Well, did you buy Plum Creek stock on my suggestion last month?
A few weeks ago, Congress passed HR 2419, the “Food, Conservation and Energy Act of 2008,” aka the Farm Bill. Deep within this 682-page pig were two impressive, and impressively stupid, pork slabs for corporate America: $182 million in tax breaks for Weyerhaeuser; $500 million for Plum Creek – buried there by Sen. Max Baucus, a Democrat, who proudly announced the funding May 23 alongside Plum Creek CEO Rick Holley.
Plum Creek’s stock closed at $42.47 May 23, and on June 5 was at $47.03.
Nonetheless, both these windfalls are remarkably inept, even for this Congress. As I wrote two columns ago, the “timber industry” (Weyerhaeuser is the last holdout) is dead. Changing tax laws now won’t “save” Weyco or keep it from breaking up into a Real Estate Investment Trust.
As for Plum Creek’s present … hasn’t the company already scored enough goodies from Congress?
First, the shutdown of federal timber harvest not only reduced the once-wonderful United States Forest Service to an empty husk and killed off most of Plum Creek’s Northwest sawmilling competition, also raised the value of Plum Creek’s wood – an outcome worth millions to its bottom line.
Second, when environmentalists began litigating over the bull trout in 1992, Plum Creek as the largest private owner of bull trout habitat found itself at serious risk of shutdown, an economic and political disaster not just for the company, but for Montana.
In a political tour de force, Interior Secretary Bruce Babbitt offered Plum Creek a lifeline in the form of “safe harbor” provisions contained in what is now the Native Fish Habitat Conservation Plan. Work began in earnest in 1998, and the NFHCP was approved in November 2000 … the nick of time. Babbitt helped save the company, but probably also saved the Endangered Species Act.
Environmental groups, including Trout Unlimited and Pacific Rivers Council, opposed the NFHCP, sued to stop it, but failed. An unhappy Bruce Farling of Trout Unlimited complained that Plum Creek got “30 years of insulation from lawsuits with this document.”
Third is federal REIT law, that has enabled every major integrated timber company (except one) to disintegrate, literally tossing millions of acres of forests through a gigantic loophole … profitably.
In short, faced with the legal and economic environment Congress created, Plum Creek, like all timber bigs, has cut … and now they’re running.
I can’t blame Plum Creek. Were those my trees, I would do exactly the same. Cut ‘em, cash ‘em, then buy more ground where I’m less likely to be sued out of existence, or … get into another line of work entirely.
So here’s the deal, touted as the “Legacy Project.” Plum Creek will get $500 million for up to 300,000 acres and a minimum of 40,000. Half the funding will be federal, with the state of Montana expected to pony up $100 million and the Trust for Public Lands and Nature Conservancy raising the rest.
Bummer.
First, the “nonprofit” partners, which between them hold about $4.5 billion in net assets and scored $106 million in government funding in 2005 alone, will get their money from contributors interested more in “Nature” than Montana.
Next, half the ground is to go to the Forest Service, an agency that emphatically cannot manage what it already has.
Finally, the ground being offered here is not the “good stuff” for trophy buyers and subdivisions. It’s ground with little present value for subdivision, and not the prime timber-growing ground, which Plum Creek intends to keep.
So what’s the real legacy? Colonialism – outside interests running Montana for their benefit, which often is not Montana’s benefit.
Last year, Montana had a budget surplus of over a billion dollars. We shot it away. In retrospect, Montana would be far better off to have taken $500 million, grabbed every acre we could to expand our state forests and school trust. Ever after, the policy shots would be called by Montanans, elected by Montanans. We could have gotten hold of at least a small part of our future. But we didn’t.
And that’s our legacy.