Dec. 6 (Bloomberg) -- Plum Creek Timber Co., which as a real-estate investment trust pays no federal taxes, may benefit from a provision in House-passed energy legislation that would subsidize any sale of prime bull trout habitat in Montana for conservation purposes.

A provision in the 1,055-page energy measure would make U.S. taxpayers pay the interest on as much as $500 million of state-issued ``forestry conservation bonds'' to be used for the potential purchase of at least 40,000 acres of Plum Creek timberlands. Seattle-based Plum Creek is the biggest private landowner in Montana.

Federal taxpayers would pay as much as $161 million to help the state of Montana compete with developers in the potential sale of land near population centers such as Missoula.

The provision ``aims to protect pristine lands from ever being flipped by developers into condos and strip malls,'' said Carol Guthrie, a spokeswoman for the Senate Finance Committee. That panel's chairman, Democrat Max Baucus, is from Montana and helped write the energy bill.

House Republicans called the provision a special-interest clause, or earmark, which Democrats said they would limit when they took control of Congress in January.

The legislation ``can only possibly benefit one landowner in the U.S.,'' Republican Representative Jim McCrery of Louisiana told reporters. ``These are the kinds of things that are hatched in secrecy.''

No Lobbying

Kathy Budinick, a spokeswoman for Plum Creek, and Guthrie said the company didn't lobby to have the provision added to the energy bill.

``This is not something Plum Creek is doing, it is something Senator Baucus is doing,'' Budinick said.

Plum Creek's political action committee contributed $9,000 to Baucus in 2005 and 2006, more than it gave to any other federal candidate, according to the Washington-based Center for Responsive Politics. All told, the PAC gave $21,000 to Democratic candidates for the Senate and $26,500 to Republican candidates for the Senate during that period.

In the previous two-year cycle, Plum Creek's PAC gave $1,000 to Baucus, who last ran for re-election in 2002.

Criteria Fits

While the 654-word provision doesn't mention Plum Creek by name, it describes criteria that fit the company, which became an REIT in 1999 when it realized its land holdings were becoming more valuable than the timber it held.

Real estate investment trusts don't pay taxes except on activities of non real-estate units such as manufacturing subsidiaries. Instead, they pass profits through to shareholders who pay a 15 percent rate provided at least 90 percent of the company's taxable income is paid as a dividend.

Under the legislation, the bonds can be used to purchase at least 40,000 acres, some of which must be adjacent to U.S. Forest Service land. The land also must be subject to a ``native fish habitat conservation plan'' approved by the U.S. Fish and Wildlife Service.

Tim Bodurtha, of the Fish and Wildlife Service in Montana, said the agency signed an agreement with Plum Creek in 2000 to try to protect the threatened bull trout in the Bull River area in the state near the setting of Norman Maclean's novella ``A River Runs Through It,'' later a movie directed by Robert Redford.

The agreement grants a waiver to Plum Creek for accidental deaths of a threatened species of bull trout in the course of conducting its economic activities so long as it takes other precautions to protect the fish.

Deed Restrictions

``We were very concerned that they would sell highly valuable lands to developers and that these lands would have high conservation value with native fish,'' Bodurtha said in an interview.

Under the agreement, Plum Creek had to balance the land it sells to developers with land retained for conservation.

``Plum Creek would get mitigation credit if they sell to a conservation buyer and mitigation debt if they sell to a developer,'' Bodurtha said. ``They have to maintain a proportion.''

He said the company also has to put deed restrictions on sales to developers that require them to protect the bull trout habitat.

The Fish and Wildlife department has helped Plum Creek sell more than 60,000 acres to conservation groups and the state of Montana.

Boehner Objects

House Republicans ridiculed the narrow scope of the provision.

``I didn't know fish lived in trees,'' said Representative John Boehner of Ohio, the top House Republican.

Guthrie said the legislation places no geographical limits, and other states have fish habitat conservation plans.

``This is not an earmark,'' she said.

``Plum Creek might get proceeds from a sale, but if they don't sell their land to the public, then they will sell it to developers at a higher price,'' she said. The land will be split between the state and the federal government and administered by a conservation group such as the Nature Conservancy, Guthrie said. There are no active bids for the land, she said.

The provision gives Plum Creek no direct tax benefit. Rather, the company would benefit by having the state government involved in any bidding for its land.

The provision is separate from a measure in the larger energy bill that would allow companies such as Weyerhaeuser Co. that own their own timberlands to pay 15 percent capital gains tax on profits attributable to trees they harvest instead of the 35 percent corporate rate.

Plum Creek rose 95 cents, or 2 percent, to close at $47.21 in New York Stock Exchange composite trading. The shares have risen 26 percent in the past year.

To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net

Last Updated: December 6, 2007 19:25 EST