Plum Creek Timber Company, Inc.
Plum Creek Timber Company, Inc.
Sales: $209.1 million (2000)
Stock Exchange: NYSE
Ticker Symbol: PCL
NAIC: 113310 Logging; 113110 Timber Tract Operations; 321113 Sawmills; 321212 Softwood Veneer and Plywood Manufacturing; 321219 Reconstituted Wood Product Manufacturing; 322110 Pulp Mills; 551112 Offices of Other Holding Companies
Plum Creek Timber is the second-largest owner of private timberlands in the U.S., with 7.9 million acres of land in six states. The company also controls nine wood-product conversion facilities and produces wood-fiber products, such as medium-density fiberboard. Plum Creek Timber is sold through the company’s 49 warehouses, located throughout the country. The company is based in Seattle and operates two business segments: the Northern Resources segment consists of lands in Washington, Montana, Idaho, and Maine; the Southern Resources segment encompasses Louisiana and Arkansas. Plum Creek Timber exports 9 percent of its harvested timber.
Late 1800s to 1989: From Railroads to Timber
During the 1800s, an act of Congress gave land to railroad corporations as incentive to build railroads from the Great Lakes region to Puget Sound and the West Coast. Congress intended the land to be sold to settlers. While some of the land was sold and settled, much of it remained in control of the railroads and some was sold to timber companies such as Weyerhaeuser and Boise Cascade.
Then, in 1989, Burlington Resources, Inc. spun off Plum Creek Timber, L.P., which took its name from the Minnesota stream where the first U.S. lumber mill was built. Plum Creek Timber was established as a Master Limited Partnership to take advantage of the elimination of double taxation in the tax code. The company started with more than a million acres of forested land in Washington, Idaho, and Montana.
It was a tough time for a timber company. In early 1990, the spotted owl controversy erupted. The owl’s habitat is in forests with trees that are hundreds of years old and 200 feet high or more. These trees make the most valuable timber. Environmentalists sued the U.S. Forest Service to protect the spotted owl, and in 1991 a federal judge issued an injunction against logging in the owl’s habitat.
Besides the spotted owl problems, Plum Creek was faced also with criticism for its practice of clear-cutting forests quickly and expansively. Forest conservationists were unhappy with Plum Creek’s practice of clearing several square miles at a time, what the conservationists referred to as “checkerboarding.” Some groups felt Plum Creek over-logged its land. U.S. Rep. Rod Chandler, R-Wash. called Plum Creek the “Darth Vader of the state of Washington” in a Wall Street Journal article in 1990. Subsequently, Plum Creek set out to clean up its reputation and establish a plan of action that would mollify environmentalists, preserve wildlife, and increase value for its business.
Plum Creek matched the U.S. Forest Service’s shift in focus from harvesting to multi-use forest management. The company set three goals: To keep live trees at each site, preserve wildlife as much as possible, and retain dead trees (snags), which help maintain the habitat and contribute nutrients to the forest. An example of its efforts was a 10-mile strip of forest that was left at its Cougar Ramp site in Washington in 1993; although hardly a forest, the remaining trees contributed to the overall habitat in terms of shade, seed, and visual appeal.
In 1993, Jerry Franklin, a University of Washington professor and ecosystem analyst, presented ideas on “kinder, gentler forestry ” to President Clinton at a timber summit in Portland. Shortly thereafter, Plum Creek hired Franklin as an advisor, and his team developed a program they called “environmental forestry.” This involved selective logging, protection of streams and their habitats, and taking into account the aesthetic values of avoiding clear-cuts. Plum Creek reduced clear-cutting to 15 percent in the Northwest and to 10 percent in the Rocky Mountains.
Mid 1990s: Expansion into the Southern and Eastern U.S.
In 1996, Plum Creek acquired 538,000 acres of softwood timberland and three wood products production plants in Louisiana and Arkansas from Riverwood International Corp. The deal increased Plum Creek’s timber ownership by 25 percent and diversified its land holdings. As part of the agreement, Plum Creek continued sending pulpwood to Riverwood’s Louisiana board mill.
In 1998, Plum Creek purchased 905,000 acres of forests in Maine from South African Pulp and Paper (Sappi) for $180 million. This boosted Plum Creek’s acreage to more than 3.3 million acres. The company agreed to supply Sappi’s paper facility with fiber from these lands. Environmentalist groups, most notably the Natural Resources Council of Maine, opposed this move. The council speculated that Plum Creek would sell off recreational lands, but Plum Creek vowed that was not their plan.
Ten Years in the Making: The I-90 Land Swap in Washington State
When the government granted lands to the railroads in the 19th century, it granted only every other square mile. When timber companies logged these land parcels, they often left clear-cut areas starkly next to untouched areas. To help remedy this checkerboard effect and to make better use of its land, Plum Creek participated in a land swap with the U.S. Forest Service in Washington State. Ten years in the making, the swap was coined “The I-90 Land Swap.” In the deal, Plum Creek traded 42,000 acres of land that paralleled Interstate 90 east of Seattle for 11,500 acres of federal lands in the Cascades plus $4.3 million. Supporters argued that the swap moved private lands to areas where forestry made more sense and created public lands better suited for recreation. As part of the deal, Plum Creek also donated 838 acres to the government and held some lands for possible purchase in the future.
Some environmentalists protested the deal, claiming the swap violated the National Environmental Policy Act, the Endangered Species act, and other laws. Further complicating the matter was the discovery of the protected marbled murrelets on the government’s land, which meant that Plum Creek could not harvest 1,000 acres of the land it was to receive. But Plum Creek surprised many in the timber industry with a new tactic: it sued the environmentalists for the right to log. The U.S. Forest Service and five environmental groups were named as defendants in the lawsuit. With the lawsuits pending and protestors staked out in the trees, the swap was in danger. Finally, however, in January 2000, after a settlement had been reached with Plum Creek getting about a third less land in exchange for more cash, the deal was finalized.
1990s and Beyond: An Emphasis on the Environment
In 1994, the American Forest and Paper Association established the Sustainable Forestry Initiative (SFI) to address environmental issues within the forestry industry. Developed by foresters, conservationists, and scientists, the program asked companies to use environmentally sound practices, address the needs of the future, adhere to environmentally responsible guidelines, consider the qualities unique to each area, and continuously improve forest management techniques.
Although Plum Creek had conducted third-party audits of its practices in the past, in 1999 it added the SFI guidelines to its policies and completed audits of all its land holdings in compliance with SFI. The audits concluded that Plum Creek protected water quality, improved wood use, used chemicals prudently, and protected special sites.
Some environmental groups questioned the validity of Plum Creek’s audits, but the company strived for a good image. It set guidelines, based on SFI, that addressed the impact of roads through Plum Creek lands. In June of 1997, Plum Creek developed a habitat conservation plan for the Bull Trout and worked with the National Marine Fisheries Service to create a Native Fish Habitat Conservation plan. The company set up riparian management practices, one of which was maintaining streams with woody debris. Plum Creek also set up land use, range management, and restoration planning. It created policies at its timber mills and wood plants in an attempt to address woodfiber recovery, safe workplaces, waste disposal, and air quality.
Turn of the Century: Restructuring and a Major Acquisition
In July 1999 Plum Creek reclassified itself from a Master Limited Partnership to a Real-Estate Investment Trust (REIT). Not only did this have tax and financing advantages, it also separated timberlands from pulp and paper operations. Because pulp and paper operations had been performing poorly during this time, those areas brought down the stock of the entire company. Many timber companies converted these parts of their businesses to REITs in order to preserve their overall stock price and bolster their financials.
At Plum Creek, our entire company is united in carrying out the key strategies that are central to our future growth: Expanding our asset base with high-quality acquisitions. Managing our lands to maximize their value. Continually improving upon our market-driven, value-added product focus. And leading the industry in environmentally responsible resource management.
But Plum Creek didn’t own any paper operations and instead converted the entire company to a REIT, a move not done before by any other company. The goal was to make it easier to raise capital, broaden the company’s appeal to investors, and create REIT stocks, which were much more liquid than partnership shares because REIT shares could be made available to individual investors, who were unable to buy into a limited partnership. After the REIT conversion, Plum Creek’s previous controlling partner, SPO Partners, decreased ownership to 27 percent.
In September 2000, Plum Creek signed an agreement to merge with The Timber Company, an operating group of Georgia-Pacific Corporation. In October 2001, the merger was completed. The transaction was valued at about $4 billion and added 4.7 million acres of timberland to Plum Creek’s holdings, making it the second-largest private timberland owner in the U.S., with more than 7.9 million acres in 19 states. As part of the deal, Plum Creek assumed $1 billion of The Timber Company’s debt and agreed to honor a 10-year wood supply agreement between Georgia Pacific and The Timber Company.
Alliance Forest Products; Boise Cascade; Deltic Timber; Doman Industries; Fletcher Challenge Forests; Georgia-Pacific Group; International Forest Products; Longview Fibre; Louisiana-Pacific; MAXXAM; Weyerhaeuser; Willamette.
- Plum Creek Timber Company, L.P., created when it is spun off from Burlington Resources.
- Plum Creek puts in place environmental forestry plans and policies.
- The Sustainable Forestry Initiative guidelines are established.
- Plum Creek buys 538,000 acres of timber land in Arkansas and Louisiana from Riverwood International Corp.
- The company builds a sawmill in Louisiana.
- Plum Creek becomes a publicly traded Real Estate Investment Trust (REIT).
- The Washington State I-90 Land Swap is completed.
- The company sells 44,500 acres of timber lands to Pope Resources. A merger with Georgia-Pacific’s The Timber Company is finalized.
“$180 Million Sale of Maine Woodlands Troubles Environmentalists,”Washington Post, October 7, 1998, p. A22.
Blackman, Ted, “Plum Creek updates panel, lumber plants in Montana(parts I & II),” Wood Technology, January 1995, p. 30.
Bond, Jeff, “Timber’s Good Guys,” Washington CEO, June 2000. Carlton, Jim, “Plum Creek Timber to Purchase Land in the Northeast,”The Wall Street Journal, October 7, 1998, p. B2.
DeSilver, Drew, “More Timber for Plum Creek,” Seattle Times, July 19, 2000, p. CI.
Didisheim, Pete, and Berk, Judy, Statement from The Natural Resources Council of Maine, October 6, 1998.
Draffan, George, “Facts about Plum Creek Timber,” Railroads and Clearcuts, September 1999.
Ervin, Keith, “Plum Creek Sues Activists over Land Swap,” Seattle Times, October 17, 1999, p. B1.
Fisher, Frank, “Chunk of Maine Forest to be Sold,” Associated Press, October 6, 1998.
——, “Sappi Announces Deal to Sell 905,000 Acres of Maine Woods,” Boston Globe, October 6, 1998.
“Forests: The biggest tree sale of all,” The Economist, November 6, 1999.
Knickerbocker, Brad, “‘New Forestry’: A Kinder, Gentler Approach to Logging,” Christian Science Monitor, June 20, 1995, p. 10.
Ludwick, Jim, “Corporate Shift Will Open Plum Creek to All Investors,” The Missoulian, June 9, 1998.
Mapes, Lynda V. “Big Timber Swap Hits Snag,” Seattle Times, July 21, 1999, p. A1.
——, “Land Swap Delights Environmentalists,” Seattle Times, November 4, 1999, p. B2.
——, “Activists, Company Agree on Land Swap,” Seattle Times, November 3, 1999, p. C1.
McClure, Robert, “Bird Foils Big Timberland Swap,” Seattle Post-Intelligencer, July 22, 1999, p. B1.
——, “Partial Buyout Seen As Way Around Problem of Endangered Bird,” Seattle Post-Intelligencer, September 10, 1999, A1.
McCoy, Charles, “Plum Creek Timber Aiming to Convert Into A REIT, Boosting Acquisition Plans,” Wall Street Journal, June 8, 1998, p. B1 1E.
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“Plum Creek Timber Company to Merge with Georgia-Pacific Subsidiary,” The Forestry Source, September 2000.
“Plum Creek to Buy Products Unit,” Pulp & Paper, October 1996 pp. 23–25.
“Public’s ‘Green’ Attitudes Force Forest-Sector Changes,” Wood Technology, September 1995.
“The I-90 Land Exchange Is Completed,” Seattle Post-Intelligencer, January 6, 2000.
“Timber Co. Finances Purchase with Private Loan,” Corporate Financing Week, October 12, 1998.
Raeburn, Paul, “Can This Man Save Our Forests?,” Popular Science, June 1, 1994, pp. 81–88.
Thomas, Tom E. “Plum Creek’s Chainsaw Massacre,” Business and Society Review, Fall 1990.
Thompson, Steve, “Seeing the Forest for the Trees,” Missoula Independent, May 10, 2001.
Turcotte, Deborah, “Plum Creek Timber Firm Seeks to Shed ‘Evil’ Image,” Bangor Daily News, October 8, 1998.
Virgin, Bill, “Timber Deal Is Struck: Plum Creek to Buy Spinoff Unit of GP,” Seattle Post-Intelligencer, July 19, 2000, p. D1.