees. All that ended abruptly in the late 1980s with the disappearance of the spotted owl and diminution of public logging.

Soon after, White and others were thrown into new jobs on the land-exchange team. To them, the logged-over landscape of young, struggling trees isn't ugly. It's familiar.

Says White: "You can grow trees - but not land."

Skepticism over the deal

Roy Keene knows plenty about growing, and cutting, trees. He's a commercial timber consultant based in Eugene, Ore., telling logging companies what stands of forest are worth to them.

But he's also an environmental activist who is waging a personal, off-hours campaign to protect the remaining old-growth in public forests.

From the moment he heard about the Huckleberry trade, Keene was suspicious. So he sat down at his kitchen table with the appraisal of the deal and a calculator.

Something didn't add up.

"I was suspicious of any trade required by law to be equitable between the Forest Service and Weyerhaeuser," Keene said. "I just thought the Forest Service had a huge disadvantage trading with Weyerhaeuser. I had a hard time imagining the Forest Service coming out ahead."

It's a sentiment shared privately by many in the timber business. But Keene felt compelled to do something about it. He spent hours flipping through the appraisal, comparing the values in the front of the book with the land stats in the appendix and aerial photos spread across his table - then drove 300 miles north to see the trees for himself.

It didn't take long to spot some trouble areas: The value given for the fine, old Douglas firs on the Forest Service land seemed much too low. And the value of Weyerhaeuser's clear-cut land seemed way too high.

"Nearly 20,000 acres of it was low (poor) site . . . with an unrealistic value put on it - about three times what it should've been," he said.

But by the time Keene sounded an alarm to local environmental groups, the deal had been approved and the deeds transferred. That's because the Forest Service keeps appraisals under wraps until trades are completed.

Independent analyses of the appraisal for The Seattle Times by forestry experts found Keene was on to something: The Forest Service had generously discounted the value of its own high-quality timber on the mountain while placing a high value on Weyerhaeuser's reproduction land - the technical term for cutover land that's planted with a new crop of trees.

The result: a multimillion-dollar break for Weyerhaeuser at the expense of taxpayers.

The most detailed analysis was done by independent forestry consultant Kelly Niemi, who reviewed the appraisal and a separate Weyerhaeuser report on site quality and tree-stocking levels.

Niemi is a member of the Association of Consulting Foresters of America and former chairman of the Practicing Foresters Institute Trust, a national group that promotes professional standards. He has campaigned for certification of timber appraisers in this state and has done extensive valuation work on public and private forest land.

Niemi said he was surprised at how poorly the appraisal documented its conclusions, with numbers seemingly pulled "out of thin air" that could easily be off by millions of dollars in either direction. Even the most basic statistic - how many trees were on Forest Service land - appeared to be based on inadequate field checking, he said.

One problem Niemi and other forestry experts noted was the way the appraisal came up with a $19.6 million value for the 23,000 acres of reproduction land - an average of $850 an acre.

Niemi's analysis placed the value closer to $8 million, or $350 an acre, as did a second evaluation by another firm. The disparity, Niemi said, stemmed from a glaring omission in the appraisal: failure to account for the poor quality of Weyerhaeuser's land.

"What kills it is there's so much low-value ground," he said. "Low-site ground that is poorly stocked is worth almost nil."

The timber industry rates the tree-growing quality of land on a scale of 1 to 5, with 5 being the worst. Sixty percent of the cutover land Weyerhaeuser traded to the Forest Service is rated 5, according to the company's own documents. An additional 20 percent is rated 4.

Other forestry experts shared Niemi's low opinion of the value of site-5 land.

"I don't know a soul who intentionally buys site 5. Nobody wants it," said Don Bryan of the Timber Exchange in Portland, who is cited by the Forest Service as an expert in valuations.

The land may have scenic or environmental value that's important to the Forest Service, he said. But under federal appraisal rules, those intangibles are not to be considered.

There are exceptions in the marketplace to the low value given poor-quality timberland. Niemi noted that a timber company recently paid a premium for low-quality land - but purchased it for a narrow regulatory purpose that had nothing to do with growing trees. That wasn't the case here.

Generous discounts

The appraisal gave Weyerhaeuser a second big break: discounts amounting to roughly $30 million.

Discounts for profit, risk and capital costs are standard in the timber industry. But this appraisal used rates most forestry experts consider generous, providing an extra cushion of as much as $4 million.

The appraisal shaved 17 percent from the value of the Huckleberry timber for "profit and risk," then an additional 30 percent to account for the "cost of money." It also discounted the relatively small amount of timber on Weyerhaeuser's land, but at much lower rates.

If anything, the discounts on Forest Service trees should have been conservative, forestry experts said. Here's why:

-- The "cost of money" discount was based on the prime rate plus 2 points. It should have been lower, because large businesses such as Weyerhaeuser can borrow at lower rates. Even Weyerhaeuser's exchange-team leader, Tom Miller, when told about the discount rate, said, "That's too high."

-- While large transactions often get a volume discount, it would be modest in this case based on the acreage going to Weyerhaeuser.

-- A competitive marketplace also lowers the discount. Plum Creek Timber Co. was interested in trading for the same land, but the Forest Service's appraiser says he wasn't told of that interest.

That's not surprising, given Weyerhaeuser's long-standing clout with federal officials. Don Nettleton, manager of land sales for Plum Creek, says he was rebuffed when he approached the Forest Service about acquiring Huckleberry Mountain in the late 1980s. Plum Creek had tens of thousands of uncut acres, including untouched roadless land, to offer.

"We were competing for those same lands Weyerhaeuser wanted," Nettleton said. "We didn't know it at first, but we knew soon after we started. We were told, `Hands off.' "

The "profit and risk" discount provided a big margin of protection against greater federal and state restrictions on logging in the future. In effect, the company got a break for new regulations spurred, in part, by its own past logging practices.

The big discounts meant taxpayers paid for protecting Weyerhaeuser against losses from changes in regulations or the marketplace.

That protection came in handy. Within months of the signing of the exchange deal in late 1996, the export market began a long tumble as the Asian economy faltered. Douglas fir prices have fallen 20 percent.

Miller of Weyerhaeuser said the company still came out ahead. The key? "The discount factor."

`Anyone can nit-pick'

The Forest Service appraisal was signed by Jeff Osmundson, a certified staff appraiser and key member of the team that shepherded the Huckleberry deal through the system.

Although the Forest Service often uses outside appraisers for large deals - and has used teams of appraisers and forestry consultants in some - Supervisor Bschor said he picked Osmundson because he was qualified and affordable.

The deal was a lot to tackle for a single appraiser who had never handled one larger than a few thousand acres. Osmundson said he got extensive advice from timber-company representatives and other experts, and based his discount rates on that advice. He based the reproduction values on recent timber sales in the area, assuming the site quality was comparable, and on the age of the trees. He couldn't say how much Weyerhaeuser land was poor quality and he didn't see the need to do a detailed site analysis, as outside experts - including some he consulted - said he should.

He stands by the values in his appraisal: "Anyone can nit-pick."

Miller said he hasn't seen the appraisal, but considers it closer to the true value than the forestry consultants suggest. He said he has had a problem with independent appraisals erroneously undervaluing company land.

"Appraisals are a tool used to approximate value," he said. "Ultimately, the price is determined by . . . what it's worth to you and the other person."

Blaeloch said this case shows why the public should have access to appraisals during deliberations: "The appraisal is the central factor that determines whether a trade is equal and, thus, whether it's legal. So the one piece of information that would assure the public that an exchange was being done fairly is not available for our scrutiny."

Sierra Club gives its support

A final key to this colossal deal was a surprising ally: the Sierra Club.

The conservation group's support is cited by government and company officials as proof the Huckleberry exchange was a good deal for the public. Winning that support was a public-relations coup by Weyerhaeuser - engineered behind the scenes to keep the powerful Northwest environmentalist community from derailing the project.

That community's opposition was strong in 1994, when the Forest Service unveiled the proposal to the public. Environmentalists bellowed about the loss of valuable old forest in exchange for cutover land. Some pushed for a trade with Plum Creek instead.

"The Forest Service needed to know that, politically, there was enough cover to make this exchange take place," explained Miller of Weyerhaeuser in a recent interview. "It was up to us to provide enough cover. The best way to do that was to have a major environmental group testify on behalf of the exchange."

Miller set his sights on one of the earliest, most influential critics of the exchange: the Sierra Club. That opposition was driven by Charlie Raines, director of the club's Cascade Checkerboard Project, who assessed the deal as "trees for stumps." No amount of Weyerhaeuser stubble could make up for the loss of Forest Service trees, he said.

"It's as if Weyerhaeuser wanted a new well-equipped Forest Service truck," he wrote in a Sierra Club flier. "In exchange, they offer four old, stripped-down trucks with a couple of flat tires, plus an unused bicycle."

Raines' position was important. He carries a lot of clout in the environmentalist community, and with federal officials.

He had worked side by side with officials to create the network of popular wilderness areas that dot the Cascades and Olympics. In a testament to his influence, the boundary of Washington's Henry M. Jackson Wilderness briefly plunges south to Highway 2 to encompass the spot where Raines met his former wife.

His first success: the 400,000-acre Alpine Lakes Wilderness, a popular backpacking destination with 150,000 visitors a year.

Miller seized on Raines' interest. In private meetings, he told Raines the company would donate 2,000 acres to the Alpine Lakes Wilderness area - if Raines helped the Huckleberry deal succeed.

Agency documents recount Weyerhaeuser's strategy - dubbed "Big D," for donation - to win over the Sierra Club's backpacking constituency with a "romantic" donation to one of their favorite haunts.

It worked. Raines agreed, in writing, to support the deal and deliver five environmental organizations.

Raines recently reviewed a copy of his '94 "trees for stumps" press release. The nature of the exchange hadn't changed in most respects since then, he admitted. What had changed was his perspective.

"I'd been so focused on the land being cut over. But I began to see there were pieces that were valuable," he said.

The real catalyst, though, was the Alpine Lakes donation: "That changed the rest of the discussion. That's when I could go back to my colleagues and say there's a new package. The donation really did change cynicism to support."

Raines said the donated land - high, remote and partially forested - is an important enough addition to the wilderness ecosystem to overshadow the exchange's flaws.

"Enviros love that high-country wilderness ground," said Jerry Franklin, a nationally renowned forestry professor at the University of Washington.

But he worries such priorities are skewed. The habitat in need of protection right now is lower-elevation forest, he said. Yet, it is often sacrificed in exchanges like Huckleberry Mountain, because the timber companies want low land and environmentalists favor high land.

The Sierra Club was not the only public-interest group to support the exchange, but it was the most influential and surprising.

With the Sierra Club on board, other local groups fell in line - with one notable exception. The Pilchuck Audubon Society joined the Muckleshoot Indian tribe, which has cultural ties to Huckleberry Mountain, in an unsuccessful lawsuit to stop the exchange.

These days, Raines has taken the lead for the environmental community in ongoing negotiations over a larger land exchange between Plum Creek and the Forest Service.

Ironically, he's arguing that the Forest Service should not be taken in by the amount of acreage offered by Plum Creek.

"It's the quality we want," he says, "not the quantity."


Background & Related Info.
Crown Pacific gets land despite last-minute revelations
Mining company has close ties with government in land exchange


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