John Driscoll/The Times-Standard

Posted: 12/22/2010 10:20:35 AM PST

The Humboldt Redwood Co. will pay $330,000 to settle more than $4 million in penalties from water quality violations by bankrupt Pacific Lumber Co. if an agreement is approved by state regulators in January.

As part of a stipulation with the North Coast Regional Water Quality Control Board, Humboldt Redwood has agreed to pay a portion of the fines levied against PL for its failure to comply with several cleanup orders regarding Elk River and Freshwater Creek. The orders, lodged in 2004 and 2006, required PL to assess, treat and monitor sediment discharges from logging practices in the watersheds, which can harm salmon and cause flooding.

Clearcutting and road building by PL in those watersheds generated a flood of controversy over years. PL went bankrupt in January 2007, and the Mendocino Redwood Co.'s bid to buy the company was successful. With the purchase, the new Humboldt Redwood Co. agreed to stop cutting old-growth redwoods, reduce the rate of logging and eliminate traditional clearcutting.

In the stipulation, the water board staff acknowledges the company's higher standards but said that the company was aware of the $4 million liability it was taking on when it bought PL during bankruptcy.

The substantially reduced penalty of $330,000 is a result of negotiations between the water board and Humboldt Redwood, said water board Assistant Executive Officer Luis Rivera.

”It's a reflection of today's circumstances,” Rivera said.

Humboldt Redwood Chairman Sandy Dean said that PL had tried to negotiate a reduction in the penalties before it went bankrupt. After Humboldt Redwood took over, the new company argued that the fines should be waived altogether, Dean said, especially since it fired the top management of the defunct PL. Dean said Humboldt Redwood has done the best it could to resolve the matter to the water board's satisfaction, but he wouldn't comment on whether he felt it was fair to punish the new company for the old company's deeds.

”Having to pay fines for the actions of the old PL at a time when our industry is under significant economic strain is a challenge,” Dean said.

With the stipulation, the water board will have settled all violations from the old PL, Rivera said. The orders will sunset, and new permits will be issued to Humboldt Redwood to reflect the company's logging practices and protect the Elk River and Freshwater Creek watersheds, he said.

The stipulation is scheduled to go before the water board on Jan. 27.

John Driscoll covers natural resources/industry. He can be reached at 441-0504 or