CEO Holley optimistic about Plum Creek's future

By CHRIS PETERSON / Hungry Horse News

Skyrocketing energy prices. Large loses in manufacturing. A souring real estate market.

You would think Plum Creek Timber Company officials would have a glum outlook on their business. True, there are some bumpy times ahead, but overall CEO Rick Holley says he's optimistic about the future of the nation's largest private landowner.

Local mills are seeing significant losses — the company's manufacturing segment, which includes all its mills here, reported an $11 million loss for the second quarter on Monday.

Holley and Hank Ricklefs, the company's vice president of northern resources and manufacturing, blame poor lumber markets due to the decidedly soft housing market. That softening market could lead to consolidation of mills in Montana, Ricklefs noted.

Timetable?

Ricklefs couldn't say exactly, but the company is definitely examining its options. The hope is to do the consolidation without trimming jobs, he noted.

Holley and Ricklefs both noted that the medium density fiberboard plant and its plywood operations are both profitable. The company is also still trying to attract a flooring manufacturer to Columbia Falls. The hope is to get the company to locate at Great Northern Bark industrial site.

Holley said overall he was optimistic about the housing market. He noted that the U.S. is still seeing population growth and plenty of immigrants, and they'll all need housing in the coming years. He predicted the housing situation, which has been rocked by millions of foreclosures, bank failures and government bailouts, to rebound in the next couple of years.

THE COMPANY'S REAL ESTATE segment is still showing significant gains. In the second quarter, it had $57 million in revenue and $35 million in operating income. The company, which owns about 8 million acres of timberlands nationwide, reported $31 million in earnings for the second quarter.

In the last five years, the company sold about 27,000 acres in Montana and about 3,000 acres were sold for outright development — housing projects.

In the next five years the company plans to sell about 20,000 to 30,000 acres more for recreational lands and another 3,000 to 5,000 acres for housing development. But the bigger project is in the Swan Valley where the Nature Conservancy, the state and the federal government have all entered an agreement to eventually buy 320,000 acres of timber from the company.

The idea is to dissolve the "checkerboard pattern" of land ownership in the valley, where Plum Creek owns one section and the state and federal government own another. The fear, conservationists noted, was the company would begin to liquidate those lands to private landowners, forever taking them out of not only the timber base, but for recreation as well.

Holley said the deal was good for the company and good for the public. He noted the company would have a fiber agreement on the lands for 15 years after the deal. And even after that, the company was in a good position to bid on that timber when it became public property.

ONE IDEA, HOLLEY SAID, was to have the state manage the timberlands, but have the federal government own them. In recent years, the Forest Service has been slow bringing up timber sales unless they're fire salvage sales and even those sales have resulted in litigation.

On the balance, Holley said, most of the company's remaining 900,000 acres "will be timber."

The company is also looking at ways of making the timber it harvests more productive. Two employees are currently working full time on developing biofuels — taking treetops, slash and the like that would normally be burned and turning it into ethanol. Another idea is a co-generation plant in Columbia Falls that would create electricity to run the mill. Ricklefs said the company is examining that prospect, but it's still a ways off and some government incentives may have to be put in place to make it happen.

The MDF plant is taking steps to curb pollution. A new scrubber is being installed to reduce the plant's formaldehyde emissions. The company has been sued by some neighbors of the plant who claim the compound, which is used to make glue, fouled their wells. The company settled with most of the parties, but some are still sticking with the suit.

Holley also pointed out the good the company does. Its foundation offered $175,000 in scholarships to its communities last year and $670,000 in grants. The scholarship program used to be just for employees' children, but now the company offers them to students who simply live in the community.

Holley was in town last week talking to reporters, an effort, he said to bring more "transparency" to Plum Creek's operations.