Borough reaches agreement over veneer plant

Posted: Wednesday, July 16, 2003

KETCHIKAN (AP) An out-of-court settlement agreement was reached in a lawsuit the Ketchikan Gateway Borough filed against and Gateway Forest Products and the Ketchikan Pulp Company.

The Borough Assembly approved the settlement 6-0 Monday night.

Under the agreement, the borough will take control of the pulp company's Connell Lake dam and pipeline to Ward Cove. The annual maintenance cost of the dam and pipeline is estimated at between $50,000 and $100,000, said Assistant Borough Manager Steve Corporon.

Assembly Member Dick Burton said the dam and pipeline are integral to the development of Ward Cove.

''I think it's probably a pretty good bargain,'' he said.

The pulp company agreed to remove asbestos from several buildings on the former pulp mill site, including the former powerhouse. The cost of removing the asbestos is estimated at about $2 million, said borough attorney Scott Brandt-Erichsen. He said once the asbestos is removed from the powerhouse, it will be the borough's responsibility to demolish the structure.

The pulp company also agreed to lift environmental encumbrances on borough property in Ward Cove, according to the settlement.

The environmental encumbrances, which were the result of the pulp mill's sale of its Ward Cove assets to Gateway, has limited the boroughs ability to redevelop the cove, said Brandt-Erichsen.

The borough filed its lawsuit Nov. 1, 2002, in Ketchikan Superior Court, accusing the two companies of breach of contract, fraud and conspiracy.

The borough claimed that the pulp company was in charge of Gateway, that the two companies conspired to attract the borough investment and that the two falsely represented a due-diligence report that the borough alleges was written by a Gateway shareholder.

Assembly Member Jack Shay said a settlement ultimately saved the borough money.

''Had we taken another course of action and continued the suit, we could have spent a lot more money and we could lose,'' Shay said.

Assembly Member Dick Coose said he appreciates Gateway's efforts in Ward Cove.

Gateway opened a veneer plant on the site of the former pulp mill in Ward Cove in January 2001. One month later, Gateway filed for bankruptcy.

The borough issued $15 million in loans to Gateway and its creditors and purchased Gateways veneer plant for about $2 million from Gateway creditor Foothill Capital Corporation last July. The plant remains idle.

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