Montana Viewpoint

May 26, 2008

Recent secret talks between Plum Creek Timber and the U. S. Forest Service have been raising as many issues as eyebrows recently. The topic of the talks, according to those who will say anything about them, is to renegotiate the terms of Plum Creek’s easements through Forest Service land. Many think the purpose is to increase access to thousands of acres of land that Plum Creek would like to develop as real estate.

Plum Creek is being coy about its future plans for its land, saying that when they have come to a definitive decision they will let us know. But they have already made a decision, definitive or not, since they have let their shareholders know they estimate they aremaking $320 to $340 million on real estate sales this year. They have a track record of developing backcountry areas. In Maine they bought 900,000 acres from a paper company and are putting in a 14,000 acre subdivision on and around remote Moosehead Lake.

Plum Creek has a couple of distinct advantages over us mere mortals; they have more clout with the Forest Service than we do, and they can sell an identical parcel of land for less money than we can and still make a better profit.

The first advantage is basically because of their size—they are the largest private land owner in the state, and the Forest Service has to go through Plum Creek land to get to Federal land. The second advantage is their unique income tax status—they don’t pay any. That affords them the potential to sell land at a lower price and higher profit than can other corporations or individuals.

When you or I sell a house or a piece of property, we pay tax to Montana on the profit. Plum Creek doesn’t because they enjoy the special tax status of a Real Estate Investment Trust (REIT). Except for REITs, all corporations and individuals pay tax in the state where they make their profits. REITs are able to avoid that by passing the tax costs on to their investors. So almost all of the taxes on a profit made in Montana are paid to the states' treasuries of those states where Plum Creek shareholders live such as Connecticut, New York, and California.

Plum Creek is the latest in a string of owners of federal land originally granted to the Northern Pacific Railroad by Congress in 1864. The grant was to raise money for the railroad to build the transcontinental line from Minneapolis to Seattle because banks were not willing or capable of financing such huge and risky enterprises. (The railroad defaulted on the terms of the agreement twice in the first 15 years.) Nationally, the land grant comprised 39 million acres. Today, about 1.25 million acres in Montana remain in the ownership of one of the successors to the Northern Pacific—Plum Creek Timber.

Imagine a giant checkerboard with its red and black squares stretching 50 miles north and 50 miles south of the Yellowstone and Clark Fork rivers. The Northern Pacific was given ownership of the imaginary red squares and the federal government retained control of the imaginary black squares; setting up the beginning of a giant game of checkers which is currently being played behind closed doors.

Much of what is left of the checkerboard is in the timbered part of Montana, and it has been to the mutual benefit of the Forest Service and Plum Creek to grant easements to each other so they could access their respective parcels for timber management. A lot of the Plum Creek land is some pretty spectacular stuff, and in the past decade it has become far more valuable as real estate than for timber production. To that end Plum Creek has been negotiating better access to the more valuable parcels.

So what’s the uproar? Well, the counties, whose taxpayers are the ones who will eventually pick up the tab for the services for these subdivisions, are being kept out of the loop. Contrary to popular opinion, not to mention logic, the taxes that new developments generate do not come close to covering the costs of providing service to those subdivisions (Gallatin County pays out $1.35 in services for every tax dollar brought in by new development), and the more remote the development, the more costly the bill.

Added to this list of concerns are increased costs of fire protection service to remote homesites, the effect on wildlife populations, and diminished access for hunters and outdoor recreationists.

What it boils down to is that some pretty important decisions about Montana’s future are being made behind closed doors, and they are being made by the two largest landowners in the state of Montana, the Federal Government and Plum Creek Timber, REIT. It’s simple: we don’t have a say, we don’t get the taxes, but we do get the consequences.


Jim Elliott