Tom Shepstone
Shepstone Management Company, Inc.
Pennsylvania’s DCNR appears to be using the state’s Infrastructure Investment Authority (PennVest) to create a private Northwest PA Wilderness with public funds.
I have written here several times about the nature of the wealthy foundations, motivated by special interests, who are behind fractivism. They seek guilt-alleviating power and influence, hope to protect hedge fund investments in “clean energy” and engage in land scams threatened by natural gas development. Those scams are accomplished using public money to create wilderness playgrounds for the rich, with plenty of profit along the way. I detailed here, here and here what’s been happening in New York, with orchestration by the NRDC gang (the Rockefeller family). Now, it could be spreading to Pennsylvania.
The story isn’t pretty. It’s likely, in fact, to disgust you if you’re a Pennsylvanian. It’s about these two loans with a combined subsidy value of $17,546,532 at the expense of taxpayers:
It’s about a timber company from New Hampshire that’s found harvesting the product of government is more profitable than forestry. It’s tapped into a strategy advanced by, among others, the Steyer-Taylor Center for Energy Policy & Finance at Stanford University (funded by Stanford trustee and Governor Tom Wolf’s big-time political patron, Tom Steyer) to “capitalize on climate investment opportunities.”
Indeed, Lyme Timber Company CEO James Hourdequin spoke at a Stanford conference on the subject. His company was also extolled in another Stanford document as an example proving how “money grow on trees” via “purchasing land and increasing its value through operational restructuring and conservation strategies.”
The Lyme Timber model of managing bureaucratic timber is perfectly legal and they apparently enjoy a reputation for doing it well, though that hardly makes it good public policy from the other end. Indeed, it is the actions of the Pennsylvania Department of Conservation and Natural Resources (DCNR) that should disgust you, not those of Lyme Timber. DCNR has put together a deal to help Lyme Timber acquire over 60,000 acres of forest land in Northwest Pennsylvania using $50 million of 1% loan money from a state authority intended to finance sewer and water projects.
Lyme Timber’s investment strategy is laid out in several places, starting with its own website (emphasis added):
The team specializes in the negotiation and sale of working forest conservation easements that restrict development on lands but allow income generation from sources such as sustainable timber harvesting, recreational leasing and the sale of carbon-offset credits. To date, Lyme has permanently conserved approximately 820,000 acres of its historical portfolio through the sale of working forest conservation easements and other conservation instruments. The Lyme team also has expertise accessing advantageous debt arrangements (e.g. New Markets Tax Credit financings) and restructuring forestry and timber operations.
Notice there are three potential profit centers that come in some part via taxpayers; (1) sale of conservation to public entities such as DCNR, (2) sale of carbon-offset credits through government created schemes and (3) securing advantageous funding (e.g., low-interest public financing). You might say Lyme Timber is skilled at triple-dipping, albeit perfectly legally. Who can blame them?
What Lyme does, moreover, is something they’ve been doing for quite some time and it emulates what the Open Space Institute (OSI), run by Rockefeller descendant Kim Elliman has been doing years; borrowing economic development money from the state to buy land and easements that can be sold back to the state at high-end prices on the theory that limiting development somehow produces it. OSI walks away with net income to pay Elliman’s big salary plus additional wilderness buffers around the Adirondack and Catskill second homes of its benefactors. Lyme has been doing similar things since at least 1983 as has the company from which it is buying the land; the Hancock Timber Resource Group, a subsidiary of John Hancock Mutual Life Insurance.
So, if Hancock Timber Resource Group, which does sustainable forest management, already owns the land and it’s such a good investment, why is it so important for the taxpayers to assist Lyme’s purchase of it? The answer is found in this Endeavor News article about the deal:
“These purchases will allow us to create opportunities for the state to purchase easements and keep the land in private hands, while remaining on the local tax rolls,” said Lyme Timber chief executive officer Jim Hourdequin…
Lyme plans to option rights over the remaining 50,740 acres to enable the DCNR to acquire additional conservation easements over the next five to seven years.
The sale, in other words, is necessary to create the need for state involvement in protecting the land via purchase of conservation easements; future Lyme sales that justify it paying Hancock’s relatively high asking price for the property (reportedly in the range of the $2,300-2,400 per acre). Hancock, which essentially manages the timber investments of wealthy people as real estate trusts, could itself sell conservation easements to DCNR but without a property transfer at an artificially high price that incorporates the prospect of such sales, it wouldn’t be able to realize its asking price. Likewise, there is no case for DCNR action and no reason to tap low-interest PennVest loans for the purchase (which also add to the value of the transaction), without a creditable threat of a sale.
This land swap transaction, therefore, although perfectly legal, is primarily a mechanism for internalizing the benefits of future government actions into land values for two real estate and timber investment companies. The deal, to be saleable tom government, though, must be wrapped in potential threats to values and altruistic surrounding conservation goals. Lyme Timber deals like this one are helped along, in this regard, by organizations such as the Rudolph Stein Foundation (a/k/a RSF Social Finance), which is a Greenpeace supporter and organizer of investments made by money-laundering donor-advised funds in Lyme’s projects. Here’s how they describe Lyme:
It has achieved attractive financial returns while protecting the ecological and social value of undeveloped lands. Lyme Timber uses its network of nonprofit conservation organizations to identify lands of conservation priority, which include properties that provide habitat to endangered species, encompass important bodies of water, or buffer already protected public and private land. In partnership with nonprofit conservation groups, Lyme Timber will purchase such properties and then sell control of specified land use rights over time to government natural resource agencies, sometimes in fee and often through conservation easements, to generate returns to its investors.
This overview of what Lyme and Hancock are doing immediately raises the question of why state government is involved. Does government exist to pick winners and lodges and embellish the income streams of realm estate investment trusts and their kin? Well, no, but government is far too beholden to special interests who have the ability to lobby it and Cindy Dunn, the Secretary of DCNR is a true believer environmentalist who wants to make as much of a Northwest PA wilderness as she possibly can while serving in that capacity. Her entire career has been one of bouncing back and forth between environmental groups such as anti-gas, anti-development PennFuture (funded by the Heinz and Haas families) and DCNR.
Brion Johnson, the Executive Director of PennVest, at a recent Pennsylvania House of Representatives hearing on this entire matter, stated that no one from the Wolf Administration had lobbied him to make a $50 million loan at 1% over 20 years to Lyme (with the first five years interest-free). Yet, DCNR brags about “facilitating” the deal. Here’s what their website says as I write this (obviously outdated as to the figures but still relevant):
LYME TIMBER AWARD
DCNR helped facilitate $25.1 million in PENNVEST funds to purchase 33,000 acres of forestland in Cameron, Potter, and McKean counties for:
This also included a donated easement of 4,227 acres to DCNR in the Sterling Run watershed of Cameron County.
DCNR regularly works with partners to conserve large tracts of working forestlands, and is looking for innovative ways to do this in the future. The Lyme Timber easement will be one model for conservation easements.
Apparently, facilitating is just fine. Johnson’s written statement to legislators at the hearing was also accompanied by the products of an obviously orchestrated letter-writing campaign in support of the loan. It appears another key player in this campaign and the facilitation of the loan was The Conservation Fund, a 501(c)3 charity with annual income of $215 million and 19 management staff making over $200,000 per year in 2016.
Lawrence Selzer, the President and CEO made just shy of $572,000 that year. He knows the art of the land deal when it comes to conservation easements and his art has been very good to him. He also serves as a Director of forest giant Weyerhaeuser and previously served as a Director of Plum Creek Timber, yet another company engaged in what Hancock and Lyme do. This the network of folks behind the PennVest deal.
Selzer, like Lyme’s leadership, is clearly talented. He’s also connected to the Rockefellers, with Nelson Rockefeller, Jr.serving on his board. This group of folks has resources and access to capital. They don’t taxpayer help, especially from the Pennsylvania Infrastructure Investment Authority a/k/a PennVest.
The Authority uses money provided by EPA to help finance sewer and water projects with revolving loans and limited grants. The EPA objective is broadly water quality but Pennsylvania attached additional restrictions on PennVest when it created this financing vehicle. It defined a qualified project as:
The eligible costs associated with the acquisition, construction, improvement, expansion, extension, repair or rehabilitation of all or part of any system or facility, whether publicly or privately owned:
(i) For the collection, treatment or disposal of wastewater, including industrial waste, or for nonpoint source projects or estuary protection projects…
Pennsylvania further defines a nonpoint source project as:
A project which does not have a discernable or confined discrete conveyance, and which is necessary for the implementation of a nonpoint source pollution control program under section 319 of the Clean Water Act (33 U.S.C.A. § 1329.
Brion Johnson says his PennVest Chief Counsel tells him this language authorizes a $50 million low interest loan to make a land deal happen. Call me skeptical; deeply skeptical, in fact. First of all, consider this statement from the PennVest project summary:
Many of the streams included in these parcels are Exceptional Value and High-Quality status already, requiring no further restoration work. The proposal includes plans to address water quality in at least one large parcel afflicted by acid mine drainage, so protection will be coupled with restoration…
This project is a collaborative effort by PENNVEST, Department of Conservation Natural Resources (DCNR) and private industry to provide a more effective, or cost-effective way to keep streams protected by protecting the forests around them. Conservation easements in this case provide a long-term water quality benefit, a complimentary economic and community benefit, and improve overall forest management through forest certification…
This project offers many environmental benefits. A working forest conservation easement will protect streams and other headwaters by protecting those waters from increased runoff, development pressures and changing land use regulations. There is no more effective, or cost-effective way to keep streams protected than protecting the forests around them. By using the conservation easement model, these acres remain in private hands, albeit with important conservation restrictions and no additional development. The parcel included here take advantage of existing seller opportunities but also happen to be located in the “conservation gap” area between DCNR’s large state forest holdings in north-central Pennsylvania and the large and contiguous Allegheny National Forest to the west. A conservation “land bridge” between these two-large public conservation land holdings would create many advantages to migratory wildlife, stream systems, and the “wilderness” feel many visitors and PA residents can’t find elsewhere.
This is no project to deal with pollution except for some acid mine drainage issues on one parcel out of the 60,000+ acres and just $500,000 is being spent on that; less than 3% of the $17.5 million in subsidy benefit being offered to Lyme. The waters otherwise are already high-quality or even exceptional value classification. There is but the absolutely flimsiest of arguments to suggest this even comes close to meeting the legislative intent behind PennVest.
The contention of development pressure is, likewise, utterly laughable of this weren’t such a serious issue. The land involved is largely undevelopable and Northwest PA’s greatest challenge is dealing with a lack of growth and development with Cameron County (used to establish the 1% loan rate for the deal) having the single largest rate of population decrease between 2010 and 2015 at 6.9% down.
The truth about why smug Cindy Dunn wants this bad deal so bad is found in the talk about a “conservation gap” and a “land bridge.” She’s determined to make a Northwest PA wilderness on the backs of taxpayers and residents of that county and its neighbors for the sale of those many wealthy visitors who want a wilderness experience uncluttered by real people and their enterprises; people who have to get their hands dirty making a living and don’t have the luxury of trips from Philly or Pittsburgh for weekend hikes. They know there’s little or no money in selling organic granola bars to those folks.
Those wealthy visitors though, if they’re invested in Hancock or Lyme are also going to make out financially like bandits and do it legally. They get the $17.5 million in subsidy value connected with the PennVest loans, they’ll get unspecified millions more for selling conservation easements to the taxpayers over the next several years and they may well get carbon offset credits as well, not to mention whatever timber they actually harvest, the recreational leasing fees and so on. They’ll get all this from one state agency created to finance sewer and water infrastructure and another saying it will create economic development by stopping development that isn’t occurring, a new plane of double-speak to be sure.
The net impact of all this will, as one of the owners of a smaller natural resources company trying to compete with Lyme states, is that smaller companies like his, without access to massive PennVest subsidies or the political influence to secure them, will always have the edge as Pennsylvania’s government effectively becomes the arbiter of who gets to own land in the Commonwealth. Be sure to watch his remarks and those of Keith Klinger preceding him to understand all that’s wrong with this deal (video starts with their remarks):
This is, for all these reasons and several besides, a terrible deal and even worse precedent for Pennsylvania. It precisely explains the nature of the special interests opposed to natural gas development that we fight every day. It should be stopped now before the cancer spreads.
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