Timber firms sue Minn. over pay caps

Three large timber companies have sued the Minnesota government, saying the state reneged on contracts for a forest protection program by capping payments as lawmakers attempted to balance the budget.

The lawsuit filed this week in Ramsey County said the companies missed out on nearly $8 million in payments related to a half-million acres of forest enrolled in the program.

Blandin Paper Co., Potlatch Corp. and Meriwether Land and Timber contend the state breached contracts by enacting a $100,000 cap per landowner.

"The state is not free to disregard its contractual obligations," the companies argue in their lawsuit, which seeks back payments, interest and guarantees that future payments won't be affected.

State lawyers haven't formally responded to the lawsuit and declined comment to The Associated Press. The governor, Legislature and several state agencies are listed as defendants. The governor's office also declined comment.

Under the 2001 Sustainable Forest Incentive Act, landowners with parcels of at least 20 contiguous acres are paid to make long-term agreements to avoid residential or agriculture use. They can be penalized for failing to comply.

In 2009, the incentive was about $16 an acre. Most landowners in the program didn't have enough acres to exceed the $100,000 cap. The companies say they are being discriminated against because of their large land holdings, getting as little as 38 cents an acre back.

Once enrolled, the landowners are bound for at least eight years and they must give four years notice to get their acres off the rolls.

According to court papers, there were 869,000 acres enrolled in the program as of 2009, with the timber companies accounting for more than half of that.

The dispute stems from a 2009 move by then-GOP Gov. Tim Pawlenty, who tried to use his executive budget-cutting authority to cap the payments. They were part of a so-called unallotment package in which Pawlenty withheld spending the Legislature previously authorized. After a court struck down the Pawlenty cuts, the Legislature adopted many of them.

The current Legislature is deciding whether to extend those cuts into the future. A bill the Senate passed on Thursday would keep the $100,000 cap and lower the overall reimbursement rate to $7.75 an acre.

Sen. Tom Saxhaug, DFL-Grand Rapids, wouldn't comment on the merits of the lawsuit. But he expressed concern that the falling reimbursement rate could erode the protection program, both among the large timber companies and smaller landowners.

"They will not find it profitable to keep these lands as forest lands and will sell them," Saxhaug said, suggesting the land could be subdivided for residential use or hunting preserves instead.

(Copyright 2011 by The Associated Press. All Rights Reserved.)

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