Economically and environmentally, Humboldt County wins with the decision by federal judge Richard Schmidt to approve the Pacific Lumber Co. reorganization plan proposed by the Mendocino Redwood Company and Marathon Structured Finance Fund.

Both the MRC and the Noteholder/Sierra Pacific Industries proposals had the capital behind them that would be needed to fund a reorganization, but the judge decided that MRC had an edge. It has considerable experience with redwood in Mendocino County and will take possession of both PALCO’s timberland and its Scotia mill. Keeping the mill open means job stability, at last, for the workers. And, PALCO’s timberlands will continue to be covered by the Headwaters Agreement.

Many in Humboldt will cheer a by-product of the decision. That is, PALCO’s parent company MAXXAM will be out of the picture at PALCO now and for good.

The process of hearings in the bankruptcy proceedings in Corpus Christi, Texas covered nearly a year, and a number of interested parties were heard from in detail. Judge Schmidt did not reach his decision hastily. His written decision runs to 119 pages.

The MRC plan was widely supported within Humboldt County by businesses and environmentalists.

Gov. Arnold Schwarzenegger hailed the decision for both its economic and environmental benefits.

That, after all, was what was at stake.

There is a big “however” to all of this.

A last-minute “super priority” claim by the Noteholders for $290 million, which is above and beyond the $510 million Schmidt said the Noteholders would be paid, threatens to be a deal-breaker for Marathon.

Schmidt should resolve the issue quickly lest PALCO run out of money in the meantime and the otherwise-fine outcome turns to dust.