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State High Court Invalidates Logger's 'No Surprises' Guarantee

A logging plan and endangered species permit that were part of the Headwaters Forest deal approved by the state in 1999 have been invalidated by the state Supreme Court.

The court rejected the "sustained yield plan" because the California Department of Forestry and Fire Protection (CDF) improperly deferred final preparation of the plan to Pacific Lumber Company (Palco) and because the court could not identify which documents constituted the plan.

The court threw out a permit allowing the "incidental take" of protected species because of a "no surprises" clause that prevented the Department of Fish and Game (DFG) from imposing new mitigation measures to reflect changed or unforeseen conditions.

The unanimous state Supreme Court decision may be more important for the precedents it sets – especially on the no surprises question – than for its impact on the Headwater agreement and Palco. The logging company has been operating under different logging plans since a trial court judge rejected the sustained yield plan in 2003. Furthermore, a bankruptcy court in June gave control of Palco to Mendocino Redwood Company of Ukiah.

The decision "is without practical effect for us," Palco General Counsel Frank Bacik told the Eureka Times-Standard.

But the court's ruling regarding the no surprises clause included in a state endangered species permit could have ramifications beyond the redwood forest. The court ruled that the no surprises clause in a 50-year permit issued under the California Endangered Species Act (CESA) was illegal because it prevented DFG from imposing additional mitigation measures that may be required by new circumstances or if the original mitigations are found to be inadequate.

"[T]he Legislature intended that a landowner bear no more — but also no less — than the costs incurred from the impact of its activity on listed species," Justice Carlos Moreno wrote for the court. "To the extent that the changed and unforeseen circumstances provisions of the incidental take permit exempt landowners from this obligation, they exceed DFG's statutory authority under CESA."

"Particularly in light of the 50-year duration of the permit, provisions that freeze Pacific Lumber's obligations to mitigate in the face of changing circumstances, even when these circumstances are labeled ‘unforeseen,' cannot comply with the statutory mandate," Moreno wrote.

The Sierra Club and the Environmental Protection Information Center (EPIC), which brought the lawsuit, praised the decision for providing necessary species protection.

But Paul Weiland, a building industry attorney with Nossaman, Guthner, Knox & Elliott who filed an amicus brief regarding the species permit, said the ruling may discourage regional habitat planning.

"What we learned [from the decision] is you can get no surprises if you do a natural communities conservation plan," Weiland said. "But if you get a permit under CESA, Fish and Game doesn't have the ability to give you no surprises. It's going to be one less incentive for people to engage in these types of conservation efforts."

Pacific Lumber did not prepare a natural communities conservation plan (NCCP), which is authorized by state law. Instead, the company received approval for a habitat conservation plan (HCP), which is authorized by federal law. The state based its incidental take permit for the endangered marbled murrelet and the threatened bank swallow on implementation of the HCP. Weiland said NCCPs are typically more difficult and time-consuming to prepare than HCPs because the former deals with all plants and animals in a planning area, while the latter focuses only on the needs of protected species. The ruling may cause landowners to walk away from the HCP process and simply get permits addressing individual species on individual pieces of land, Weiland predicted.

In the late 1990s, Congress and the state Legislature authorized the Headwaters deal, under which the federal and state governments paid Palco $480 million to acquire the 7,000 acre Headwaters Forest of old-growth redwoods. The deal also set a March 1, 1999, deadline for Palco to get all necessary approvals for logging its remaining 200,000 acres — including the HCP and sustained yield plan (SYP).

After state agencies issued all approvals, EPIC and the Sierra Club filed a lawsuit against CDF and DFG challenging the SYP, the incidental take permit, a streambed alteration agreement and California Environmental Quality Act findings. In a separate lawsuit, the United Steelworkers of America challenged the SYP. (The union represents workers at five Kaiser Aluminum factories owned by Palco's parent, Maxxam.) Humboldt County Superior Court Visiting Judge John Golden in 2003 ruled almost entirely for the environmentalists and labor union. More than two years later, the First District Court of Appeal overturned the lower court, ruling almost entirely for the state agencies and Palco (see CP&DR Environment Watch, March 2006). The case then went to the state Supreme Court, whose July 17 ruling is closer to the trial court's decision.

The state high court rejected the SYP in large part because it could not identify the plan. A sustained yield plan "is kind of a master plan for logging a large area," the court explained. Specific timber harvest plans are used to carry out the SYP. Palco argued that the SYP was found in Appendix Q of the Environmental Impact Statement/Environmental Impact Report (EIS/EIR) for the entire project. But CDF said the SYP was contained in letters of approval signed by the department director on February 25 and March 1, 1999.

The court determined the plan could not be Appendix Q of the EIS/EIR because "voluminous supplemental information" submitted by Palco to CDF was not contained in the appendix. And the letters of approval refer to ambiguous portions of the EIS/EIR and other agency approvals and delegated the task for determining the final contents of the SYP to Palco, which apparently never completed the task.

"[B]asic confusion about the contents of an unconsolidated SYP scattered over a voluminous administrative record does not allow the public and decision makers to readily know those contents and use the SYP for the purposes for which it was intended," Moreno wrote.

The court also agreed with environmentalists and the labor union that the watershed analysis for the SYP was based on areas so broad that particular impacts of the planned timber harvest could not be adequately identified.

On the issue of no surprises, the court explained that the incidental take permit prevented state agencies from imposing mitigations beyond those contained in the HCP, even if circumstances change — and even if circumstances change as a result of timber harvests. The court said that the provisions went too far. The "types of regulatory assurances at issue here" are best provided through the NCCP process, and not through employment of CESA provisions, the court concluded.

The court upheld the streambed alteration permit, various CEQA findings and a cumulative impacts analysis. The court sent the case back to the trial court for further proceedings regarding remedies for the invalid SYP and the incidental take permit.

The Case:
Environmental Protection Information Center v. California Department of Forestry and Fire Protection, No. S140547, 08 C.D.O.S. 9147. Filed July 17, 2008.
The Lawyers:
For EPIC: Sharon Duggan, (510) 271-0825.
For CDF: William N. Jenkins, attorney general's office, (415) 703-5519.
For Pacific Lumber Company: Frank Bacik, Carter, Ogelsby, Momsen & Bacik, (707) 764-4212.
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