Maine bankers are in the thick of a struggle between environmentalists and the business community over the state's multibillion-dollar timber industry.

As the political battle over the future of logging drags on, bankers worry that many of their customers with close ties to the industry will be hurt.

"Logging contractors put their equipment purchases on hold, and mills that process the wood put their expansion plans on hold," said Edward L. Hennessey Jr., president of Machias Savings Bank in Machias, Maine. "That's going to have a long-term effect on banks."

Mr. Hennessey said banks in the eastern and western parts of the state could have hard times if the state doesn't put an end to the nagging debate over clear-cutting of forests. Banks rely on the $6 billion Maine logging and paper industry-everything from the companies that harvest trees to the employees that work there-for their livelihood.

A proposal to ban clear-cutting died in a statewide referendum last November, to the dismay of environmentalists who vowed to try again.

Meanwhile, compromise legislation-supported by Gov. Angus King and the banking industry-won a majority in the Legislature but didn't get enough votes to become law. The state faces another referendum on the compromise, which would restrict but not ban clear-cutting. A vote on the new proposal hasn't been scheduled.

Last Monday, the Maine Supreme Judicial Court refused to consider a request to let the Legislature decide the issue, instead of a referendum.

Maine's bankers say the vote can't happen soon enough.

One trade group official said the uncertainty is already hurting banks, which is especially harmful in a state where new business is hard to find.

"In the interim, nobody is willing to make credit commitments," said Christopher W. Pinkham, president of the Maine Association of Community Banks.

Mr. Hennessey, whose $250 million-asset bank counts numerous logging contractors among its customers, said he's seeing the effects in terms of "missed opportunities."

"They haven't purchased any new equipment, they haven't expanded their operations," Mr. Hennessey said. "In many instances, they've been concerned about survival."

Edward N. Clift pointed out an abandoned feller-buncher, which is used to cut trees, as a symbol of the hesitation by companies to make large investments before the clear-cutting issue is resolved.

Mr. Clift, president of Merrill Merchants Bank in Bangor, said one of his clients had a customer "just walk away" from the $300,000 piece of equipment.

But the environmental group that's been pushing for the clear-cutting ban rejects the bankers' and governor's position that the economy is being hurt by their efforts. Jonathan Carter, executive director of the Forest Ecology Network in Augusta, Maine, called the claims "bogus economic paradigms."

Mr. Carter, who is backing an anti-clear-cutting bill in the Legislature this year, said the loss of forest would have a greater economic impact on the state.

"The fastest-growing sector is tourism and recreation," Mr. Carter said. "Nobody is going to come to Maine to hike in a clear-cut forest."

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