Gov. John Kitzhaber's spending blueprint for 2013-15 aims to help get more timber to mills and set aside more land for a state forest.

A log truck near Tillamook, Ore., in an undated file photo.

Amelia Templeton

The Oregon Court of Appeals heard arguments Tuesday in a case that has major implications for how the state manages forestland and whether counties can depend on timber revenue from state forests.

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The state of Oregon is challenging a 2019 jury verdict that required the state to pay more than $1 billion to a handful of timber counties who say they lost money as logging declined.

Attorneys representing the state and 13 counties traded arguments before the court Tuesday morning.

At issue in the case is whether Oregon breached a contract with these counties by failing to deliver sufficient revenue from harvesting timber on state forestland — and whether such a contract ever existed.

The counties donated about 700,000 acres of mostly razed and burnt forestlands to the state in the 1930s and 1940s, when they didn’t have the resources to make the land profitable. The state agreed to manage the forestlands “so as to secure the greatest permanent value of those lands to the state” and kick some of the profits back to the counties.

The phrase “greatest permanent value” and what exactly that means is central to the case.

“The one thing we know that it doesn’t mean is ‘maximum revenue,’” Oregon Solicitor General Benjamin Gutman, representing the state, told the three-judge panel.

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For years, logging state forests has factored largely into the budgets of these timber counties and other tax districts and government entities that receive state forest dollars.

The state still distributes about two-thirds of timber harvest revenue — tens of millions of dollars, statewide — to the counties every year.

Oregon cut back on logging over the years as it sought to safeguard wildlife habitat, improve water quality and boost fire resiliency on state forestland.

The counties sued, saying the state hasn’t logged the donated forestlands enough and hasn’t delivered the money they were promised.

In 2019, a Linn County jury agreed and ordered the state to pay $1.06 billion.

“The counties would never have transferred their property to the state without an assurance that the state would apply sustained yield principles to maximize revenue from the land on a long-term basis,” John DiLorenzo, the lead attorney for the counties, told the court Tuesday.

DiLorenzo added that the greatest permanent value terminology is “the only provision of this contract that guarantees to the county that there will be revenue generated.”

Gutman countered that logging revenue isn’t the only permanent value that forestland can provide and that recreation, habitat protection, flood stabilization and other land uses also contribute.

“It provides economic value even if the land doesn’t generate revenue,” Gutman told the court. “That’s not just some 21st-century notion being superimposed on statutes from the 1940s.”

Oral arguments concluded Tuesday morning. The court will now deliberate and decide on the case at a later date.

Correction: This article previously misstated one of the reasons that counties sued the state of Oregon. It has been updated to clarify the distribution of logging revenue from state forests. OPB regrets the error.

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