Mat-Su floats major new timber venture. But is it too good to be true?

PALMER — It sounds too good to be true: a massive Susitna Valley timber sale providing jobs and clearing trees infested with spruce bark beetles — even rescuing the Mat-Su Borough's failing port.

Borough officials estimate the project could drum up nearly $900,000 a year for the government-owned Point MacKenzie port that is currently losing $800,000 to $1.5 million each year.

The ambitious venture partners a local logger who once sued the borough with a new company formed by a Washington timber manager who is, in turn, working with a New Zealand wood products company.

Skeptics say the deal sounds too good to be true because it is.

Along with questions about how fast the project is proceeding with little public input, the borough wants to exempt the timber sale from several aspects of existing code and public scrutiny.

"The whole thing is sketchy," said Ruth Wood, a Talkeetna activist concerned about the complicated history of the timber sale and the fast pace of proceedings. "I understand the borough wants to get money in the port but to do a bad business deal to get money in the port seems odd."

Born from a lawsuit

The 24,000-acre borough timber sale, known as Chijuk Creek, is off Oilwell Road in the Trapper Creek area about 22 miles southwest of Talkeetna and 30 miles northwest of Willow.

The proposed sale follows what one Assembly member called a "checkered" history involving the Matanuska-Susitna Borough's involvement with the logger and the land.

Logger Charlie Nash bought Chijuk Creek in 1998, but the borough terminated the timber deal in 2002, saying Nash didn't cut enough trees and left too many spruce logs on the ground, violating the terms of the timber sale contract as well as state law. Leaving logs like that can cause bark beetles to spread.

Nash, who at the time blamed road-building requirements and washouts that temporarily closed Oilwell Road, sued the borough. The case made it to the Alaska Supreme Court, which remanded the decision to a lower court. The two sides settled in 2013.

In a separate case involving a wood-products company, NPI, doing business at the port, the borough paid a $2.5 million settlement.

Borough Mayor Vern Halter said at an Assembly meeting Tuesday that he generally supports the new project but hoped the proposed partnership would not result in yet another lawsuit. Halter sat on the Assembly during the Nash settlement.

[Port lawsuit settlement gives borough leasing freedom]

"I am very hesitant with the current lease holder," Halter said.

Chinese markets

If the sale goes forward, a company called Denali Timber Management, formed by Washington state resident Eric Oien in October, would log the trees mechanically and chop them into 8-foot sections. Denali would use contracted log trucks to haul the wood to Port MacKenzie.

From there, a New Zealand company called TPT Forest Products Ltd. would move the lumber to China via roughly six ships a year, company officials say.

The Chinese buyers received six sample log loads late last year, and the "notoriously crooked birch trees" and "blue-stained" spruce met with approval, Oien said.

TPT handles 7 million tons of log and lumber exports a year to China, Korea, India and Japan, according to joint owner Mark Procter. Procter said he traveled for 24 hours to come to several meetings in Palmer with local officials on Tuesday.

"We see this as an opportunity and take it very seriously," Procter said.

Assembly role

Before the project can proceed, the Mat-Su Borough Assembly is considering two ordinances: one giving Nash the contract for an estimated 15,000 acres of "operable" timber over a five-year term at $31.50 an acre; and another giving Denali Timber Management a port lease that includes three-year exclusive rights to ship logs to Pacific Rim countries.

The borough is calculating $960,000 in port revenues from wharfage and dockage fees plus an 8-acre lease, according to the proposed ordinance.

Officials had estimated the borough could make another $475,000 or so from timber purchases, but that's apparently in error.

The number was based on the 15,000-acre operable timber estimate. Oien in an interview Thursday said Denali expects to actually log 11,000 to 12,000 acres, though that could rise to 14,000 by the end of the five-year contract.

The Assembly delayed action Tuesday night after Wasilla member Ted Leonard couldn't attend the meeting. A second public hearing and possible decision are scheduled for April 17.

Covering costs

Two Assembly members — Dan Mayfield and Randall Kowalke — have worked on the timber sale for up to two years. But other members complained Tuesday they got little information until days before a possible decision.

Assembly member Jim Sykes also pressed the borough manager on why the sale couldn't be put out for competitive bid instead of going straight to a logger with a difficult past.

Manager John Moosey said that any delay could push logging into the next season.

"The last three years, there has been questions brought forth: 'What are we doing at Port MacKenzie? How come we're subsidizing Port MacKenzie?' " Moosey said at a Tuesday afternoon work session. "This is an opportunity right now to cover those costs."

Beat the beetles?

The forests of Mat-Su are at the epicenter of an ongoing epidemic of bark beetles reminiscent of one that started in 1996 and decimated Kenai Peninsula spruce stands.

The Alaska Division of Forestry estimates 450,000 acres are infested statewide, according to Jason Moan, the state's forest health monitoring program manager. Most of that is scattered around Mat-Su.

The Chijuk sale is 60 percent birch and 40 percent spruce that's infested with beetles, Oien said. The value of timber from infested stands on the Kenai and in Canada started to drop after one to five years.

The marketability of that spruce is "certainly our biggest concern," he said. "That's why there's such a push for expediting this. The clock is ticking."

Numerous small-mill owners, timber-dependent businesses and a land manager with Cook Inlet Region Inc. pressed for approval of the deal Tuesday night to boost the struggling industry in the borough and reduce fire danger. CIRI could benefit from a major new player in Valley timber, officials say.

John Sturgeon, who admitted he's known more as "the moose hunter that went to the U.S. Supreme Court," owns Concord Forest Products in Anchorage and urged the Assembly to tap "incredible" China markets.

"It's time to do something," Sturgeon said.

'Why have code?'

Critics say the proposal, introduced for hearing just last week, needs more scrutiny.

Borough officials estimate that 25 log trucks every weekday could rumble down Oilwell Road. The road, used by cabin owners, snowmachiners and hunters, is maintained by the borough through a local taxpayer-funded service area for about 12 miles. Then it turns into a rough one-laner.

Donna Massay, who lives along the road, showed the Assembly photos of when she encountered an oncoming truck at the Moose Creek bridge.

"If you look closely, you'll see my tire is right at the top of the bank. His tire is right at the top of the bank. And our mirrors couldn't pass," Massay said. "I want us to be safe. I want to see the plan how that's gonna happen."

The proposed ordinance specifically exempts the Chijuk sale from the borough's own forest-practices code — which includes competitive bidding requirements — and natural resource management plan, though it still needs state approval.

The borough already changed code to remove the timber sale from annual allowable cut limits, established to maintain sustainable logging practices over time,  said John Strasenburgh, a Talkeetna resident who tracks timber issues and weighed in during the Nash settlement in 2013.

"Why have code and planning if the first big 'opportunity' comes along, you just say, 'Well, the code doesn't apply'?" Strasenburgh said.