12 CapitalPress.com
May 19, 2017
Oregon
Details of public ownership of forest unclear Ditch company explores
By CLAIRE WITHYCOMBE
Capital Bureau
Florence
101
Elliott
State
Forest
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Reedsport U
mpq
ua
R.
Lakeside
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cean
38
Pa
SALEM — Now that a
proposal to sell an expanse of
state forestland is off the table,
the broad outlines of an alterna-
tive arrangement are just start-
ing to take shape.
Until this week, the state
was considering selling the
Elliott State Forest for $220.8
million to a partnership be-
tween a Roseburg timber com-
pany and Indian tribe. The State
Land Board voted unanimously
to stop that sale process in favor
of continued public ownership
Tuesday.
Offi cials must tread careful-
ly because the Elliott State For-
est is a state trust land. It’s re-
quired to generate revenues via
timber harvests for the Com-
mon School Fund. Revenues
collected from activity on the
forest are invested in the fund,
and some money is disbursed
from the fund every year to the
state’s public K-12 schools.
The State Land Board —
Gov. Kate Brown, Secretary of
State Dennis Richardson and
Treasurer Tobias Read — is in
the driver’s seat.
How they choose to move
forward on the forest is not
without controversy: environ-
mental groups, education advo-
cates, school kids, Indian tribes
and the timber industry have all
weighed in.
“I would argue there are
very high expectations and of-
ten competing priorities from
the public on what the Elliott
should and can provide for
Oregonians,” Liz Dent, head
of the state forests division for
the Oregon Department of For-
estry, told land board members
during their meeting Tuesday.
Some argue that environ-
mental activists put the state in
the position of needing to sell
the forest after aggressive fed-
eral lawsuits challenged how
the state managed it. Increased
restrictions drastically reduced
how much timber could be har-
vested on the forest and made
the Elliott a fi nancial liability to
the Common School Fund.
Environmentalists, mean-
while, counter that the state
needs to manage public natural
resources to forestall climate
change and take a stand under
a presidential administration
decidedly unfriendly to envi-
ronmental protections.
Many aspects of continuing
public ownership are yet to be
determined, although the over-
all intent is to keep the land
126
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Area in
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Capital Press graphic
public while meeting the state’s
obligations to the fund.
How will the state pay for
the forest?
Brown has proposed using
up to $100 million in bonds to
buy a portion of the forest.
That arrangement would
mean a few things: $100 mil-
lion that could be used for other
state projects, such as building
roads, would be used to buy a
part of the Elliott, because the
state has a limited amount of
money it can borrow.
It also means that the state
would not only have to pay
back that $100 million over
time, but would also have to
pay interest. The cost of that
would be borne by the state’s
general fund.
Just how much the state
pays in interest — on top of
the $100 million it owes — de-
pends on the bonding vehicle,
Jason Miner, an adviser to the
governor on natural resource
issues, told the board Tuesday.
The $100 million, if bor-
rowed, would be deposited in
the Common School Fund.
Revenue from sales of timber
harvested on the land would go
to the Common School Fund,
as well, and would not be used
to pay off the bond.
This arrangement requires
legislative approval. Read con-
tends there’s support for it in
the Legislature, an argument
supported by the testimony of
Senate President Peter Court-
ney, D-Salem, at the February
meeting of the land board, who
said he’d help the board fi nd a
way to keep the Elliott public.
But Richardson opposes
bonding to buy a part of the
forest.
“I do not support a plan that
relies on borrowing $100 mil-
lion to buy a forest we already
own,” Richardson said in a
written statement Wednesday.
Instead, he has suggested
swapping the Elliott for com-
mercial-grade sections of fed-
eral forest — in other areas of
the state that aren’t home to en-
dangered species — that could
be “monetized” by logging.
Who will have access to
the forest?
Under the governor’s plan,
public access would be main-
tained throughout the forest,
except in areas that are unsafe
due to logging or wildfi re, or to
protect certain resources.
Under the acquisition pro-
posal submitted by Lone Rock
Resources, a Roseburg timber
company, and the Cow Creek
Band of Umpqua Tribe of Indi-
ans only half of the land would
have been accessible to the pub-
lic.
Who will manage the for-
est?
It’s not clear which public
agency may manage the Elliott.
Read has proposed that Oregon
State University acquire it and
run it as a research forest.
There still could be a role
for other groups, such as Indian
tribes, to play in managing the
land, Miner told the board.
The $100 million in bonds
that form the crux of the gov-
ernor’s plan would pay for eco-
logically sensitive areas of the
forest. Her proposal includes
negotiating what’s referred to as
a habitat conservation plan on
the rest of the land.
What is a habitat conser-
vation plan?
A habitat conservation plan
is a guide for how federal agen-
cies will work with states or oth-
er entities to protect endangered
species while harvesting timber.
One question raised at Tues-
day’s meeting is the likelihood
of such a plan getting approved.
Dent, the head of state for-
ests for ODF, told the land board
she was optimistic.
The possible $100 million
in bond capacity relieves pres-
sure to produce higher levels
of timber harvests and signaled
that the state was willing to
take steps to preserve endan-
gered species; and the potential
of privatizing the land “under-
scored the need for collabora-
tion” among state and federal
agencies, Dent said.
State offi cials want the hab-
itat conservation plan to stay
even if there’s a change of own-
ership.
How would the OSU ac-
quisition proposal mesh with
the habitat conservation
plan?
OSU’s purchase of the land
hinges in part on the approval
of a habitat conservation plan.
Under Read’s plan, OSU
would not only buy the rest
of the forest for no more than
$121 million, but would dedi-
cate a fi xed amount of money
per year to research associated
with the forest.
That research could be
funded by harvest or “other
revenues, but must be assured
as an ongoing commitment to
the long-term continuity of the
research,” according to an April
25 memorandum of under-
standing from OSU President
Ed Ray to Read.
But there are a number of
terms that have to be met in
order for the university to buy
the forest. “In short, there must
be a viable business plan,” the
memo of understanding states.
What happens if the ar-
rangement with OSU falls
through?
The university isn’t obligat-
ed to buy the forest. So if the
deal doesn’t work out, Read
says, a “stakeholder advisory
board” formed to consult on
management issues and timber
harvests will recommend oth-
er potential buyers to the State
Land Board.
Is the plan legally sound?
All three members of the
land board are adamant that
they need to meet their fi duciary
responsibility to the Common
School Fund. What they decide
will be scrutinized by the Ore-
gon School Boards Association.
The association warned the
board last week that its mem-
ber districts may sue unless the
amount of money that the forest
is worth — $220.8 million, ac-
cording to a state assessment —
is paid to the fund.
Read argues that the $100
million lessens the immedi-
ate pressures on the Common
School Fund, which sustained
net losses on the Elliott be-
tween 2012 and 2015, and
functions as a “down payment”
while the state secures a perma-
nent public owner.
OSBA’s executive director
said his organization would
be monitoring the proposals
closely, and that any resolu-
tion must meet the board’s fi -
duciary duty to the fund.
Another consideration is
the cancellation of the sale
protocol. While the Depart-
ment of Justice has said that
the Department of State
Lands and the Land Board
are under no legal obligation
to Lone Rock and the Cow
Creek Band of Umpqua Tribe
of Indians, the entities say
they spent about $500,000 to
comply with the sale protocol.
switch to irrigation district
By KATY NESBITT
For the Capital Press
JOSEPH, Ore. – For more
than 40 years Associated Ditch
Co. has struggled to fi nd the
money to fi x its aging Wal-
lowa Lake dam
This spring the private
company announced it is ex-
ploring an old idea with new
enthusiasm.
Exhausting several ave-
nues over the years, including
selling water to a downstream
user, the ditch company’s
board has found the support it
needs to form an irrigation dis-
trict, making funding such as
low-interest Clean Water State
Revolving Fund loans easier
to access.
Following a rash of dam
inspections in the wake of the
1976 Teton Dam failure in Ida-
ho, the dam was deemed un-
safe to store the ditch compa-
ny’s entire water allotment. In
order to bring the dam back to
full storage capacity and pro-
tect water used by upper Wal-
lowa Valley farmers valued at
$36,079,000 per year, the dam
needs to be rebuilt.
Any reconstruction, Tom
Butterfi eld, former Associated
Ditch Co. president said, must
include fi sh passage. That dol-
lar amount, he said, is still be-
ing studied.
Butterfi eld’s son Dan is
now the ditch company’s pres-
ident. He said forming a dis-
trict had been considered in
the past.
Jay
McFetridge,
a
multi-generational Wallowa
Lake water user, said when
his grandfather was president
of the ditch company in the
late ’70s and early ’80s and
his father in the ’90s the wor-
ry was over the equitability, or
perceived lack thereof, in how
votes are tallied among water
users under the rules of a dis-
trict versus the one-vote-per-
acre agreement currently used.
“My dad said his biggest
reason that it wouldn’t work,
and they would not pursue at
all, was because of the vot-
ing,” McFetridge said.
This time the suggestion
came from Nate James of the
Natural Resources Conser-
vation Service when he was
asked to help the board with its
irrigation modernization plan.
“About a year ago we met
with Nate to look at fi nancing
for piping spur ditches, screen-
ing the ditches and possibly
even putting in water measur-
ing devices,” Butterfi eld said.
James said he has worked
with Wallowa Lake water us-
ers individually to upgrade
their systems, but with the
scope and scale of the ditch
company’s
modernization
needs, including reconstruc-
tion of the dam, they need-
ed extra funding sources not
available to a private ditch
company.
A district, formed under
state statute, would hold pub-
lic meetings and be able to
vote and process decisions in
a timely manner.
“They could see the bene-
fi ts were very positive to going
down this path,” James said.
For technical assistance,
James asked Farmers Conser-
vation Alliance to work with
the ditch company’s modern-
ization committee. During
their initial meeting, fi xing the
dam was discussed.
The alliance’s executive
director, Julie O’Shea, said her
organization started out manu-
facturing fi sh screens for irri-
gation districts, but after years
of designing and installing
screens she said her staff found
it diffi cult to fi x one piece of
an irrigation system without
opening a box of other issues.
“We realized there was a
great need for irrigation dis-
tricts to have people come in
with expertise – not just from
an engineering perspective,
but a fi nancial and communi-
ty-based one,” O’Shea said.
Mateusz Perkowski/Capital Press
Win a $200
Gift Card
The U.S. District Courthouse in Eugene, Ore., where Oregon rad-
ish seed growers are pursuing a $6.7 million lawsuit against a bank
over alleged interference with crop sales.
Oregon farmers sue bank for
$6.7 million in radish seed dispute
By MATEUSZ PERKOWSKI
Capital Press
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190-050517
19-4/#13
A group of Oregon farmers
is seeking $6.7 million from a
bank for allegedly interfer-
ing with sales of radish seed,
causing it to lose value.
The lawsuit fi led by the
Radish Seed Growers’ As-
sociation against Northwest
Bank is the latest installment
in a saga that began with the
2015 insolvency of Cover
Crop Solutions, a seed com-
pany.
Cover Crop Solutions
contracted with numerous
Oregon farmers to grow a
proprietary variety of radish
seed but was unable to pay
them due to fi nancial upheav-
al caused by oversupply and
weather disruptions.
The seed company’s cred-
itor — Northwest Bank of
Warren, Pa. — then fi led a
lawsuit against the growers,
demanding ownership of the
radish seed as collateral for
a defaulted loan taken out by
Cover Crop Solutions.
In June 2016, U.S. District
Judge Michael Mosman re-
jected the bank’s claims that
it owned the seed, but that
hasn’t put an end to the mat-
ter.
Northwest Bank is now
simultaneously challenging
Mosman’s ruling before the
9th U.S. Circuit Court of Ap-
peals and pursuing a malprac-
tice complaint against the law
fi rm that advised on the loan
to Cover Crop Solutions.
In the malpractice lawsuit,
the bank acknowledges it had
no collateral in the radish seed
even as it argues otherwise
before the 9th Circuit, ac-
cording to the complaint fi led
by the Radish Seed Growers
Association, representing 38
growers, and two non-mem-
ber farms.
“These two positions are
irreconcilable,” the complaint
said.
Due to the bank’s litiga-
tion against the growers, they
were unable to sell nearly
7.4 million pounds of radish
seed in 2015, when it fetched
roughly $1.30 per pound, the
complaint said.
Aside from losing value
as it aged, the radish seed
also competed against crops
grown in later years, so farm-
ers were only able to sell it for
56 cents per pound or less, the
plaintiffs claim.
The lawsuit aims to re-
cover about $5.5 million in
reduced seed value and $1.25
million in storage costs and
additional expenses caused by
Northwest Bank’s “wrongful
interference.”
The case has been assigned
to U.S. Magistrate Judge Jolie
Russo in Eugene, Ore.
A representative of North-
west Bank said the company
doesn’t comment on pending
litigation.