the new west conference

Holley Lays Out Plum Creek’s Plans

By Peter Metcalf, 10-24-08

	Plum Creek CEO Rick Holley delivering his keynote address Friday morning in Missoula at NewWest.Net's 3rd annual conference. Photo by Anne Medley.

The perceived rate of sale of Plum Creek Timber Company timberlands in Montana to private recreational buyers and for residential subdivision has elicited widespread public concern, lands that for generations have provided well-paying jobs, public recreation and wildlife habitat.

Plum Creek President and CEO Rick Holley took great pains to allay these concerns during his keynote presentation at NewWest.Net’s 3rd Annual Real Estate and Development conference Friday morning. 

“We converted to a (Real Estate Investment Trust) in 1999 merely to access capital and to grow more efficiently,” Holley said. “We think of ourselves today as a land and timber company.”

Public perceptions that the state’s (and country’s) largest private landowner is in the business of selling huge swaths of land for residential development are misplaced, Holley said.

In Montana, Plum Creek sold 210,000 acres over the past five years, 85 percent of which has been sold to other timber companies or to conservation buyers like The Nature Conservancy or The Trust for Public Lands. Only 3,000 acres have been subdivided for residential development and of that, only 1,500 acres have been sold, Holley said. 

In the next five years Holley expects Plum Creek will sell no more land in Montana than in the past five years. This includes 30,000 recreational acres and the subdivision and sale of an additional 3,000 acres in 25 60-acre chunks, although he acknowledged the current economic situation may delay this process. 

“My guess is its going to be difficult to have 3,000 acres of development over the next five years, but that is the plan,” Holley said.

One of the reasons for the misconceptions surrounding Plum Creek, Holley said, is its lack of transparency in their business dealings. But it’s begun to spend more time talking with county governments, citizens and other “neighbors” about their plans and to learn their needs and concerns so future development can be a “win, win, win” for Plum Creek, the community and wildlife, Holley said. 

Nationally, the company expects to sell between 1.5 and 2 million acres over the long term. Of these acres, Plum Creek considers 200,000 as “development gems,” land that is near water corridors, cities or prime recreational sites. Holley expects these lands will see some sort of development in the next 15 - 20 years. The company also plans to sell another million acres of prime recreation lands as well as 300,000 acres of land it considers non-strategic, that is, without high timber or recreational value. 

The emergence of real estate as an important piece of Plum Creek’s business model in the Northern Rockies results from the collusion of two forces, Holley said. First is a squeeze in the wood products economy. The timber business in the Mountain West suffers from lack of access to timber on public lands, competition from cheap Canadian imports, longer harvest cycles than elsewhere in the country, and, today, a big housing slump. At the same time the shift from a resource- to a recreation-based economy have resulted in land values of three to five times per acre the value of saw logs, Holley said

Despite the shift, Plum Creek remains committed to the wood products business in Montana and protecting free public access to its land, Holley said.

Plum Creek, which harvests 10 million tons of pulpwood annually, is also well positioned to take advantage of the renewable energy source of cellulostic ethanol which synthesizes ethanol from wood fiber. Montana has a great potential to supply wood fiber for cellulostic plants if the public will permit increased harvest of diseased, dying or dead trees on public land. And if it does, Holley said, he hopes Plum Creek can convince new cellulostic plants to locate in Montana.

While Plum Creek plans to continue to sell land to private buyers and remain a timber company, it remains committed to conservation efforts, Holley said. “Conservation is a big part of our history here in Montana.”

Holley called Plum Creek “the biggest conveyor of conservation in the country,” with hundreds of thousands of acres under conservation easements in Montana alone, the development of voluntary habitat conservation plans for fish and wildlfie, protection of wildlife corrirdors for Grizzly bears in the Swan Valley and the sale of land through conservation projects like the nascent Montana Legacy Project.

“We think this is a very important project for the people of this state and the people of this country,” Holley said. 

The Legacy Project involves the sale of 312,000 acres in western Montana to The Nature Conservancy and The Trust for Public Lands. The project is funded in part by the sale of federal Forest Conservation Bonds to the tune of about $250 million and includes agreements by both TNC and TPL to provide wood to local mills, at market prices, for at least the next decade. 

Plum Creek also made headlines this year when it came under intense public scrutiny for what was perceived as backroom dealings to renegotiate the cost-share road agreements with the Forest Service. In the agreements, which date to the 1960s, the Forest Service and private timber companies agreed to share the cost of road construction and maintenance in exchange for guaranteed access across each other land to reach checkerboarded properties. As part of the negotiations, Plum Creek wanted to clarify that the original agreements included access for all uses, including residential, not just timber management. The move was seen by many people and county governments as an attempt to open up more land for potential residential development. 

Currently about 100 houses in western Montana are accessed off cost share roads, Holley said. 

When asked by New West publisher Jonathan Weber about the perceived backroom approach used in the negotiations, Holley denied the deals were secret but acknowledged the company erred in not engaging county governments and the general public about their concerns with the negotiations.

Weber also asked Holley about Plum Creek’s so-called “nuclear option.” As a majority private landowner in some western counties, Plum Creek can under state law automatically veto any county zoning proposal. 

“We’ve never exercised this right and hope never to exercise it,” Holley said. They would only do so if the county wanted to down-zone their property from, say, 160 acres to 640 acres per minimum lot size. One effect of the Legacy Project is that it could reduce Plum Creek’s holding to less than 50 percent in parts of Missoula county, effectively removing the veto power.

Despite the downturn in the housing market, Holley expects demand for recreational land and rural development in Montana to remain strong over the long term. Comprehensive planning is needed to identify where that development should occur. Plum Creek favors the transfer of development rights--which pay one landowner not to develop their land in order for another landowner to develop at a higher density--instead of zoning to implement a growth plan.

“No one wants fragmented development,” Holley said. “It makes no sense.”

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