By TED SICKINGER/The Oregonian/OregonLive
The Oregon Court of Appeals on Wednesday erased a $1.1. billion verdict against the state over its management of state forests, determining the Department of Forestry and its policy-setting board are not obligated to maximize timber harvests and associated payments to counties where the forests are located.
The state appealed the verdict on 28 alleged legal errors before and during a 2019 trial in Linn County, but the appeals court based its decision on just one. Its ruling said that specific language in the Forest Acquisition Act of 1941 did not constitute a contract between the state and the counties to maximize revenues from timber harvests. The trial court, it said, erred by failing to grant the state’s original motion to dismiss the lawsuit on that basis.
The decision overturns the 2019 verdict by Linn County jurors who concluded the state breached the contract in question, shortchanging 13 rural counties — including Lincoln County — and 151 local taxing districts on harvest revenues for two decades. It also means the Department of Forestry and its policy setting board have the discretion to manage state forests for multiple uses including clean water, wildlife protection and recreation.
Roger Nyquist, chair of Linn County’s Board of Commissioners, one of the counties that sued the state, said the decision will be appealed to the Oregon Supreme Court, though a decision to review the ruling is at the court’s discretion.
“We knew from day one this was ultimately headed to the Supreme Court,” Nyquist said in an emailed statement. “We have no option at this point other than to appeal this decision.”
For now, however, the ruling is a major victory for the state, which had declined to enter any significant settlement talks with the counties and has yet to make any payments, watching the award accrue interest at 9% a year, nominally adding more than $200 million to the award since the verdict.
“In Oregon, we manage our forests not only for the benefit and prosperity of this generation but those to come,” Gov. Kate Brown said in an emailed statement. “Today’s decision by the Oregon Court of Appeals is a validation of the fact that a balanced, science-based approach to public forest management will produce the greatest long-term outcomes for all Oregonians, including the counties and taxing districts that receive revenue from state forests. Working together, I am confident the state and the counties can find a sustainable approach to supporting critical services for Oregonians.”
The decision was also applauded by environmental groups, which filed amicus briefs in the case in support of the state and believe the Department of Forestry is already logging state forests in an unsustainable fashion and failing to live up to conservation commitments in existing forest management plans.
Ralph Bloemers, a lawyer at the Crag Law Center supporting conservation groups, said in an emailed statement that the political argument that the state must maximize revenue for the counties is legally dead. He hopes the decision will refocus the Legislature’s attention on re-instituting a state tax on timber harvests from large private forestland owners, whose holdings and harvest volumes dwarf those coming from state forests.
“This decision helps focus our attention on the need to do more to take care of rural Oregon,” he said. “The case is a big backfire for the large timber landowners and industry trade groups who initially funded it. The notion that the State can make up for the loss of revenues caused by the massive tax breaks given to big Wall Street timber corporations has been laid bare.”
The decision is a body blow to counties and the timber companies who originally financed the lawsuit. Counties had hoped to eventually use the verdict revenues to fund all manner of public services. The court’s decision could not only kill that windfall but also add vitriol to a policy debate that has raged for decades and exacerbated the state’s urban-rural divide. Though timber-related jobs make up a very small portion of the employment base in most rural communities, they are are still some of the best paying jobs, and mills in some counties rely on state forests for a big portion of their log supply.
Nyquist said Wednesday’s decision didn’t resolve the problems caused by “mismanaged” state forest lands. He said they continued to face economic challenges and wildfire risks because of the state’s refusal to live up to more aggressively manage state forests.
John DiLorenzo, the lead attorney for the counties, said in an emailed statement that he was disappointed with the Court of Appeals’ narrow view of the case and is confident the Supreme Court, after weighing the facts and its own precedents, would restore the jury’s verdict. He said the appeals court hadn’t considered the harm rural communities have suffered from the state unilaterally changing its harvest policies.
“Those harms are well documented and are the direct consequences of the loss of a timber economy which the state’s leadership has decided is no longer consistent with their ‘urban values,’” he said.
The Linn County lawsuit has its origins in 1941, when state and county officials cut a deal that eventually resulted in the transfer of some 600,000 acres of logged-over and burned forest lands to the state. Those once-derelict lands now comprise the bulk Oregon’s state forests, and as a condition of their transfer, the state agreed to rehabilitate them, protect them from fire and share a portion of timber revenues with the counties when they became productive again.
The state’s formal mandate, codified in the Forest Acquisition Act of 1941, was to manage the forests for the “greatest permanent value of such lands to the state.”
The counties, which receive two thirds of the timber sale revenues off the lands, contend that the Forest Acquisition Act and subsequent amendments constituted a contract between the counties and the state, and that in 1941, “greatest permanent value” was understood to mean that the state would manage the lands to maximize timber production and resulting revenue transfers to the counties.
The lawsuit was originally financed by Hampton Tree Farms, Stimson Lumber and the Oregon Forest Industries Council, which have aggressively lobbied for higher harvests from state forests.
At trial, the counties offered a parade of witnesses who testified that timber production was the department’s prime objective in 1941 and remained so until the late 1990s. At that point, they say the state breached its contract with the counties, when the state Board of Forestry unilaterally changed the deal by adopting new administrative rules that included a broader definition of greatest permanent value.
But the Court of Appeals on Wednesday ruled that the provision was not in fact part of a contract between the state and counties, making it impossible for the state to have violated the terms.
“Considering the text, context, and legislative history of the provision of (the Forest Acquisition Act of 1941)…requiring the Board to manage lands transferred by counties to the state under the Act ‘to secure the greatest permanent value of such lands to the state,’ we conclude that that provision is not a term in a statutory contract between the state, on the one hand, and various Oregon counties, on the other,” said the court’s opinion, written by appeals court Judge Douglas Tookey.
The state had consistently maintained that the statutory term in question – greatest permanent value to the state – was not contractual, and even if it was, did not mean what the counties assert: that they have a right to revenue maximization.
From the state’s point of view, the Board of Forestry’s and the Department of Forestry’s mandate was always to manage the forests for the greatest value to the entire state, and for multiple uses.
Wednesday’s ruling comes on the heels of a separate deal environmental groups and private landowners reached this year that will establish wider no-cut buffers for fish-bearing streams; new buffers for streams that were previously unprotected; new rules governing logging on steep slopes to minimize erosion; improvements to logging and forest roads; and new minimum harvest standards for small forestland owners. The groups reached the accord to avoid a divisive and costly fight over dueling ballot measures that had been proposed in 2020.
Brown signed a bill earlier this month that will transfer the 91,000-acre Elliott State Forest in southwest Oregon to Oregon State University and convert it to a research forest with a mix of conservation reserves and areas open to logging. The forest is a stronghold of old trees and home to several endangered species. While the legislation still permits some logging, the state is buying out the appraised value of the forest – $221 million – from the common school fund so it will no longer be dependent on harvest revenues from the land.
The decision also comes after President Joe Biden last week issued an Earth Day executive order that directed the U.S. Department of Forestry and the Bureau of Land Management to inventory mature and old growth forests across the country and develop new policies to protect them from wildfire risks and climate change.
“This court case, together with the big policy changes in the Private Forest Accord and for the Elliott State forest, really underline a transition that is underway in how we view our forests and how we will manage them going forward,” said an emailed statement from Bob Van Dyk, Oregon policy director for the Wild Salmon Center, a conservation group. “Hopefully this is the last gasp of the early 20th century view that forests are just tree farms. Values have changed, the climate is changing, the economy is changing. We need to catch up with the future, which will be here too soon.”
That momentum, however, won’t resolve the ongoing and heavily partisan debate over forest management in Oregon. At a recent forum for Republican gubernatorial candidates sponsored by the rural advocacy group Timber Unity, several candidates said the state should have dropped its appeal and paid the money to the counties.
“Kate Brown makes bad decisions right, left and center,” said former House Minority Leader Christine Drazan, who stepped down in November to run for governor. Keeping the appeal going, she said, “is just one of many.”
— Ted Sickinger; tsickinger@oregonian.com; 503-221-8505; @tedsickinger