San Francisco, December 13, 2005 – Morrison & Foerster LLP’s Land Use and Environmental Law Group secured a hard-won victory for The Pacific Lumber Company (PALCO) yesterday when the Court of Appeal for the First Appellate District reversed a 2003 trial court decision that invalidated the state plans, permits and approvals for the landmark Headwaters Agreement.

The United States, the State of California and PALCO entered into the Headwaters Agreement in 1996 to end a fierce legal battle over the proper regulation of timberlands and endangered species in California’s North Coast. Under the deal, PALCO transferred valuable old growth timberland to public ownership in exchange for regulatory certainty for its timber harvesting operations on its remaining holdings. The Agreement depended on the adoption of several federal and state plans and permits. For the next few years, various state and federal agencies worked with PALCO, scientists, interest groups and the public to develop and adopt environmentally sound, yet economically feasible, restrictions, guidelines and plans for PALCO’s timber operations.

After the adoption of the state plans, permits and approvals, two groups of petitioners—one environmental (Environmental Protection Information Center and the Sierra Club (EPIC)) and one labor-based (United Steelworkers of America (USWA))—sued PALCO and the State of California challenging these approvals. In 2003, the Humboldt County Superior Court issued a decision in favor of these challengers and set aside the plans, permits and approvals.

On December 12, 2005, the Court of Appeal, in a 84-page decision, systematically rejected all of Petitioner USWA's and nearly of all Petitioner EPIC’s arguments. The Court rejected claims that the state agencies violated the state forestry laws, the California Endangered Species Act (CESA), the California Fish and Game Code and the California Environmental Quality Act in approving PALCO's Sustained Yield Plan (SYP), Incidental Take Permits and Habitat Conservation Plan, Streambed Alteration Agreement, and Environmental Impact Report/Environmental Impact Statement. The Court's detailed opinion addressed many issues of first impression, including the proper scope and content of an SYP, the temporal requirements for the "full mitigation" mandated by CESA, and the validity of "No Surprises" assurances under CESA.

Ned Washburn noted that "the decision is a ringing endorsement of the Headwaters Agreement. In affirming the validity of PALCO's SYP, ITP/HCP, Streambed Alteration Agreement and the CEQA environmental review document, the Court of Appeal has given the judicial stamp of approval to the deal the Legislature and the Governor made with PALCO that brought the Headwaters Forest into public ownership and ensured the company would be able harvest at an economically sustainable level."

Morrison & Foerster represented PALCO in this matter. The team included partners Ned Washburn and Chris Carr; and associates Bill Sloan and Shaye Diveley.