Plum Creek - Largest Land Owner in the United States --
Its History in Maine and Beyond

September 2007
Originally published, in an earlier form, in the October 2002 issue of the “Maine Commons.”
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"...We who live here know that things cannot stay the same, but we do not want to be treated as side issues. We do not just live and work and play in the forest - We are a part of it. We are ingrained in it, and it is ingrained in us." - John Harrigan.

Several trips up North on Plum Creek land, driving on what seemed like endless logging roads. Hiking up to the top of clear cut hills and flying in a small airplane over the land to take pictures. It put a lot of questions in our heads that we wanted answers to. We started to take a closer look at what Plum Creek has done in other states, and what it is now doing in Maine. We wondered, if all this land gets subdivided, what will happen to Maine as we know it? A large piece of land on which many Mainers and our family members live, work, and play, is being threatened by a large out-of-state real-estate company.

How Plum Creek Got Its Land

Seattle-based timber company, Plum Creek, began in 1989 when it broke off from Burlington Northern Railroad, acquiring 1.4 million acres in the Pacific Northwest. On October 6th, 2001, six subsidiaries of the Georgia-Pacific Corporation, collectively referred to as The Timber Company, merged with Plum Creek. This merger brought 3.9 million acres of primarily pine forests to Plum Creek. Following the merger, Plum Creek became the second-largest private timberland owner in the United States, with more than 7.8 million acres of timberlands located in 19 states.

Today, Plum Creek owns over 8 million acres, making it the largest commercial land owner in the United States. The private investment group SPO Partners controls and profits off Plum Creek operations. SPO stands for its founders last names (John H. Scully, William Patterson, and William Oberndorf). Scully, Patterson, and Oberndorf all graduated from Stanford Graduate School of Business, and were taught and guided by Investors Professor John G. McDonald, now also on the Plum Creek Board of Directors. McDonald encouraged the three former students to invest in Plum Creek when it was struggling out west under the ownership of Burlington Resources, and they converted it to a Real Estate Investment Trust, controlled by SPO Partners. SPO Partners other holdings include Crown Castle International, one of the largest land owners in the United States of cell-phone tower sites, and Cabot Corporation, a company that produces fine particles carbon black, fumed metal oxides and tantalum used in, among other things, biotech, agriculture, aerosols, oilfield drilling, and military products.

In October of 1998, Plum Creek made its first New England land purchase, buying 905,000 acres in Maine, mostly in the Jackman and Moosehead Lake regions, making it the fourth largest landowner in the state. Plum Creek bought its Maine land from SAPPI (South African Pulp and Paper Inc.) at tree-growth value of less than $200 an acre. This amounted to a purchase of 5% of all Maine land, over a third larger in size than the state of Rhode Island. There are over 2,500 miles of logging roads running through Plum Creek's land in Maine. Mt. Abraham, Bald Mountain, Spalding Mountain, and Sugarloaf Mountain are a few of the mountains on which Plum Creek owns a significant amount of land. It also owns land on 143 ponds and lakes, including Spencer Lake, Roach Pond, Moosehead Lake, and Bald Mountain Pond.

Darth Vader Reputation

In the Western states where Plum Creek owns land, it has gained a reputation for business practices that are harmful to the surrounding community. Bob Eckey of the Wilderness Society said, "Quite simply, Plum Creek hasn't been a good neighbor in Montana. They have liquidated their forests, degrading water quality and damaging wildlife habitat throughout Western Montana".

The criticism has not been limited to environmental groups - in 1990, Washington State Representative
Republican Rod Chandler, who has been called one of the "most vocal timber industry advocates in Congress" commented on Plum Creek's practices, stating, "Within the industry they're considered the Darth Vader of the State of Washington." Plum Creek earned this characterization after company executive Bill Parsons expressed his feelings on sustainability, stating, "We have never said we were on a sustained-yield program, and we have never been on a sustained-yield program. ...Let's get to the heart of it. Sure, it's extensively logged, but what is wrong with that?"

Plum Creek broke records in Maine by receiving the largest fine in state history for breaking timber harvesting laws. Plum Creek also built a 7,500 foot powerline corridor and apparently “forgot” to apply for the required permit, though it received after-the fact approval. There is also evidence from a Maine forest service employee, that Plum Creek has one of the highest concentrations of water quality law violations of any company in Maine, and according to a Department of Inland Fisheries and Wildlife biologist,
“probably the worse record of any major landowner in the State” for protecting deer wintering yards.

According to camp owners on Plum Creek land in Maine, yearly leases have increased significantly - in at least one case the lease increased four fold. Plum Creek has also periodically closed off ATV access and use of Ponds surrounded by land it owns. While Plum Creek has claimed to build new developments at a sustainable rate and preserve access and wilderness on certain lands under easements, its record at its First Roach development shows otherwise. After being granted permission to build new houses around the Pond, Plum Creek changed the terms of the conservation easement, allowing itself development on previously “protected” lands.

A 2006 Audubon Magazine article quotes Joan Wisher, president of the First Roach Pond Improvement Association as saying, “Plum Creek promised us they’d be ‘good neighbors ...Then they took the big hardwoods, destroying our shade canopy, making a permanent dust bowl, and silting the pond. The dust covered everything and gave me prolonged fits of coughing. We went to them as an association and begged them to give us a no-harvest buffer zone; they refused. We begged them not to develop the north inlet, a pristine area where people go to watch moose and where eagles nest; they refused.” In another article, Wisher, explains that people living around the pond were told that the development plan would move slowly over a 25-year period, but once in, Plum Creek sold most of the lots in the first year, resulting in major construction and “chaos.”
Unsustainable Forestry

In 1999, Plum Creek lost its single largest customer, Home Depot, when the home improvement retailer adopted stricter purchasing guidelines, that require wood products it purchases to have independent, third-party forest certification and come from certified forests. Plum Creek's wood products do not meet these guidelines.

Plum Creek has subscribes to the Sustainable Forestry Initiative (SFI) program. This program is run by the American Forest & Paper Association, and organization made up by about 200 large companies that produce timber, paper products and hardwood. As a result of this industry control, the requirements of the program are much weaker than many would like - it allows for cutting of old-growth forest, and its guideline on cutting trees is to leave eight trees per acre.

In a September 26th 2002 article in the “Independent Voice,” Kim Woodbury of Home Depot said that Plum Creek's Sustainable Forestry Initiative does not provide the independent stamp of approval that Home Depot requires for certification and "Home Depot's purchasing guidelines require the application of external standards developed outside the industry itself. Those standards must consider social as well as environmental issues."

While the nation's largest home improvement retailer won't support Plum Creek's current practices, there are some very unlikely groups who do, such as the Forest Service and other government agencies. This is at least partly due to the fact that Plum Creek, like almost all large timber and real estate companies, plays a role in shaping those agencies' policies through major donations and lobbying. Between 1993 and 1998, timber companies that log National Forests hired more than 35 lobby firms and at least 141 lobbyists at a cost of more than $22.5 million.

Political Power

Plum Creek plays a significant role in shaping logging policy in Maine, since Doug Denico, Maine's Plum Creek Representative, is also the Chairman of Maine's Sustainable Forestry Initiative Program. In the 1999-2000 election cycle, over a third of Plum Creek's direct donations to candidates and party committees went to candidates and committees in its new land-base of Maine. Within Maine, 76% of all campaign contributions from timber companies, sawmills, and others engaged in cutting down trees were from Plum Creek. In addition to direct donations, Plum Creek has both created and become a member of other Political Action Committees (PACs) that lobby and make donations. It formed the Plum Creek Good Government Fund in 1993, which has given $32,000 in the upcoming national election, $2,000 of that to Maine Senator Susan Collins. Plum Creek is also a member of the very powerful National Association of Real Estate Investment Trusts which has given $227,000 in this election cycle, again with $2,000 of that going to Senator Collins.

According to a 1999 Public Interest Research Group (PIRG) report, Senator Collins was among the top five recipients of PAC money from timber companies that log National Forests, of which Plum Creek is one of the eight largest. It would seem that these donations to Collins, which have been occurring regularly since she first ran for office, have been reflected in her voting record. According to the PIRG report, Senator Collins voted to continue a timber road building subsidy and supported continued logging in National Forests.

In the Northwest, Plum Creek has seen direct benefits from its donations to politicians. In the 1997-98 election cycle, Plum Creek was the fourth largest contributor to Washington Senator Slade Gorton's campaign, donating $21,000 (between 1996 and 2000 Plum Creek made $58,700 in direct donations to the Senator). When Plum Creek was attempting a Washington land swap of thousands of acres of its for a smaller amount of public land in 1998, it began to face public outcry and challenges.

Public Land Swaps

While Plum Creek would be gaining less land than it was offering, much of the land it was offering was either already cut or in areas too difficult and expensive to cut, and the new land had more valuable trees and was far less visible. "Clearly, for Plum Creek, this exchange would allow us to take somewhat of a lower profile in Western Washington," explained Plum Creek vice president William Brown. When the challenges and negotiations increased, Plum Creek threatened to pull out of the deal unless a decision was made quickly. As a result, Washington Senators Slade Gorton and Patty Murray met with Plum Creek representatives to craft a rider that would short circuit the normal environmental review and public process, and allow the company and Forest Service to avoid appeals and lawsuits after the exchange occurred. The exchange passed with that rider inside a much larger, unrelated Omnibus Appropriations Bill.

A 1999 Seattle Times investigative series "Trading Away The West" focused on Plum Creek's activity in its Western land holdings. "These days, Plum Creek might be called 'The Tree Swapping Company.' No other company is pushing land exchanges with the federal government more aggressively,” explains the article.
Plum Creek has 10 proposed swaps in the works, involving everything from sections of the Lewis & Clark Trail in Montana to rattlesnake habitat in Arkansas." As Jay Letto observed in the Seattle Times series, "So why does the Forest Service pursue projects that don't benefit most people? Simple: it needs money to operate. There is no shortage of business interests offering cash for a piece of the forest and no shortage of members of Congress who will take the cash to help them get it. [...] But don't blame the Forest Service. Currently Congress appropriates more than one third of the forest service budget to the timber program, while only 11% goes to recreation, watershed protection, and wildlife programs combined."

Profits from Government Subsidies

Plum Creek has seen many benefits from logging on public lands in the Northwest, where it cut at a rate of over 500 million board feet a year. As a result, it has been able to greatly underbid smaller logging operations and mills. With many small, family owned mills having a tough time surviving in Montana (where Plum Creek now makes up 90% of the timber industry) a group of small loggers and mills have proposed a five-year plan that would prevent the large timber companies from bidding on a percentage of federal timber sales. The small companies argue that they log using more environmentally sound practices, and this change might allow the last remaining independent mills and loggers in Montana to survive in the face of Plum Creek ownership.

In addition to being able to cut and buy timber cheaply from Public lands, government programs in the form of taxpayer subsidized road programs have also helped Plum Creek. According to New York Agriculture Department official Jim Lyons, the number one water quality problem in the forest is roads. US Forest Service data compiled by Common Cause, from 1991 to 1997, shows Plum Creek receiving $4,648,460 in tax-payer money to cover the cost of timber road construction.

Plum Creek was benefiting from a program called the Purchaser Road Credit Program, since eliminated in 1998 as a result of protests of corporate abuse of the program. However, as soon as that one program was ended, it was replaced with a new similar program, called the Specified Roads Costs (SRC) program. While no data was found on the specific amount of money received by Plum Creek as a result of this program, already over $14 million in taxpayer money has gone to benefit private timber companies (almost definitely including Plum Creek) under the SRC program. Under the Bush administration, this amount is only growing, with a $12 million increase in timber subsidies planned for 2003 alone.

REITs and Taxes

Tax structures in the IRS have been kind to Plum Creek. Before 1999, Plum Creek was structured as a master limited partnership corporation, which exempted it from paying federal tax on its profits, which exceeded $150 million a year. In July of 1999 it restructured as a Real Estate Investment Trust (REIT), amid what the Wall Street Journal called "a knotty tax issue", in its new structure and plans to merge with The Timber Company. However, almost exactly four months prior to the Plum Creek and Timber Company merger, the IRS revised and clarified its rules, deciding that a company can distribute to its shareholders tax-free stock (called spin-off) of a company that would elect REIT status. The ruling allows landowning companies to cut their tax burden by moving real-estate assets off their books and paying rent to a REIT they would create.

According to Plum Creek's website, a REIT structure is profitable to the company since "Plum Creek derives most of its income from the sale of timber, which is treated as capital gain income. Accordingly, the taxable portion of Plum Creek dividends will, for the most part, be treated as a capital gain (taxed at the maximum rate of 20 percent)."

REITs were created about 25 years ago as a way to help small investors own real estate, but because of their favorable tax status, they have become a huge presence in the world of property ownership. Plum Creek was the first timber company to use the REIT structure in this way. While moving timberland into the REIT structure is profitable for the companies like Plum Creek, it often deprives the communities in which the land is owned of a large portion of tax dollars. Additionally, tax laws frequently force individual and small landowners (and even some of the traditional larger, locally based timberland owners) to sell their land, as they cannot afford the property and inheritance taxes, and are not able to form the REIT structure for their land that major companies like Plum Creek are able to form. Clutter concluded, "There has always been a connection between traditional forest products companies and the timberland they managed. But the new tax structures mean we'll see more and more land owned by those most removed from it."

From Logging to Subdivisions

When Plum Creek bought the land in Maine in 1998, its CEO Richard Holley claimed that there were “no plans to sell off . . . the lands for vacation homes, camps, or other development.” Yet, with its shift to a REIT, much of Plum Creek's focus has turned to real estate and development. "These lands have been enjoyed by generations of Maine people for hunting, fishing, and remote recreation, yet if Plum Creek manages these lands as they have managed their holdings in other states - then these precious areas could be sold off for development, posted with "no trespassing" signs, and become off-limits to the people of this state forever. ...Unlike Maine's other larger land owners, Plum Creek is a major real estate developer in addition to being an aggressive timber harvester," explained Peter Didisheim in 1998 in a Natural Resources Council of Maine statement. "One look at Plum Creek's website shows that the company specializes in subdividing their most attractive properties for vacation homes."

A November 2001 Wall Street Journal article confirmed Didisheim's fears, stating, "[Plum Creek President] Mr. Holley said at least 400,000 of [Plum Creek's] acres appear ideally suited for commercial or residential development, since they are either near big cities like Atlanta and Daytona Beach, Fla., or along lakes such as in Montana and Maine. Analysts praised the move, saying it builds on Plum Creek's existing practice of selling off timberlands for development or other purposes for more than it could get from logging." Indeed, Plum Creek officials admit that they focus on finding the most profitable use for the land they own, whether it be as timber, other resource extraction, or real estate development. "We are clearly focusing on identifying our assets that have a higher-and-better use for real estate value," explained executive vice president for real estate and strategic business development, Tom Lindquist, in a Seattle Business Journal article, adding that oil, gas, coal, and mineral extraction, and land subdivided and sold or leased for development could eventually account for as much as a quarter of the company's earnings.

Energy Extraction

The company has begun to make inroads to energy extraction, recently having signed an agreement with Iluka
Resources Inc, and Australia-based processing and mining company, for the purpose of exploring Plum Creek's lands for mineral deposits. A Plum Creek subsidiary has also signed an agreement to begin drilling 70 wells to extract methane gas from coal beds in West Virginia and Virginia. Real estate activity currently generates the third largest amount of revenues for the company, behind timber harvesting and manufacturing. It generated about $23 million in revenue from real estate in the first quarter of 2002, and with 400,000 acres the company's land having what Plum Creek considers "real estate potential," this number will likely increase.

In the Northwest, Plum Creek has become known for engaging in double liquidation forestry, cutting the valuable timber, and then subdividing and selling the land for real estate development. After selling off large amounts of timber for log and wood chip exports to Asia, Plum Creek began selling off prime valley-bottom and riparian areas for real estate development. "The communities and forests of our nation are being exploited as colonial possessions by Plum Creek and other huge timber corporations," said John Osborn of The Lands Council in Spokane, Washington. "From Maine to the Great Lakes to the Pacific Northwest and back again they take our forests, they take our workers' jobs, they take their promises and cut and run."

Buy Low, Sell High

Since Plum Creek moved to Maine, it has shown its intent to make profits from real estate, and has already begun selling off large sections of its originally $200 an acre land. (How many people get a deal like that?) While Plum Creek lauded itself for its environmental consciousness for selling a 65 mile strip of lakeshore and riverfront to the Maine's Public reserved land system, it was not making major sacrifices in this sale, since it sold the land to the state at $652 an acre.

Plum Creek also sold 7,500 acres of its newly acquired land to billionaire summer resident John Malone (who, ironically, has been dubbed the "Darth Vader of the cable industry"). Malone paid $10.5 million for the land, or $1,333 an acre, around the northern half of Spencer lake, including Fish Pond and a private boat launch that the previous owner, SAPPI, had kept available for public use. Many people in areas where Malone has been purchasing land have been voicing concerns about public access and leased cabins on the land and lake. Then, in July of 2001, Plum Creek officials announced the largest subdivision ever in Maine's unorganized territory of Kokadjo, in the Moosehead Lake region, subdividing much of the area surrounding First Roach Pond into 89 camp lots.

The Future

As one of the largest landowners in the state, Plum Creek's history and practices should not be ignored. Converting wild and working woodlands into summer homes, restricting access to the land, and practicing unsustainable forestry practices will lead Maine down the path that many states and countries have followed, turning parts of the state into either plantations for large out-of-state companies, or retreats for out-of-state wealthy people who profit from these companies. The Maine Forest Service has recently released an analysis of the state's timber supply which shows that Maine's largest landowners are cutting 14% more wood annually than the forests are growing. Companies such as Plum Creek do not necessarily have what is best for the local history, cultures, and environment in mind when they conduct their business.

Plum Creek does have profits in mind, and are legally bound to generate the greatest profits they are able to for their stock holders. If sustainable harvesting of wood and employing local workers is the most profitable path, then the company will take it. If selling the land to the state or conservation groups is the most profitable path, the company will take it. If selling off the Maine woods to become just another vacation retreat is the most profitable path, the companies will take it. If cutting the wood as quickly as possible, mechanizing forestry, hiring out-of-state contractors who hire non-local workers, paying workers the lowest wage they can get away with, or avoiding responsibility for worker safety are the most profitable paths, then the company will take them. If the company faces damage to its reputation and lost profits as a result of the actions it was taking to generate profits, it will change (though not necessarily stop) its practices until it can regain profits.

Plum Creek is not unique in its practices. Just like many other major real estate and resource extraction companies, it influences and benefits from government policy. It benefits from tax rules that allow it to pay the least taxes possible to the communities whose land generates its profit. Its practices, whether they be clear cutting, creating easements, road building, manufacturing, gas extraction, or real estate subdivision are based on a need to create the greatest profit possible. Will the people of Maine leave it entirely up to Plum Creek to choose from these options? It is the people who live and work on this land, who are a part of this land, who are affected by these practices. It is these same people who will be able to observe Plum Creek's practices. With research and organization, the people who are a part of this land might able to have some say in what happens to the land, and make themselves known to be more than just “side issues.”

BY JOSH LAMBERT, BREANNA NORRIS, AND HILLARY LISTER

Learn More:

- Maine Independent Media Center: maine.indymedia.org

- End Game: www.endgame.org/plum-realestate.htm

- Forest Ecology Network: www.forestecologynetwork.org

- Land Use Regulation Commission: www.maine.gov/doc/lurc/reference/resourceplans/moosehead.html/

- Moosehead Futures: www.mooseheadfutures.org

- Maine Wilderness Guides: www.mwgo.org/content/view/57/82/

-Natural Resources Council of Maine: www.nrcm.org/issue_plumcreek.asp

- Native Forest Network - Gulf of Maine: NFN c/o Freeman, 224 Westside Dr. Verona Island, Maine, 04416, poscreek (at) gmail.com