Small sawmills want state to loosen Weyerhaeuser's hold

registerguard.com ^ | 19-10-03 | By Joe Harwood

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SALEM - Grant Wheeler wants to add a second shift to his Reedsport hardwood sawmill, his Westwood Lumber Co. remanufacturing plant in Junction City and his planing mill in Saginaw.

But a shortage of the alder sawlogs that Wheeler converts into Fender guitar bodies, Purdy paintbrush blanks and parts for kitchen cabinets will keep employment at the three facilities hovering at 135 workers. At least in the short term.

"If I had more logs, I would add more employees," Wheeler said. "The market is there."

To get those logs, Wheeler and other independent sawmill operators are taking the unusual route of beating up on the nation's biggest timber company, Weyerhaeuser Co., and trying to stop Weyerhaeuser from buying alder logs from state lands in Oregon.

Weyerhaeuser has a dominant grip on the Northwest alder supply, and the independent sawmill operators at a public hearing on Tuesday asked the state to eliminate a special waiver that lets Weyerhaeuser buy alder sawlogs off state lands.

The State Land Board will use evidence gathered at Tuesday's public hearing to decide whether to revoke or modify Weyerhaeuser's ability to buy state logs.

Weyerhaeuser's Northwest Hardwoods division, with six mills including facilities in Eugene and Garibaldi, controls more than 60 percent of the Pacific Northwest alder market.

The state in 1999 gave Weyerhaeuser a special waiver to buy state alder logs after the firm resumed exporting Douglas fir logs off its forestland.

State laws bar log exporters from buying timber harvested off state lands. The law aims to keep domestic sawmills running and their workers employed.

The state Department of Forestry granted Weyerhaeuser the exemption to buy alder logs from 133,000 acres of state-owned land after the company argued that it needed the state logs to keep its Garibaldi and Eugene sawmills running.

But court documents from a civil anti-trust trial in Portland earlier this year showed that Weyerhaeuser vastly exaggerated the need for state logs by the two mills. That trial ended with a jury deciding Weyerhaeuser must pay $78.8 million to a small independent mill for engaging in illegal and monopolistic behavior in the alder market.

Weyerhaeuser, for example, told the state in 1999 that state logs were needed to supply 34 percent of the raw logs used at the Eugene mill.

But documents that surfaced in the court case showed that even if the company bought every state-owned alder sawlog within 100 miles of the Eugene mill, those logs would make up less than 5 percent of the mill's supply.

Weyerhaeuser has said the 1999 information was a math error and that it did not intentionally deceive the state.

The independent mills argue that Weyerhaeuser is trying to monopolize the alder market and drive small rivals under.

In deciding whether or not to revoke the exemption, State Land Board will mainly study how its decision will affect the state's timber sales revenues. That money funds schools.

Rob Taylor, a Weyerhaeuser vice president, argued Tuesday that if his company were barred from buying state alder logs, competition for the logs would decrease, reducing state revenue.

But Portland attorney Michael Haglund, who was the plaintiff's attorney in the April trial and is representing Wheeler and others in a separate alder lawsuit against Weyerhaeuser, said Weyerhaeuser's strategy has been to buy up as much alder as possible in order to eliminate smaller mills, reduce competition and eventually lower its alder log costs.

Using internal Weyerhae- user documents unsealed by a federal judge in August, Haglund showed that Weyerhae- user officials in 2001 were expecting alder log prices to drop through 2003 as the company consolidated its stranglehold on the market.

Richard Zerbe Jr., an economist and professor at the University of Washington who gave his testimony Tuesday by telephone, said that because Weyerhaeuser is a monopolist in the Northwest alder industry, the company "holds the power to reduce the prices for alder sawlogs to the detriment of log suppliers in the region, including the state of Oregon."

But cutting Weyerhaeuser out of state alder log sales might hurt the firm's Eugene mill, which has about 160 workers. Weyerhaeuser's Taylor warned state officials: "Loss of the opportunity to purchase state logs ... is the type of factor that I expect would be included in future business investment and operating decisions."

Economist Joe Cortright, a member of the Governor's Council of Economic Advisors, said that even if Weyerhaeuser closed its Eugene and Garibaldi operations, no net jobs would be lost because other mills such as Wheeler's are ready to increase production.

That comment didn't sit well with two workers from the Weyerhaeuser's Eugene hardwood mill, who testified that they worried about losing their jobs.

Several of those asking that Weyerhaeuser's exemption be revoked testified that Weyerhaeuser conditions its sales of Douglas fir logs to other Oregon forestland and sawmill operators - such as Roseburg Forest Products and Hampton Affiliates - on the commitment of those firms to sell all their alder logs, including those off state lands, to Weyerhaeuser. That's anti-competitive, Haglund argues.

But Dave Ivanoff, a Hampton's vice president, said that allegation is untrue and that Hampton sells all its alder logs to Weyerhaeuser because Weyerhaeuser pays its bills on time and takes all the alder Hampton offers.

Hampton used to do business with some of the independent hardwood mills, but they were slow to pay and couldn't always handle the volume of logs Hampton offered, Ivanoff said.

The State Land Board, made up of the governor, secretary of state and state treasurer, is expected to make a decision at its Oct. 21 meeting.

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[EggsAckley]

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[Carry_Okie]

I saw examples of Weyerhauser's forestry on the Olympic peninsula last month. I was not impressed, big blocks, high stumps, torn up ground, and lots of weeds. What I saw of Simpson's work was far better but could improve.

[bicycle thug]

I worked alot in the Weyco Calapooya Tree Farm here in Lane County, and down near North Bend/Coos Bay. They run a tight tree farm, which in my book doesn't make it any kind of real forest.

I have worked for Simpson too picking seed cones. What I have seen of their lands is indeed much better looking.