Enforcement of public benefits in Elliott sale still to be determined

Capital Bureau

SALEM — A Roseburg timber company is suing the Department of State Lands and the State Land Board for about $3.3 million for backing out of the sale of the Elliott State Forest.

Lone Rock Resources, which until May was positioned to buy an 82,500-acre swath of the state forest near the southwest Oregon coast for $220.8 million, claims that when the state canceled its plan to sell the forest, it “materially (breached) the agreement and understandings of the parties.”

The Elliott is a state trust land, which means that the state is required to generate revenue from it for the Common School Fund, an endowment for K-12 education in Oregon.

For years, logging on the forest had provided that revenue. But recently, due to more stringent enforcement of environmental regulations and protections for endangered species, the state struggled to make money off the land.

So the land board — the governor, secretary of state, and treasurer — sought to sell it to a private or public entity and embarked on a detailed process to try to find a buyer.

Last fall, Lone Rock was the sole company to propose buying the forest for the price the state set: $220.8 million.

The company alleges it spent about $1.3 million to comply with the protocol the state had set up for selling the forest, and seeks that amount in damages, plus interest, as well as lost opportunity damages of $2 million.

The company also argues that it was reasonable to assume that the state would comply with its obligations to make money from the Common School Fund land, which are laid out in the state’s constitution.

Since Lone Rock submitted a plan for buying the forest last fall, political opposition to the sale mounted until the State Land Board withdrew from the sale process altogether in May.

The Department of State Lands, through a spokeswoman, said that it does not comment on current or possible litigation.

On Friday, the Oregon Legislature approved about $100 million in bonding to buy a part of the forest and decouple it from its Common School Fund obligations, reflecting the suggestion of Oregon Gov. Kate Brown, the chair of the land board.