The timber company behind the lone bid to buy the Elliott State Forest filed a lawsuit this week alleging Oregon violated its own policies when elected officials "unilaterally and wrongfully terminated" an agreement to sell the land to a private company for $220.8 million.

Lone Rock Timber Management filed the lawsuit Wednesday in Marion County Circuit Court naming the State Land Board and Oregon Department of State Lands as defendants. Gov. Kate Brown, Treasurer Tobias Read and Secretary of State Dennis Richardson comprise the land board.

The timber company is seeking $1.3 million for out-of-pocket expenses plus $2 million in "lost business opportunity damages" after the state declined to sell the land. The company also seeks 9 percent interest rate on the expenses it says it's owed, dating to the May meeting where the company says the agreement with the state unraveled.

The lawsuit comes as state lawmakers voted Friday to approve $100 million in state bonds to buy a portion of the 82,500-acre forest, money that will free the public land from its obligation to generate revenue for the Common School Fund.

The forest has for decades been a moneymaker for the school fund, which is valued at greater than $1.4 billion and distributes tens of millions of dollars to K-12 school programs each year.

But in 2012, the forest started losing money after several timber sales stalled amid challenges from environmental groups over the presence of endangered and threatened species.

Two years later, Oregon started weighing whether to sell the forest wholesale. By 2015, the state settled on that option and created a process to transfer it to a future buyer.

Fifty organizations formally expressed interest in buying the forest, but Lone Rock was the only one to submit a bid. The proposal included Cow Creek Band of Umpqua Tribe of Indians as a partial owner.

The company alleges that the state violated its own processes and did not negotiate a deal in good faith.

"Lone Rock would not have spent significant time, effort and money on the proposed purchase of the Elliott if it knew the representations and promises of Defendants were not truthful," the lawsuit said, "or could not be reasonably relied upon, or would never be performed."

At a February land board meeting, Oregon appeared close to making the deal with Lone Rock. State officials had begun negotiating a sales agreement with the company.

But by May, the board had reversed course, with all three members supporting a plan to keep the forest in public hands. Environmental groups had rallied their supporters, and thousands of them had lobbied lawmakers to keep the Elliott under state ownership.

"Keeping the Elliott State Forest in public hands benefits the Common School Fund, while also protecting the diverse habitats of the forest, and ensuring public access for future generations," Brown said before the decisive meeting.

In the lawsuit, Lone Rock claims the state "knowingly made false representations and promises to induce" the company to submit a bid.

"Our unique coalition operated in good faith and met every criteria identified in the state's transparent, multi-year process to sell the forest," Toby Luther, Lone Rock's CEO, said in a statement. "It's clear now, however, that the governor had no intention of accepting a proposal under the established protocol. You cannot simultaneously encourage bidders and commit to bidders publicly while privately planning a shift in policy."

The Department of State Lands declined to comment, citing the pending legislation. A spokesman in Brown's office didn't respond to a request for comment.

On Friday, Oregon lawmakers approved Senate Bill 847, which creates a process by which lands obligated to generate revenue for the Common School Fund can be transferred to other public entities that can better manage them and keep the lands open to the public. Washington has had a similar policy in place for decades.

Read, then a state representative, tried and failed to pass a similar bill in 2015.

Rep. Karin Power, D-Milwaukie, said before the House vote Friday that Oregon's trust lands discussion goes far beyond the Elliott State Forest. There are more than 600,000 acres of forest and rangelands that contribute to the school fund, she noted.

The Elliott State Forest "is a fight that we could have perhaps avoided" if Oregon had a trust lands transfer bill previously, Power said.



-- Andrew Theen

atheen@oregonian.com

503-294-4026

@andrewtheen