Posted at 9:31 p.m. PST Monday, Feb. 12, 2001

PG&E could sell scenic watersheds to state to help pay deregulation costs

California's energy crisis BY PAUL ROGERS Mercury News

Pacific Gas & Electric Co. says it has nearly run out of money. But the utility still has one very enticing asset that has gone largely overlooked by the public and Sacramento lawmakers -- some of the most scenic land in California.

PG&E owns more than 140,000 acres of rural land across Northern California, from the Sierra Nevada foothills to the Eel River of Mendocino County, as part of its hydroelectric system.

As state legislators seek to craft a multibillion-dollar bailout of PG&E and Southern California Edison -- which say they are $12 billion in debt from the state's energy deregulation disaster -- a group of environmentalists and some lawmakers are trying to put 88,000 acres or more on the table to help cover the bill.

The idea, a debt-for-nature swap, is usually used to help Third World countries save rain forests. Here, the idea would be to save PG&E's lands.

More than 80 parcels in 15 counties from Shasta County to Fresno County, the properties are nothing less than a privately owned park system. They include every major watershed in the Sierra Nevada and southern Cascade ranges, a patchwork of blue-ribbon trout streams, oak woodlands, stunning mountain canyons and thick conifer forests.

To environmentalists, the lands represent valuable wilderness that should be preserved. To some timber companies, they could be equally valuable -- for logging.

``We think this makes sense,'' said Steve Wald, coordinator of the California Hydropower Reform Coalition. ``These lands are in wilderness and rural settings. They are a tangible asset of public value.''

The coalition is an environmental group based in Berkeley that includes such organizations as Trout Unlimited, American Whitewater, California Outdoors and the California Sportfishing Protection Alliance.

Wald and other leaders from groups such as Friends of the River and Environmental Defense met last week with the staffs of several Sacramento lawmakers to discuss the idea. Sources said the lawmakers include powerful legislative leaders such as state Senate President Pro Tem John Burton and state Sen. Byron Sher, D-Redwood City.

The proposal is simple. PG&E would sell large swaths of its lands to the state to help pay off debts.

Some would become new state parks. Others would be added to adjacent national forests, or sold to other agencies for wildlife preserves and recreation areas for fishing, hiking and camping.

``It's important to secure these assets as part of the multibillion-dollar bailout,'' said Steve Evans, conservation director of Friends of the River, based in Sacramento.

``If they were sold off to the highest bidder, a lot of prime recreational areas and critical habitat for fish and wildlife could be ruined.''

PG&E acquired the lands over the past century to protect its dams, reservoirs and power plants. Some lands were sites for dams that were never built.

Environmentalists say they fear that if PG&E sells the lands to raise money, the properties might be heavily logged or developed. That already has begun.

In the late 1990s, for example, the utility sold 18,000 acres. Several large pieces in Butte and Tehama counties were bought and logged by Sierra Pacific Industries of Redding, the largest private landowner in California. The company came under fire in some Sierra Nevada communities last year for its plans to accelerate clear-cutting on its properties.

PG&E officials are playing their cards close to the vest.

Although they have been in discussions for the past two years with environmental groups and the state Public Utilities Commission over the future of the lands, no appraisal has been done, said Jon Tremayne, a PG&E spokesman.

``There are a lot of proposals,'' said Tremayne on Monday. ``We aren't taking public positions on individual proposals.''

Tremayne noted that PG&E has for decades allowed fishing, hiking or camping on many of its properties, often at little or no charge.

Monday was a state holiday commemorating Lincoln's birthday, and many legislators were unreachable. One top lawmaker still in his office working on the power crisis, however, Assemblyman Fred Keeley, D-Santa Cruz, said he is open to the idea.

``I think that it should be included as one of the asset options under consideration,'' said Keeley. In order to have a genuine business deal rather than a bailout, we will need to resolve two issues. One is the appropriate amount of debt to be recovered by the utilities. Secondly, one or more assets of substantial value will have to be transferred to consumers. I'm open to all suggestions.''

Gov. Gray Davis staff said he is not ruling out anything yet.

``At this juncture he's keeping his options wide open. Everything is on the table,'' said Davis spokesman Byron Tucker on Monday.

California lawmakers are grappling with taking control of three top assets from the utilities as part of a possible deal to sell bonds to cover the utilities' $12 billion debts.

Those assets are either stock warrants, 19,000 miles of transmission lines or the utilities' dams. The environmentalists are proposing adding the lands as part of any one of these choices, along with possibly paying rural counties for loss of property taxes, said Evans.

But there are complicating factors.

Gov. Gray Davis last month signed a bill that bans PG&E from selling its hydropower ``facilities'' for the next five years. The idea was to stop out-of-state companies from taking over more of the state's power generation.

But the environmentalists say that 88,000 acres of the 140,000 acres PG&E owns are not affected by that law. Those lands, they say, are not included in the areas that are under license from the federal agency that regulates dams, FERC -- the Federal Energy Regulatory Commission. Those lands do not include power plants, roads, towers or the bottoms of reservoirs.

Nobody knows the value of the 88,000 acres. If they were valued at $5,000 an acre, the value would be $440 million. If they were $10,000 an acre, they would be worth $880 million. One report by the California Department of Forestry reportedly places the value of the timber alone to be at least $400 million, said Wald.

Another hurdle is whether Burton or other state leaders will accept an asset that does not generate revenue.

Environmentalists, however, say if logging companies buy the lands and clear-cut hills, it will harm fish and degrade water, both of which cost money to restore. And they say some assets cannot be measured with dollars alone.

``The lands may not generate a revenue stream, but they have continuing value if they are preserved,'' said Nancy Ryan, an economist with Environmental Defense, in Oakland. ``They generate a stream of recreational and ecological value.'

Contact Paul Rogers at progers@sjmercury.com or (408) 920-5045.

http://www0.mercurycenter.com/front/docs1/lands0213.htm

-- Martin Thompson (mthom1927@aol.com), February 13, 2001