Pacific Lumber Company

Pacific Lumber Company

Company type	Private (formerly public)
Industry	Logging, Sawmill, Forestry
Founded	1863
Founder	A. W. McPherson and Henry Wetherbee
Defunct	2008
Fate	Bankruptcy and assets transferred to Mendocino Redwood Company; town of Scotia sold to Marathon Structured Finance
Successor	Humboldt Redwood Company (operating entity)
Headquarters	Scotia, California (operations); San Francisco (administrative offices) , United States
Area served	Humboldt County, California
Key people	George O'Brien (CEO), Frank Bacik (Vice President and General Counsel), Michael Claes (spokesperson)
Products	Lumber, forest products (Redwood and Douglas-Fir)
Owner	Maxxam, Inc. (1985–2007)
Number of employees	350 (at closure) (2008)
Parent	Maxxam, Inc. (1985–2007)

The Pacific Lumber Company (commonly referred to as PALCO or PL) was a prominent logging and sawmill enterprise based in Scotia, California, with administrative offices located in San Francisco. Established in 1863, the company was under the stewardship of the Simon J. Murphy, Sr. family and their designated leaders from 1905 until 1985. Its primary operations consisted of extensive log storage and milling activities centered in Scotia, supplemented by additional mills situated in Fortuna and Carlotta. PALCO owned and managed over 200,000 acres of timberland within Humboldt County, encompassing Redwood and Douglas-Fir forests, positioning it as one of the largest private employers and a significant contributor to the local forest products sector.

In 1985, Maxxam, Inc. acquired PALCO, which then functioned as a subsidiary for the subsequent twenty years. The company sought bankruptcy protection in January 2007 due to financial difficulties. Following a US Bankruptcy Court ruling on July 29, 2008, PALCO’s assets and subsidiaries were transferred to Mendocino Redwood Company, while ownership of the town of Scotia passed to Marathon Structured Finance. The new operating entity is known as Humboldt Redwood Company. Although some creditors contested the decision, later adjustments had minimal impact on the asset transfer and corporate reorganization.

During its final phase, key leadership included CEO George O'Brien, Vice President and General Counsel Frank Bacik, along with spokesperson Michael Claes. PALCO’s operational model emphasized sustainable timber harvesting, milling processes, and marketing of forest products within the competitive Redwood Empire region. The company’s history reflects notable expansion and strategic management within the forestry industry spanning over one hundred years.

Overview

Founded in 1863, Pacific Lumber Company employed more than 350 individuals by its closure in 2008, a substantial reduction from over 1,600 employees around the year 2000. It operated what was recognized as the largest Redwood mill ever constructed, featuring an innovative hydraulic debarker. The adjacent company-owned town remains accessible to visitors today. After a hostile takeover by Maxxam, Inc. in 1986, PALCO underwent a significant shift away from its original sustainable forestry practices. In 1999, Pacific Lumber divested thousands of acres to establish the Headwaters Forest Reserve, agreeing to more rigorous land management protocols. These restrictions played a role in PALCO’s bankruptcy filing in early 2007 and its subsequent dissolution toward the end of 2008.

19th century

Pacific Lumber (PL) originated in 1863 when A. W. McPherson and Henry Wetherbee purchased timberland along California's Eel River at $1.25 per acre. By 1882, with additional partners onboard, PL expanded its logging operations at the site initially named Forestville. By 1888, it had become Humboldt County’s largest lumber firm employing approximately 300 workers and shipping over annually. The settlement was renamed Scotia and developed essential infrastructure such as a telegraph station, church, post office, and schoolhouse. In 1895, a catastrophic fire inflicted losses amounting to $400,000 (equivalent to roughly $8 million today). Simon J. Murphy, Sr., a Detroit-based businessman and early millionaire investor, assumed control of PL; his family would guide the company’s direction for nearly one hundred years. Despite insurance covering only a quarter of the damages sustained, the Murphy family rebuilt both town and mill facilities, showcasing decisive leadership and dedication to business expansion.

20th century

By 1905, control of the company had been secured by Simon Murphy, Sr., a native of Detroit, Michigan. Despite facing significant obstacles such as the 1906 San Francisco earthquake, World War I, and flooding along the Eel River, PALCO progressed into the contemporary era. By 1920, the company employed around 1,500 individuals and managed extensive timberlands. In response to growing conservation concerns, company leadership began endorsing preservation initiatives, donating areas like Rockefeller Forest to form part of what is now Humboldt Redwoods State Park. Additionally, the firm pioneered the recycling of sawdust into Presto logs.

In 1931, Stanwood Murphy took over as president and implemented a "selective cut" logging method that restricted harvesting to 70% of mature trees while ensuring forest regeneration was never exceeded. This approach established PALCO as a pioneer in sustainable forestry practices for more than fifty years.

During the 1950s, PALCO developed Scotia into a model company town featuring employee residences, retail stores, educational institutions, medical facilities, and recreational amenities. The Murphy family also introduced employee benefits including a pension plan, complimentary life insurance, and by 1961, scholarships for workers’ children.

Pacific Lumber Company went public on December 17, 1975, with its common stock listed on the New York Stock Exchange under the ticker symbol PL.

Late 20th century

Entering the 1980s, Pacific Lumber was debt-free and maintained a partially diversified asset base that included a San Francisco high-rise property and a thriving welding business in the Bay Area. This was part of a century-long strategy emphasizing sustained yield harvesting and reinvestment to safeguard cash flow. Although this approach resulted in modest annual profits, it later made the company vulnerable to acquisition attempts by Wall Street investors. Warren Murphy, the final family member to oversee operations under this strategy, described the company as stable with responsible environmental stewardship and consistent growth.

1985 hostile takeover

On September 30, 1985, Maxxam, Inc., led by Charles Hurwitz from Texas, completed a hostile takeover of Pacific Lumber. The Murphy family—then holding the largest minority stake—and many employee shareholders lost control. Warren Murphy resigned on February 26, 1986, passing leadership to John A. Campbell, his former executive vice president.

Despite changes in leadership and business direction, Pacific Lumber’s remaining contiguous old-growth forest was preserved through cooperation between environmental organizations and government bodies. This collaboration resulted in the creation of Headwaters Forest in 1999, funded by $480 million in public resources.

Clearcutting introduced under Maxxam

After acquiring the company, Maxxam abandoned Pacific Lumber’s sustainable harvest policies in favor of intensive clearcutting aimed at maximizing profits and servicing acquisition-related debt. This marked a major transformation in both the company’s operational methods and overall business model.

Opposition and Activism

On May 24, 1990, a bomb detonated inside the vehicle of Earth First! member Judi Bari, causing injuries to her and fellow activist Darryl Cherney. They were traveling to a University of California, Santa Cruz gathering aimed at promoting Redwood Summer, an initiative raising awareness about the effects of logging in the Redwood Empire. The individual responsible for the bombing was never discovered. Initially, law enforcement and the FBI accused Bari and Cherney of carrying the explosive device themselves, but prosecutors eventually dismissed the charges due to lack of evidence. Years later, Bari successfully sued the FBI for infringing on her constitutional rights; this legal victory occurred five years after her passing from breast cancer at age 47.

On September 17, 1998, Earth First! protester David Chain lost his life when a tree fell on him during a demonstration against logging on Pacific Lumber land. The company stated that their workers were unaware of Chain’s presence at the time. Protesters contended that loggers intentionally directed trees toward activists, referencing video footage showing logger Arlington Earl Ammons threatening demonstrators during the episode. This incident underscored the ongoing conflict between environmental advocates and logging firms over forest management policies.

Transition into the 2000s

In January 2007, the company sought bankruptcy protection. Early in 2008, a Texas bankruptcy court examined possible restructuring plans. On June 6, 2008, a preliminary approval was granted to the Mendocino Redwood Company’s proposal, with a formal order signed on July 8. Although bondholders filed an appeal, on July 24, a Louisiana appellate court declined to review the matter, enabling the Mendocino Redwood Company/Marathon plan to move forward. Industry analysts concur that future judicial challenges are unlikely to reverse this ruling.

Railways

The Pacific Lumber Company established the Humboldt Bay and Eel River Railroad on November 17, 1882, to facilitate lumber transport from its Scotia mill to Humboldt Bay for shipment purposes. Completed by August 1885, this railroad linked with the Eel River and Eureka Railroad at Alton. Tracks extended southward along the Eel River to deliver logs directly to the mill. In May 1903, Atchison, Topeka and Santa Fe Railway absorbed this line into its subsidiary San Francisco and Northwestern Railway; nonetheless, Pacific Lumber retained ownership of land and timber rights adjacent to the route and continued utilizing it for logging activities. By January 1907, this railway became part of the Northwestern Pacific Railroad.

Pacific Lumber manufactured wooden flatcars and maintained locomotives used for hauling logs and switching railcars at their mill site. Diesel locomotives replaced steam engines in 1955. Log trains operated between a log deck in Carlotta and the Scotia mill until 1976. Company-owned switcher locomotives remained stationed at Scotia until service by Northwestern Pacific Railroad ceased.

Locomotive Roster

Number	Manufacturer	Configuration	Year	Serial Number	Remarks
3	Pennsylvania Railroad	4-4-0	1886	1031	Initially Pennsylvania Railroad #452; underwent several renumberings; sold in 1902 to Eel River and Eureka Railroad as #4
2nd #3	Baldwin Locomotive Works	2-6-2	1922	55248	Previously Humboldt Northern Railroad #3; acquired in 1950; sold in 1953
9	Heisler Locomotive Works	2-truck Heisler locomotive	1920	1446	Originally Mount Tamalpais and Muir Woods Railway #9; retired in 1953 and placed on display in Scotia
19	Baldwin Locomotive Works	0-6-0 Tank locomotive	1875	3739	Purchased from Excelsior Redwood Company
20	Marshutz & Cantrell	0-6-0 Tank locomotive	1882		Acquired from Excelsior Redwood Company
21	Rogers Locomotive and Machine Works	4-4-0	1881
22	Baldwin Locomotive Works	2-4-2 Tank locomotive	1887	8792	Initially numbered #2; later renumbered
23	Baldwin Locomotive Works	2-4-2 Tank locomotive	1886	8007	Originally #1; destroyed in accident in 1938
25	Baldwin Locomotive Works	2-4-2 Tank locomotive	June 1904	24317	Entered service as #5; later sold to Holmes-Eureka Lumber Company
26	Lima Locomotive Works	2-truck Shay locomotive	14 July 1906	1615	New purchase; scrapped in 1950
27	Baldwin Locomotive Works	2-6-2	1909	33339	New acquisition; scrapped in 1955
28	Lima Locomotive Works	2-truck Shay locomotive	24 February 1910	2268	Purchased new; later sold to Pelican Bay Lumber Company in Algoma, Oregon
29	Baldwin Locomotive Works	2-6-2	1910	34484	(Wood-burning originally); later converted to oil fuel; exhibited in Eureka, California since 1986
30	Baldwin Locomotive Works	2-6-2	1911	36173	Newly acquired; scrapped in 1955
31	Lima Locomotive Works	3-truck Shay locomotive	6 April 1911	2419	Formerly California Western Railroad #10; purchased in 1917; sold in 1920

Environmental concerns

Under increasing scrutiny from environmental advocates, the company contemplated divesting 6,000 acres predominantly consisting of old-growth redwoods for $300 million to safeguard species such as the marbled murrelet and spotted owl. Regulatory agencies required the implementation of buffer zones adjacent to rivers to minimize erosion and protect natural habitats. However, the Eel River has experienced significant degradation over more than 150 years of logging activities, with causes extending beyond PALCO's operations alone.

In 1999, PALCO consented to activist Julia Butterfly Hill's request to create a three-acre protective buffer around a 600-year-old redwood named Luna, which she had occupied for upwards of two years. Despite acts of vandalism occurring during this period, Luna has been preserved.

PALCO was subject to a civil lawsuit in 2003 initiated by Humboldt County’s District Attorney, accusing the company of fraud and environmental misrepresentation concerning the effects of its timber harvesting on watershed areas. A Superior Court judge dismissed the case, a decision that was upheld on appeal in 2008. Amid this legal dispute, MAXXAM filed for bankruptcy. Following this, investors linked to GAP Stores proposed acquiring PALCO through bankruptcy proceedings in Corpus Christi, Texas. This acquisition plan was received positively by environmental groups as a preferable alternative to the previous logging practices under Charles Hurwitz and MAXXAM management.

References

• Harris, David. The Last Stand: The War between Wall Street and Main Street over California's Ancient Redwoods. San Francisco: Sierra Club Books, 1997. .

External links

• North Coast Journal—featuring over 380 articles detailing developments connected to PALCO.
• San Francisco Chronicle—news reports and opinion pieces related to PALCO.
• Pacific Lumber's environmental history
• Analysis of PALCO's environmental initiatives