A UT Regent's Ties to Deforestation

You can't see the forest for the clearcutting

By Kathy Mitchell
September 1990; pages 8, 18; Volume 2, No. 1

Jack Blanton, UT regent and member of the influential UT Development Board, makes $399.00 per hour in direct income from his various positions as director of corporate boards across Texas and the South. If we include long-term compensation in the form of stock grants and retirement plans, the wage jumps to $1,640.81 per hour. In Texas this compares to the hourly wage of 410 clerical assistants in the library (at $4.00/hr.), 234 shift/assistant managers (at $7.00/hr.), or 25 school teachers (annual salary).

This figure does not include Blanton's salary as President of Eddy Refining Company, a subsidiary of Ashland Oil not subject to proxy disclosure, or Texas Commerce, now held by Chemical Bank. Three of his nine directorships alone (Southwestern Bell, Baker-Hughes and Burlington Northern) account for $1,490,550 in assets and income. To industry, Jack is a very valuable man.

The political economy of Jack Blanton

Chair of the Board of Regents under Bill Clements from 1987 to 1989, and currently regent representative on the influential Development Board, the only advisory council with direct policymaking authority, Blanton is one of several business heavyweights making investment policy for the University. In his full time work as a corporate director and company president, Blanton has taken public stands against divestment from South Africa, against affirmative action in Northern Ireland (Baker-Hughes' proxy statement, 1/24/90), and against revealing any information to shareholders on company plans to support the MX missile (Burlington proxy, 4/5/90). Further, since his appointment to the board of Burlington Northern in April of 1989, Burlington has released plans to restructure Plum Creek, its forest subsidiary, to take advantage of a natural resources tax loophole and further facilitate the devastation of an old growth forest of the Pacific Northwest.

Baker-Hughes, a diversified tools and drilling company, actively maintains a South Africans subsidiary of 491 employees. In a statement on South Africa, submitted to the Baker-Hughes board of directors in January by a stockholder group representing nearly 3.1 million shares, large investors asked the company to withdraw its operations and negotiate the transfer of the company to Black control. The board voted against the stockholder proposal, arguing that Baker-Hughes "provides equipment and services to the private mining industry, which is one of the largest employers of non-whites." Despite the exploitative nature of the mining industry in South Africa, board members consider their services to be a "positive force for the elimination of apartheid." On the board of Baker-Hughes, along with regent Blanton, sits David Lybarger of the UT Engineering Foundation Advisory Council, and Richard Bressler of Burlington Northern.

Burlington's war on old-growth forests

Burlington Northern has undergone a two-phase restructuring, under the leadership of Richard Bressler, which has led directly to the clearcutting of old-growth forest stands from the Cascade Mountains of Washington to the western border of Montana. Initially Burlington set up Plum Creek as a timber subsidiary whose strategy was to clear cut in order to increase the market value of the asset and decrease the chances of a buyout. Now, Plum Creek itself is being restructured as a limited partner and a corporation in order to avoid paying federal income tax.

Profiting from Deforestation

Federal law exempts from tax publicly traded partnerships that derive 90 percent of their revenue from natural resources. Burlington divided the old Plum Creek into two entities, Plum Creek Timber, a limited partner, and a manufacturing corporation. Plum Creek Timber will contain all the trees and pay no tax, while the corporation will hold the mills. The corporation would have to pay taxes on profits, but it will be so burdened with debt that it is expected to run at a loss. The new restructuring also insures that the clearcutting will continue unabated. Long-term debt for the new Plum Creek will jump from $2 million to $325 million and it will push for the continuing upward revaluation of its timber assets to offset the debt. This means continued cutting for overseas sale while prices remain high.

As Montana Rep. Patrick Williams testified before the House Subcommittee on International Finance and Monetary Affairs, "Recently, a major timber company [Plum Creek] in the United States was split off, sold. It sold under a limited partnership, although it has public stock. It has taken on, as have many other companies to prevent their being bought out, it has taken on enormous debt. It now needs to finance that debt ... It sell to the Orient raw logs off its private holdings at enormous prices ... It then moves east, primarily to Montana, buys up and harvests everything it can in the forests in Montana on Federal land."

Burlington: from railroad to forest killer

Burlington Northern, once largely a railroad, controls 1.5 million acres of land granted to the railroads by Lincoln in the 1860s. Until 1980, when Congress began to deregulate the railroads, Burlington management had virtually ignored its heritage of Federally granted resources. Deregulation, in the early years of leveraged buy outs, led to the reassessment of the forest lands held by the rail company. Seen as undervalued assets, the forest lands were split off from the Railway, and held as a subsidiary called Plum Creek, which began clearcutting as a way to raise its value. "Let's face it," a Plum Creek spokesman told The New York Times in Feb. 1989, "Market forces and the threat of stock market takeovers won't let us do otherwise."

Plum Creek never intended to balance its tree harvest with any program of forest management. "This is not a sustained yield program. We have never said we were on a sustained yield program, and we have never been on a sustained yield program," said spokesman Bill Parson to a Montana legislator touring a Plum Creek site (10/15/89). "Sure it's extensively logged, but what is wrong with that?" In the past three years, Plum Creek has cut an average of 673 board feet, while noting an annual growth of only 210 million board feet on its lands (board feet measures the board yield from a stand of wood). By its own figures, released to the Security Exchange Commission in April of 1989, Plum Creek is logging at three times the rate that its forest can regenerate. In parts of Montana Plum Creek cuts from section line to section line every thing it owns.

The foreign market for deforestation

The clearcutting policy fits in with Plum Creek's efforts to supply logs for the lucrative markets in Japan. Briefly, Plum Creek exports 60 percent of its timber to Japan and other Pacific Rim nations, according to its prospectus for investors. This does not leave enough timber to support even its own mills, so it engages in aggressive purchases of timber from public lands. In its restructuring documents, PC predicts that harvests from its land will fall by 33 percent in the next five years, and that it intends to make up this shortfall also through public lands purchases. According to Dick Manning, a freelance writer in Missoula tracking Plum Creek's activities, the company has already cut nearly 95 percent of its Montana lands. The forest service, under pressuer from industry has raised the "allowable sale quantity" levels for timber in each of its forests, even when the local rangers report serious environmental concerns. A ranger's report uncovered during a lawsuit against the Flathead National Forest, noted that "if the timber harvest met its goal, wild life and watershed goals cannot be met, and vice versa."

Plum Creek's actions have angered both environmentalists and labor forces, as the clearcut threatens a number of endangered species and also the local logging industry. Unable to compete with Plum Creek in the bid for timber off public lands, many smaller mills expect to close in the coming months. "All the sawmills, and particularly in the independents, are scrambling to find raw material," said Doug Mood of Pyramid Mountain Lumber Co. after a timber auction in January of this year. "I don't think there is any question that a number of mills in western Montana will fail ... There's not a lot of room for us in the squeeze between Plum Creek and Champion." Further, Plum Creek has invested some of the profit from its overseas sales in a massive computerization of its plants, thus further reducing the need for skilled labor while increasing its mill capabilites. According to the director of Forestry products research at the University of Montana, new technology accounts for a loss of 1500 jobs to date.

Burlington Resources collected $550 million in cash from the sale of Plum Creek (book value, $143.7 million) to the limited partnership. Part of the money came from a public offering of "units" to investors, and part from Plum Creek's heavy borrowing. It would appear that the real harvest for the board of directors of Burlington Northern has successfully been reaped.

Unlimited partnerships

Jack Blanton isn't the only connection between Burlington Northern and the universities. Blanton's fellow boardmembers include Arnold Weber, current President of Northwestern, and Darius Gaskins of the John F. Kennedy School of Government. Corporations with representatives in upper management at UT include Freeport McMoRan, La Quinta Inc., SouthWest Airlines, MidCon, and a large number of oil and gas resouce companies held under limited partnerships or privately.

These relationships give a company whose policies wreak indefensible environmental disaster undeserved legitimacy. And the university people who participate in such relationships co-opt the students and taxpayers who pay their salaries into their activities.