February 23rd 2000
February 23, 2000 By Peter Waldman Staff Reporter of The Wall Street Journal Mendocino Redwood Company responses are inserted in blue italic text. SAN FRANCISCO - It promised to be one of those feel-good nights: A few hundred affluent baby boomers opening their wallets for a heartfelt cause- "Saving Wild California," a candlelight dinner and evening of rock-'n'-roll dancing." The last thing most patrons expected to see as they pulled up to the Natural Resources Defense Council's annual ball this past fall was a wall-size photo of a denuded California hillside, with a caption blaming the scorched earth on one of their own: "From the Fishers of Gap Inc." We do not know what picture Mr. Waldman was shown, but presume that people might be interested to see a few pictures that demonstrate our policies on Clearcutting and Variable Retention in forests. But this was war. In 1998, the family of Gap founders Donald and Doris Fisher diversified part of its roughly $12 billion investment portfolio into one of the most contentious industries around: logging redwood trees. For about $230 million, the family bought 350 square miles of timberlands just two hours north of the Golden Gate Bridge, in bucolic Mendocino County- ground zero in the battle to save the remnants of California's once-mighty redwood forests. The Fishers regard the investment as a long-term hedge against the vagaries of their main holding, a roughly 34% stake in Gap. There is also a do-good appeal: The family is a major funder of the NRDC, one of the nation's most influential environmental groups. Robert Fisher, a 45-year-old retired Gap executive, is an NRDC board member. His 38-year-old brother, John, the family's money manager and shepherd of the timber investment, also counts himself as an environmentalist. The Fishers say they want to stake out the elusive middle ground in the timber wars, by showing that trees can be cut down profitably in a way that minimizes the impact on forests. For us, it is all about our publicly stated purpose - demonstrating that it is possible to manage productive timberlands with a high standard of stewardship (which literally means to leave the forest better than we found it over the long term) and operating as a successful business at the same time. The progress we have made to date illustrates that we are well beyond the "middle ground." Specifically:
  1. new management installed to oversee the forestry operations,
  2. a reduced harvest rate that is approximately 60% of the growth rate of the forest,
  3. an unwavering commitment to open honest and responsive communication,
  4. meaningful collaboration on a variety of restoration projects,
  5. substantial investment in roads to reduce sediment that can get into streams,
  6. a systematic review of alternatives to herbicides,
  7. investment of time and money to create a commercial product for tanoak,
  8. elimination of traditional clear cutting, and
  9. continued pursuit of independent third party assessment and validation of exemplary practices in the woods
"For a family with a long-term outlook, timber is a very predictable activity," says Sandy Dean, president of Mendocino Redwood Co., the Fishers' timber arm. But is it worth the agony? Or to use the whispered words of another well-heeled heir, sitting not far from the Fishers at the NRDC ball, "What price a name?" We came to Mendocino County with a total commitment to open, honest and responsive communication. We understood there would be critics and attention surrounding what we do. We have talked with literally hundreds of people, conducted dozens of tours for friends, critics, neighbors, government officials, journalists and the merely curious. Our goal has been to answer every question and criticism. Within 90 days we established a web site, www.mendocinoredwoodco.com to provide accurate reliable information to anyone who wants to know about what we do. We have and continue to feel an obligation to share what we working to accomplish, and remain as responsive as we can to questions about what we do. The question arises because the Fishers have walked into a buzzsaw-and even some of their friends wonder how a family that built one of the nation's larger fortunes by accurately gauging the public mood could have failed to see trouble ahead. Mendocino Redwood is under attack by some of the most determined activists in California, veterans of years of wrangling with major timber companies. The area is home base for Julia Butterfly Hill, a 25-year-old cult figure-and outspoken Fisher foe-who spent 738 days in an ancient redwood tree to save it from chain saws. To be accurate, Julia Butterfly Hill was in a tree in Humboldt County, more than 100 miles north of MRC's lands. Several of her peers now are encamped atop a threatened Fisher tree. It is true there are 2 tree sitters recently moved to our property. They are on the edge of a 350 acre harvest plan that is a combination of commercial thinning and selection harvesting. The plan will harvest in aggregate about 40% of the trees in the area, and will leave about 60% of the trees. The retained trees include about 50 trees (out of an estimated 35,000 trees in the harvest plan area) that we classify as old growth - NONE of which will be harvested. The tree sitters are sitting in trees that have specifically been marked as no harvest trees. Early on, when the family refused, among other things, to set aside any of its redwood lands for conservation opponents went right for the Fishers' jugular: Gap's 2,932 Gap, Banana Republic and Old Navy stores. Now the "Save the Redwoods/Boycott the Gap" campaign is a staple on activists' Web sites, often alongside claims about Gap's alleged exploitation of sweatshop labor in Asia. (Gap denies it mistreats workers.) Supporters of both causes have joined forces to mount protests at Gap-owned stores, plus a loud demonstration outside Gap Chairman Donald Fisher's posh home here. (The refrain: "Hey, Mr. Fisher, you've got a store, what do you want the redwoods for?") None of the Fishers agreed to be interviewed for this article. Although conservation easements have a role in what we are doing, our efforts are more focused on finding ways to keep as much land as possible available for timber production while also serving as valuable wildlife habitat. From our first contact with Mr. Waldman, he described the premise of his story as
  1. Raising questions about the judgment of the Fisher family to invest in MRC
  2. Exploring the Fisher family's embarrassment over public reactions to its investment in MRC, and
  3. Questioning the viability of the operating model set forth by the Company. Even given this negative premise, we committed hours of time to educate and inform Mr. Waldman to provide useful information and contacts for his story. We felt this level of participation would allow Mr. Waldman to understand that we are achieving the objectives we set forth when we began. Despite our level of effort, Mr. Waldman wrote a story based on his original premise.
But Gap has responded to the protesters with leaflets and statements of its own, disassociating the corporation from the Fishers' private timber investment, and specifically from John Fisher, who has never been a Gap officer There is no business relationship between Gap Inc. and MRC. Mr. Dean, the family's timber man, dismisses the protests as "noise," Out of 85,000 people who live in Mendocino County, opposition to MRC appears to largely come from a handful of individuals. Citing several environmental milestones since the Fishers bought the land from Louisiana-Pacific Corp. two summers ago: a ban on traditional clear-cut logging; a moratorium on felling trees more than 250 years old and 48 inches in diameter; a 30% reduction in the yearly harvest rate; and big investments in road repairs, stream protections and other safeguards. "We believed from the beginning that if we focused on making continuous improvement, we would gain more support," Mr. Dean says. "I think, in 18 months, that has been borne out." Certainly, lots of people are rooting for the Fishers Our neighbors and local community leaders have expressed the view that our purpose is something worth working towards. Mr. Waldman chose to quote others. Environmentalists and many timber-industry professionals agree that Northern California's coastal forests have been hammered by overlogging-a lot of it, critics say, by Louisiana-Pacific. "We desperately need timber owners who can adjust their economic expectations to the natural growth rate of forests," says Richard Wilson, a Mendocino County landowner who ran the California Department of Forestry under former Gov. Pete Wilson. "Louisiana-Pacific was on a rampage here for 20 years, cutting everything in sight. But the Fishers are responsible people. They'll have a tremendous resource, if they're patient enough to wait" (Louisiana-Pacific says its logging was entirely legal) We are patient enough to wait. At first, even the most ardent forest defenders welcomed the Fishers. From their cluttered cabin on a bluff above the Albion River, Linda Perkins and Bill Heil have been saving trees for a decade. On Wednesday mornings, Ms. Perkins, 59, drives her 1985 Mazda two hours over windy mountain roads to the state forestry office, where she documents every flaw she can find in the big timber companies' logging plans, laying the groundwork for lawsuits. Meanwhile, Mr. Heil, also 59, plies the woods, earning money by sawing lumber for small landowners and, on his own initiative, surveys acre after acre of proposed logging sites. The couple's activism is the main reason the Albion watershed remains canopied by 100-year-old redwood trees. The Fishers proved to be more open to dialogue than Louisiana-Pacific, the activists say. Mr. Dean has made himself accessible, even scaling trees to hear out tree-sitting protesters. But, in the woods themselves, little changed. There were immediate changes, including:
  1. A lower level of harvest
  2. New management
  3. A commitment to end traditional clear cutting 4 1Ž2 months after starting in business
  4. The establishment of an Old Growth Policy 4 months after starting in business, and
  5. Collaboration on restoration projects from our first day as a new company.
All of this and more occurred in 1998, within our first 6 months in business. For many months after purchasing the land, Mendocino Redwood continued logging under harvest plans previously filed with state regulators by Louisiana-Pacific, including clear-cuts. Changes in new plans began occurring immediately. Initially, Mendocino Redwood also balked at seeking third-party certification of its forestry practices under guidelines set by the Forest Stewardship Council, a nonprofit group of green foresters. Our initial goal was to commit to actions and policies that could be implemented immediately. We made a public commitment to certification within 180 days of starting in business. And it continues to spray its lands with Garlon, a herbicide some locals fear could cause cancer. We use Garlon very carefully, for the specific purpose of restoring the health of the conifer forest. We have engaged an outside expert to work with us on a systematic review of alternatives to garlon that might also achieve the same results. More is available about our use of Garlon on our website. When John Fisher was asked at a public meeting, shortly after buying the land, to consider preserving a particular 320-acre tract of redwoods -- 0.1% of the family's land-he replied: "We are happy to consider a conservation easement in this area, but somebody has to pay for it." The die was cast. We do believe that conservation easements may have a role in the long term management of our forests, although this specific area has been judged by the Save-the-Redwood League as not worthy of preservation. This quote occurred following four hours of acrimonious presentations that included yelling, profanity and numerous inaccurate allegations by a group of about 20 local activists. 'Squandered' Goodwill' They squandered an enormous amount of goodwill," says Art Harwood, who owns a big Mendocino sawmill. "They should have cleaned house and committed to certification immediately. They were very naive." Policies, rather than people, were the issue in the beginning. Our policy actions in the first six months demonstrated our commitment. These actions included:
  1. A lower level of harvest
  2. New management
  3. A commitment to end traditional clear cutting 4 1/2 months after starting in business
  4. The establishment of an Old Growth Policy 4 months after starting in business,
  5. Collaboration on restoration projects from our first day as a new company, and
  6. At the end of six months, a public commitment to pursue certification.
Several timber-industry insiders say the Fishers got in over their heads. After scouring British Columbia, Australia and New Zealand for timberlands, they bid on the Louisiana-Pacific lands with Simpson Timber Co., Seattle, whose chief financial officer, Charles Pollnow, attended Princeton University and Stanford Business School with John Fisher. For itself, Simpson got an isolated 72,000-acre parcel-"one of the best-stocked pieces of timberland I've ever seen," says Jim Able, a longtime Louisiana-Pacific forester. The Fishers got three sawmills, 450 workers, hundreds of hostile neighbors, and the logged-over Mendocino lands. After the deal was struck, the Fishers grew nervous, say timber executives who fielded phone calls from the family and Mr. Dean We talked to many people during due diligence. They were clueless about what they could actually harvest on those properties," recalls Mr. Harwood, the sawmill owner, whom Mr. Dean consulted during due diligence. "Sandy thought he could cut 60 million board feet a year," which was Louisiana-Pacific's minimum estimate. "We told him no way." Following an extended period of due diligence we settled on an annual harvest rate of 40 million board feet and paid a price that reflected this harvest rate. Louisiana-Pacific's timber data compounded those doubts, says Stan Renecker, who handles acquisitions for Campbell Group, a Portland, Ore., company that manages nearly 800,000 acres of West Coast timberland, including 194,000 acres in Mendocino County. Campbell, representing another investor, underbid the Fishers for the Louisiana-Pacific land by about 25%, he says. The lower bid reflected its concerns about the reliability of Louisiana-Pacific's harvest estimates, which Louisiana-Pacific defends as sound. The annual harvest rate that we settled on is 60% of the estimated growth of the forest, and is conservative by any measure of commercial management of lands. 'Contrasting Strategy' In any case, Mr. Renecker says it was clear that most of the marketable trees were located in the most densely populated watersheds, such as the Albion, where opposition to logging was strongest. Had Campbell bought the land, he says, the group intended to mollify neighbors-and take big tax deductions-by carving out conservation areas. The Fishers, by contrast, are tapping the Albion's thick forests for about 20% of Mendocino Redwood's total harvest, although the area covers only about 7% of the family's land, Mr. Dean says. Similarly, three other nearby watersheds, which cover 15% of the Fishers' acreage, account for 25% of their logging yield. Mr. Dean says those harvest rates are sustainable- that is, more timber is grown there each year than is cut-but the pace enrages some locals. Some perspective is helpful here. Concern about harvests in the Albion have been most consistently articulated over time by Linda Perkins and Bill Heil. Linda Perkins and Bill Heil each serve as board members of the Redwood Forest Foundation, a non-profit entity organized to acquire the lands that we now own. We have been told by another board member of the Redwood Forest Foundation that the Redwood Forest Foundation's own plans for managing the Albion would have included a harvest rate 20% higher than what MRC harvested in the Albion in1999. "It really comes down to how thick your skin is," says Campbell's Mr. Renecker. Mr. Dean acknowledges he reduced his initial harvest estimate for the lands by 30% during due diligence, but says the purchase price reflected that. Mendocino Redwood expects to log about 40 million board feet this year. (There are about 14,000 board feet of lumber in a typical house.) He says the family intends to underscore its environmental commitments by earning Forest Stewardship Council certification, which should relieve some of the criticism. In August, a review panel denied certification for the company, but Mr. Dean vows to re-apply. We went through a formal certification assessment in the Summer of 1999, and learned that we have more work to do. We have been diligently working to push this ahead since that time, and will pursue another certification assessment when we have addressed issues raised in the 1999 assessment. To showcase their progress, Mr. Dean and his chief forester, Mike Jani, slog through a recently logged mountainside in the pouring rain. The 160-acre site, nicknamed Cold Pack, was typical of lands the Fishers bought, they say: Heavily logged, each acre had a scant 9,000 board feet of timber, more than half of it in unprofitable species. Actually, the 9,000 board feet was all conifer. There was also tanoak in varying concentrations throughout the plan area. 'Variable Retention' To replenish stocks of valuable redwood and Douglas fir, foresters traditionally would have clear-cut the parcel and burned it, says Mr. Jani. But Mendocino Redwood used a lighter touch called "variable retention." Instead of a lifeless moonscape, the slope remains wooded in spots and green. Water cascades over stone culverts built into logging roads, reducing erosion. For those stands where selection harvesting is not appropriate, we strongly believe that variable retention is a vastly superior approach to traditional clear cutting for MRC. The goal, Mr. Dean says, is a forest that will one day have trees of many ages and sizes, traversed by clear streams, supporting wildlife and loggers alike. "This is where the subtlety of what we do on the ground will make a difference," he says. That subtlety is lost on Mr. Heil, the forest defender. With chain saws buzzing all around him, he hikes with his dog Lucy near his home in the Albion watershed. Called Railroad Gulch, the 30-acre parcel was spared from clear-cutting in 1995, when a pair of endangered spotted owls was found nesting in the trees. The owls are gone, and now Mendocino Redwood is logging in the dense grove. The harvesting being done in this area is a single tree selection harvest. We will be harvesting less than 50% of the trees, and will therefore leave more than 50% of the trees, which should continue to serve as valuable wildlife habitat. . A traditional commercial approach to a stand such as this would likely be a clear cut. "If their lands were covered in deep, dark forest, thinning like this wouldn't matter," says Mr. Heil amid the thunder of giant trees crashing to the ground. "But they're taking down the thick forest from little to none." The Fishers seem determined to carry on. The family "is very pleased" with Mendocino Redwood's progress, Mr. Dean says. Other people who know the family say investor John and environmentalist Robert have disagreed on priorities, but respect each other's views. But it was John Fisher who laid down the bottom line soon after the family bought its timberland. "Our view," he told a community meeting in Mendocino, "is that if we are successful from an environmental perspective, but unsuccessful from a business perspective, we won't be here." We are committed to the purpose that we have stated publicly many times, to demonstrate that it is possible to manage productive forestlands with a high standard of environmental stewardship, and at the same time to operate as a successful business. We expect to achieve both.