More Questions Raised About West Branch Project

By Phyllis Austin, Maine Environmental News ( June 26, 2002.

Some Land for Maine’s Future Board members wonder if committing public money to a fee purchase would violate the board’s guidelines against buying "working forest."
(Katahdin and the West Branch)

More details about the West Branch Project have raised new questions from the Land for Maine’s Future Board (LMFB), which has allocated $1 million for the historic conservation acquisition. Some members wonder if the deal announced two weeks ago is, in effect, a new one and if committing public money to a fee purchase would violate the board’s guidelines against buying "working forest." The board was unable to learn at its June 25 meeting whether Yale University’s endowment still owns the 329,000 acres proposed for protection.

Suddenly complicating the West Branch situation is the news this week that $17.2 million of federal Forest Legacy money committed to the acquisition is in jeopardy because of the catastrophic fires in the West. The Bush Administration is seeking $600 million to address emergency funding needs, and the Forest Legacy Program is being tapped for funds. The unspent West Branch allocation for fiscal 2002 and 2003 is being "borrowed," according to Ralph Knoll, lands acquisition director for the Department of Conservation’s Bureau of Parks and Lands (BPL). When it will be repaid is undetermined.

That unexpected glitch was mentioned at LMFB’s Augusta meeting, but the focus was on details of the purchase option agreement announced on June 6 by the state and The Forest Society of Maine (FSM) in behalf of the landowner -- Merriweather LLC, the successor to Yankee Forest LLC, a subsidiary of the Yale endowment. The deal, projected to cost $35 million, would protect the upper reaches of the West Branch of the Penobscot River and the headwaters of the St. John River from development, ensure a continued flow of forest products and preserve recreational access by the public.

About 47,000 acres would be bought outright, and the remaining 282,000 acres would be protected under a conservation easement. At this point, the state and FSM have assurances of receiving $21 million for the deal, leaving $14 million to be raised. The easement will be purchased entirely with private funds raised by FSM and its partners.

LMFB board member Roger Milliken, president of Baskahegan Company lands, asserted that the West Branch project today "is a very different [one]" than the board allocated the $1 million to sometime ago. "It was 65,000 acres of fee lands in Phase 1 and 650,000 of conservation easement lands, and now the deal is 47,000 acres of fee lands and less than 300,000 acres of easement land," he said. "It seems to raise the question of how [the proposal] has shifted. It’s got the same name and area but . . . it’s not the same project," he said. "I’m not sure how we address that."

Marsha McKeague, a board member and woodlands manager for Great Northern Paper, questioned how the state could justify the fee purchase of so much "working forest" around Sebookmook Lake, pointing to the prohibition imposed by the legislature from buying prime timberland or woods in active management.

Knoll responded that a "fee component" was always part of the plan. Hutchinson explained that when the lands were analyzed, "the recreational and ecological values congregated [at Seboomook] and were starting to drive the costs" because they would have had to be fitted into active timber management. Hutchinson indicated that a way to get around the mandate against spending public money for working forest might be to use LMFB’s $1 million to specifically buy the 1,625 acres around the shore of Baker Lake, the most popular starting point for canoeing the St. John River.

The board members’ comment followed a progress report on the project by BPL’s Knoll and Alan Hutchinson, executive director of FSM. Some of the changes in the proposal, which came about at a negotiating summit in Bethel, were made clear when the agreement was announced. The fee component was larger, advised Hutchinson, and the easement portion of the project was going to be purchased with private, not public funds. Also FSM, not the state, would be the holder of the easement and raise money for a stewardship endowment.

Other key elements were a commitment to forest operations under a 10-year management plan, including 20-year timber harvest and growth projections; no residential, industrial or commercial uses except for forest activities; and subdivision limited to 15 parcels, none less than 5,000 acres unless the easement holder (FSM) approved.

Whether the language makes the kind of commitment to sustainable forestry that environmentalists believe is crucial is up in the air.
(Photo: Earth Imagery)

Since copies of the easement have not yet been provided to LMFB or the public, exactly what the requirements are on logging the easement land remains unclear. Hutchinson told the board that forest management activities "must meet a wide range of criteria," from protecting forest health to protecting endangered species. The agreement allows third-party certification for sustainable forestry to be used by the landowner to meet the forestry requirements. Whether the language makes the kind of commitment to sustainable forestry that environmentalists believe is crucial is up in the air.

BPL’s Knoll said that LMFB may be asked for more funds next year. The cost of all phases of the project is currently estimated at $70 million, significantly above the first estimate. An earlier fee sale (mostly using state Land and Water Conservation money) gave the state ownership of 4,200 acres of West Branch lands, including six miles of shorefront on Moosehead Lake, Big Spencer Mountain and a 233-acre old growth rare plant site. The next half of the project will be to negotiate an easement agreement for 320,000 acres owned by Great Northwoods LLC, an entity of the McDonald Investment Co. of Birmingham.

Approximately 40,565 acres of the fee lands encompass 6,448-acre Seboomook Lake, from the north shore of Moosehead and on north to the Golden Road. (These lands are currently managed for recreation by the landowners’ North MaineWoods entity.) Seboomook was 14th on a list provided FSM by the Department of Inland Fisheries and Wildlife (IFW) of "statewide significant" lakes and ponds in the West Branch Project area. Of the 47 water bodies listed, Canada Falls Lake is first and is included in a 250-foot fee strip purchase around the shore. The 3,895 acres encompassing the headwater ponds of the St. John River -- First, Second and part of Third St. John Pond -- are also in the fee area and almost at the bottom of IFW’s list.

Roger Milliken asked for an explanation of the conservation and recreational values around Sebookmook. There are two "significant deer wintering areas," answered Knoll, as well as a major snowmobile trail. "The lake itself probably wouldn’t rise to the top of the [priority] list," he acknowledged. "It’s not Moosehead but is associated with the [West Branch] Penobscot corridor."

"This is where people are looking at second homes and snowmobile camps."

Hutchinson elaborated that Seboomook features campgrounds managed by the state and North Maine Woods and is home to rare and endangered species, such as two pairs of bald eagles. Also, he mentioned the "history around the confluence of the North and South branches [of the Penobscot], such as Pittston Farm and access on Moosehead Lake," and there are "amenities" available at the farm and the stores at Northeast Carry and Seboomook Campground.

Development pressure in the area that’s "driving conversion of the land," Hutchinson said. "This is where people are looking at second homes and snowmobile camps," he said. There are two parcels of land being offered for subdivision into 40-acre house lots in the area. Hutchinson pointed to neighboring Elm Stream Township which was subdivided "in the blink of the eye" some years ago.

Board member Walter Balgooyen asked what kind of timber value is on the fee lands. ‘Up through the North Branch, there’s high timber value," Hutchinson said. "The exact value will be determined through the appraisal work." Balgooyen wanted to know if the woods "has been cutover." Hutchinson responded, "Absolutely not."

Ron Lovaglio, another LMFB member and commissioner of the Department of Conservation, pointed out how long it has taken – two and a half years – for negotiations to achieve an option agreement. "There was a concept of win/lose" at the beginning, he said. "Ultimately things were not going well. [Negotiations} were stalled a long time," Lovaglio noted. "Finally, we said how do we as a group get to ‘yes’ collectively."

Ron Lovaglio, LMFB member and commissioner of the Department of Conservation.

The fee portion, he told colleagues, "is where the ecological and recreational values are. That’s why we focused there – the St. John Ponds, Baker Lake. In the end, it fit a lot of the guidelines of LMFB and Forest Legacy," he said. The agreement is "a great example of getting to yes."

Lovaglio was optimistic that "there are ways to address" the timberland purchase question "to the satisfaction of the board." He also mentioned the possibility of using fee money "for the Baker Lake component. We will come back with a more definitive project," he promised.

There was little comment on the separate access agreement. It grants vehicle access across designated roads which include about a dozen major woods roads. ATVs will be permitted with permission of the landowner (currently they aren’t allowed on North Maine Woods’ roads). There are no existing ITS snowmobile trails in the easement area. New snowmobile trails would require permission of the landowner. The landowner would retain primary road maintenance responsibility and can charge fees to cover the costs of repair and recreational facilities.

Karin Tilberg, Maine director of the Northern Forest Alliance, told the board that Greenville area residents and businesses are worried about development in the West Branch area and want the lands protected. "Moosehead Lake is greatly at risk," she said. "This project can help protect it."

Doubts about the project were raised by Jym St. Pierre, Maine director of RESTORE: The North Woods, who has been "ambivalent" about the project all along. "How do you justifying spending money for acquisition of productive forestland?" he asked. "You need to address that." He wanted to know more about the separate access agreement and how BPL plans to pay for managing the recreational uses.

The public has a right "to know who you’re handing over $1 million to," St. Pierre said, referring to the apparent change in ownership. "There’s something unnerving that we don’t know who it is," he said.

Chairman Evan Richert asked Hutchinson if he knows the owner or owners. Hutchinson said, "An investment group. It changes over time. They are a legal entity." The presidents of the Yale endowment fund and Wagner Forest Management Ltd. (the land manager for Yankee) declined to return phone calls to Maine Environmental News to answer questions about the ownership.

Yale’s endowment, through Yankee Forest LLC, purchased 330,000 acres of the West Branch lands from the McDonald Company (Great Northwoods LLC) in 1999 and also bought the 440,00 acres of the old Georgia Pacific lands in that same year.

The endowment's 990 tax form for 1998 showed that Yankee Forest LLC's assets were $13,046,812 and income was a negative $134,551 -- raising questions about where Yankee was doing business then. In 1999, when Yankee was known to be a Maine timberland owner, the asset value jumped to $24,278,646, and the income was a negative $577,830. The next year, assets were listed at $108,768,783 and the income was a positive $2,686,018.

Yankee Forest was no longer listed on the 2001 form, but Yale’s foundation, as a tax-exempt organization, is not required to list its unrelated business income through subsidiaries if it doesn’t own at least 50 percent interest in the entity.

On May 15, 2002, Yankee Forest sold a large tract of land in Somerset County with Kiev LLC of Lyme, N.H. for $46 million, according to tax documents in the state property tax office in Augusta. On the same date, a certificate of merger between Kiev LLC and Merriweather LLC was deposited in the Somerset Registry of Deeds. Merriweather filed incorporation papers with the Maine Secretary of State’s Office on June 18, 2002.

(Photo: Earth Imagery)

Ron Lovaglio commented that "it’s easy to throw a lot of questions, but this is one of the most important" projects in the state’s history." The apparent change in ownership "even while negotiations [for protection are on-going] shows the importance of getting the development rights extinguished," he said. "We can wait for every answer while private ownership keeps moving." The continuing interest of multiple owners in investing in the property "proves the value of what we’re proposing," Lovaglio said.

Chairman Richert concluded the discussion by pointing to "a couple of key questions – the switchover [of project aspects] and the fee [allocation]." Also to be resolved is "to what degree are we in conflict with our statute [on acquiring timberland in production]?" he said. "It’s good to have this conversation today."

The board’s easement review committee will meet in a few weeks and expects to have a copy of the easement and access documents and a more detailed discussion with Hutchinson and Knoll.

See also West Branch Project In Trouble, By Phyllis Austin, 5/8/02.