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ECOLOGIST GREG JENNINGS, of the Bureau of Land Management, examines an ancient redwood tree in Headwaters Forest Reserve just south of Eureka in 2005.
A coalition of environmentalists, Bank of America and others will propose setting aside old-growth trees and allowing sustainable logging on the rest of the world's largest privately owned redwood forest in Humboldt County.

The plan is expected to be filed later this month in U.S. Bankruptcy Court in Houston. It would shift

12,000 acres of old-growth groves — including the tree in which Julia Butterfly Hill lived for two years — and other sensitive areas in the more than 200,000-acre forest to state parks or publicly-owned reserves, the Nature Conservancy said.

Details have not been formalized and it is unclear how much of the bankrupt Pacific Lumber's $750 million debt the deal's backers will be willing to pay.

Still, Nature Conservancy spokeswoman Jordan Peavey expressed confidence that a plan combining environmental protection with profit could work.

"We've managed to make this work in the past," Peavey said, noting recent deals in which the conservancy participated to buy 160,000 acres of private forestland in the Adirondacks and 280,000 acres of forests across 11 Southern states.

The investment partners "expectto make money on this," she added.

The Pacific Lumber land comprises about half of the watershed of Humboldt Bay and about 10 percent of the redwood forests remaining in the world, according to the Nature Conservancy.

Some of the property is old-growth forest in a region containing the tallest trees on Earth, 300-foot giants that were already rooted in the ground at the time of Christ.

Other forests and groves have been logged and lack the timeless quality of the virgin parcels.

The Nature Conservancy-sponsored plan, which would preserve nearly 12,000 acres and allow sustainable logging on about 197,000 acres, is one of four that will be considered in the bankruptcy proceedings, said Frank Bacik, Pacific Lumber vice president and general counsel. A decision could be made by the court as early as April.

One of the competing proposals, put forward by Mendocino Redwoods Co. and others, would pay about $500 million of the $750 million in debt, Bacik said.

"They (creditors) told the court they did not think that plan could be confirmed," he said.

Another plan will be brought by unsecured creditors and would address only a small portion of the company's debts and assets.

The remaining proposal is the one brought by Pacific Lumber itself, a plan that has so far has not been endorsed by creditors.

The company's plan would result in the sale of 6,000 acres of the most environmentally sensitive lands for preservation, possibly to state or federal land agencies.

In addition, 200 to 500 houses would be built on company land around Humboldt County towns.

"Our plan is the only one that proposes to pay everybody in full," Bacik said.

Pacific Lumber's history goes back to the 1800s and is rooted deeply in Humboldt County's history. In the 1980s, Maxxam Corp. bought it with the help of junk-bond king Michael Milken.

To pay debts incurred in the purchase, Maxxam greatly accelerated Pacific Lumber's logging, which in turn led to conflicts with regulators and environmental protesters.

In 1999, the government agreed to buy the most prized of the Pacific Lumber groves, the nearly 7,500-acre Headwaters Forest, for $480 million. The remaining land was placed under a habitat conservation plan, agreed to by Pacific Lumber, that limited logging to protect northern spotted owls, marbled murrelets and other threatened species.

But the company still could not pay off its debts. The company has blamed regulations regarding endangered species and water quality.

Last January, it filed for bankruptcy protection after missing a payment on its bonds.

The court last month opened the door for competing proposals to resolve the bankruptcy, making it possible for the environmental groups to make their pitch.

In addition to The Nature Conservancy and Bank of America, the latest proposal includes the Save-the-Redwoods League, investment companies and conservation groups.

Mike Taugher covers natural resources. He can be reached at 925-943-8257 or mtaugher@bayareanewsgroup.com.