Masterminding a Solution

How Helsell Fetterman Attorneys Deployed a Tremendous Variety of Skills in Negotiating a Highly Complex Deal

Even Descartes would have trouble mapping the logistics of this scenario. The case centered around the challenge of moving a dockside log yard on short notice from an environmentally insecure site to a new site on a controlled environmental cap. Presenting a convoluted entanglement of millions of dollars of resources, hundreds of jobs at stake, and the interests of eight separate parties—all spread over 34 acres in the Port of Tacoma, the brief alone could get your head spinning.

But when the complexities grew, Larry Setchell and his team focused on developing a solution. They led the way, with unwavering vision and support from their client, often having to go beyond just the role of attorney. By the deal’s completion, they had worked every facet of the case—from environmental strategist to diplomat.

Nothing Run-of-the-mill About It

The client, Forest Marketing Enterprises, Inc. (Formark), is a growing, Northwest, woman-owned company. True to the heritage of the great Northwest, its business is logs—through which it supports the employment of over 200 local Washingtonians who work as family and commercial tree farmers, loggers, truckers, and yard workers. Formark buys logs from local family and commercial foresters. It hires loggers to cut and limb the logs. It pays truckers to ship the logs to the dockside at the Port of Tacoma, where the logs are stripped of their bark for shipment to Asian markets (developed over the years through Formark’s customer relationships).

Due to growth in its export business, in 2009 the company leased new space at a 17-acre formerly Weyerhaeuser-operated log yard, located dockside at the Port. The deal was brokered by the Port of Tacoma and included a co-tenant, the Holbrook Company. Once the shared Weyerhaeuser site was opened, Holbrook partnered with global log trading company Trans-Pacific Trading (TPT) to acquire logs from Hancock Timber, which owns forests through much of Washington. With the increased volume of logs running through the site, both Formark and Holbrook required nearly constant use of the site’s only debarker—an expensive machine that scrapes logs clean—to meet the demands of Asian customers.

That’s when the first knot was twisted. Soon after Formark began operations at its new site, the Washington State Department of Ecology cited the Port of Tacoma with a Stage Three Violation of the Clean Water Act—for the exact property Formark had just leased. The Weyerhaeuser site needed major renovations. From the unprotected catch basins to its untreated and unfiltered outfall piping, it was not designed or built to accommodate modern stormwater drainage standards.

The Biggest Twist

Following the citation, in March 2011 the Port decided to bring the site under the management of one party—in order to transfer its stormwater permit to a single party ultimately responsible for site management—and declared that Formark’s lease would terminate May 1st. With less than two months to find, secure, and move its business to a new site, Formark found itself in serious danger of collapse.

Its options did not seem optimistic: undergo a massive relocation on very short notice and incur major losses, or accept a servicing agreement with TPT and Holbrook for limited storage and debarking and handling services at the Weyerhaeuser site, thus becoming dependent upon and at the risk of the Holbrook-TPT operation. Where could it go? What could it do? How would its business survive?

Finding an Alternative to Disaster

Helsell Fetterman’s Larry Setchell knew that Formark needed to act quickly. First, Larry and his team collaborated with the Port to locate an available log yard: the PONY Site, another 17-acre log yard that was originally built for Louisiana Pacific. Abandoned a few years ago, the PONY Site had a modern stormwater drainage system, an environmental cap, and a railhead. But the site also lacked some important elements. With inadequate access over dilapidated rail crossings, no security fencing, no maintenance or office facility, and a current tenant—Northwest Container Services—occupying half the site, Larry and Formark feared that it would take too much time and financing to have it in proper condition for moving logs. Even the environmental cap was in disrepair, needing substantial crack sealing and resurfacing.

To make the miracle happen, Formark needed more time. Working closely with both the Port and all involved parties, Larry Setchell and his team negotiated a plan to prevent immediate eviction. Because the Port benefits from the throughput of Formark’s logs, transferring Formark to an inoperable site would actually create losses for the Port. It would instead be a win-win to relocate Formark without causing interruption to its business. Larry’s team, with direction from Formark, and with help and cooperation from the Port Commission, ultimately obtained a time extension for Formark to remain in business at the Weyerhaeuser site while the PONY yard was refitted and repaired to meet Formark’s needs.

Larry and his team negotiated a long-term lease as well as a brief short-term right of access for tenant improvements. The deal provided much-needed economic benefits to offset the cost of relocation and prepare the PONY Site for operation, including: a schedule for occupancy which allowed the Port to fund and make the required repairs to the environmental cap; a substantial tenant improvement allowance affording Formark economic room to build a security fence and repair a 24,000-square-foot warehouse; credit for trucking fees needed to transport logs from the PONY Site to a dockside yard; and the construction, by the Port, of new and improved access ramps over new rail crossings—all without disturbance to Formark’s ongoing business.

In the meantime, Larry also enlisted the services of ERM, Inc., one of the Northwest’s most capable environmental engineering consulting firms. ERM’s assistance enabled Formark to document site conditions, apply for a stormwater discharge permit at the PONY Site, and create a workable stormwater pollution prevention program to maintain the site in compliance with stormwater management rules. Finally, realizing the old debarker at the Weyerhaeuser site was costly to use (and likely to restrict volume if depended upon by Formark), Larry and his team negotiated with the Port, its environmental and engineering departments, and contractors for permission to build a new, state-of-the-art debarker on the PONY Site. By consulting with leading architects and engineers, Larry’s team proved successful in acquiring all permits required to begin installing the 2.6-million-pound concrete pad and steel machine—all on an amazingly fast track, and in time to achieve significant year-end tax credit benefits for Formark.

The end result was that, due to Formark’s persistent support and Larry’s representation, Formark was able to adjust the move date to October 1st, maintain business operations, and hit the ground running on a new site. Formark is now primed for growth on a picture-perfect Northwest log yard.

Positive Outcomes for All

While the client certainly benefited tremendously, all involved parties came out well in what could have been a messy legal, financial and political struggle. The Port of Tacoma found a way for millions of board feet of logs to be shipped, the Department of Ecology has approved the outcome and is focused on working with the Port to accomplish the Stage Three Protection at the Weyerhaeuser site (while also monitoring the new stormwater discharge permit and plan implemented by Formark), Holbrook maintains an entire site for itself and continues its partnership with TPT, and Hancock Timber now benefits from seamless forest-to-dock handling. Perhaps most important, the Port of Tacoma and its community preserved hundreds of Western Washington jobs, thanks in no small part to the positive way in which Larry and his Helsell Fetterman team quarterbacked the process.

“Everyone got what they wanted. This was an outstanding outcome in a complex case where there was great potential for conflict,” stated Helsell Fetterman’s Larry Setchell. “With so many interests, personalities, and other factors to manage, I am proud that we were able to make this deal happen. The outcome is a great example of how public and private interests can create jobs and opportunity for economic growth in these challenging times,” adding, “Formark deserves the most credit for having the vision and fortitude to pursue an outcome that required it to overcome many obstacles—all of which depended on variables that defied conventional thinking. The Commissioners of the Port of Tacoma also deserve applause and credit for their vision and policy commitment to endorsing Formark’s log shipping business as a vital, job-creating and Northwest-heritage-preserving venture for the Port.”

Contact Larry at [email protected] or (206) 689-2171.