GRAYS HARBOR

WALKING back to his office at the Grays Harbor Paper Company after showing a visitor around, manager John McDonald is a lonely figure. He's the only person in sight at a mill that bustled with activity for more than 60 years, the last one left who heard the rumble of the now-silent machines and smelled the distinctive sulfurous odor only a papermaker can love.

This is the story around much of the Pacific Northwest, which has seen more than 100 mills shut down over the past decade. And it is the reason why so many people here are looking to President Clinton to solve the problem with his promised "timber summit."

To see the complexity and especially the human side of trying to balance environment and economy, the Clinton administration would do well to visit Grays Harbor on the Olympic Peninsula of Washington State. Here, a timber-dependent community already hard-hit by recession has just seen one of its major employers shut down.

Among the reasons why people like John McDonald, Walter Brown, and Bob Martin are now job-searching: a declining supply of wood fiber to make paper, due to environmental restrictions on logging in this area. Limitations are designed to protect the threatened northern spotted owl's habitat.

When the ITT Rayonier Pulp Mill and the Grays Harbor Paper Company mill - owned by ITT Rayonier Inc. and the International Paper Company - closed their doors last November, 626 jobs were lost. Unemployment already was above 14 percent in this county of 65,100 people, a figure Hoquiam Mayor Phyllis Shrauger "fully expects" to pass 20 percent now that 60 days of layoff pay required under federal law have run out and workers are unemployed.

Beyond the immediate layoffs, which amount to $30 million in annual pay and benefits losses, the economic impact is spreading to other businesses as well.

Across the street from City Hall, Al McLeod's small print shop used to do about half its business with the mill. "That was a big account," he says, "so it's been pretty rough not only on the business but on the people who work here." Of his five employees, one has been let go, and the others are putting in less than half their normal hours. The "multiplier effect" of the mills' shutdown could put as many as 1,200 more out of work.

The town of Hoquiam (whose Quinalt Indian name, ironically, means "hungry for wood") was getting 25 percent of its municipal income from business taxes on the mills. "That paid for the policemen, the firemen, the libraries, the swimming pool," said Mayor Shrauger, who taught in the public schools here for 27 years. In all, the pulp and paper mills provided $2 million a year in state and local taxes.

A visitor to Hoquiam and the neighboring town of Aberdeen does not see immediate evidence of economic hard times, although the "This Family Supported By Timber Dollars" signs in windows of modest homes are poignant. Log trucks still rumble through the towns every few minutes. (They carry mostly logs for export. Such exports are not permitted from federal forests, but they are from private land.)

Beneath the surface, however, there is trouble, due to the layoffs and consequent uncertainty for families here for generations. Tough transition

"It's been tough," says John Hughes, Aberdeen Daily World newspaper editor, who went to high school with many now-unemployed millworkers. "The guys on Grays Harbor have traditionally been blue-collar, hard-working, plain-spoken, breadwinner people. There's a lot of middle-age crises out there for guys whose father and Uncle Joe also worked at the mill and they never thought it would end. It may be particularly hard on wives."

"We've seen significant increases in family violence, chemical dependency, adjustment problems, and marital discord," says Joe Mazzara, a mental-health coordinator at the Evergreen Counseling Center, a private, nonprofit group. "And we anticipate seeing even more problems as the benefits run out in June or July." Although some longtime mill employees will get a year's severance pay - in addition to 60 days of layoff pay - the average is about six months.

"I've spent a lot of sleepless nights worrying about what's going to happen," said Walter Brown, a journeyman pipe fitter. "You work with these people for 14 years and it becomes like a family. I'm going to miss them."

A well-known figure in the county is Jim Coates, a former millwright electrician and union official now working for the state government "timber team" to help unemployed workers and their families. One state official calls Mr. Coates "a combination of Attila the Hun and Mother Teresa" for his ability to pressure bureaucrats and private social-service agencies for help for those in need.

Standing outside the abandoned United States Fish and Wildlife Service warehouse that he badgered federal officials into providing for storage of donated food, Coates ticks off some numbers: 42,000 pounds of canned hatchery fish - acquired through a "glitch" in state law; 76 percent of all county children receiving government meal assistance at school; 10,400 people being served from 28 food banks; 80 percent of enrollees at the local community college on federal student aid; 730,000 pounds of food distr ibuted in 1992, 950 cords of firewood....

Coates has a tough exterior and a weary look, but it's not logs or canned-food inventories that gnaw at him. "It's really a heartbreaker when you drive up and the kids are waiting on the porch wrapped in blankets because they haven't had heat in seven or eight days," he says. "Nobody should have to live like that."

"Everybody focuses on the mill closure, but they don't realize that the total job loss has been six times that great," he says, referring to the other jobs that have been lost on the Olympic Peninsula in the past few years. In the five-county area, there are more than 3,000 dislocated timber workers, says Mike Kennedy, who runs a regional government program to help such workers. "And those are the ones we can count."

Although there are reports of evicted families camped out in rock quarries and national forests, there is also considerable effort to provide support for laid-off workers. ITT Rayonier gave $2 million for outplacement, job training, and counseling. The federal government put up $2.25 million, in addition to an earlier $2.75 million for plant closures in the area. Within a week of the recent plant closing, 80 workers had enrolled for the winter quarter at Grays Harbor Community College. About 100 quickly entered a state-supported program called "New Chance" to upgrade basic skills in math and English.

"We're off to a fast start," said John Loyle of the Pacific Mountain Private Industry Council, which is helping run the temporary reemployment center at an old ITT Rayonier building in downtown Hoquiam.

Dislocated timber workers are among the most-valued outreach counselors. Charles Hargett, who worked in the paper mill for 30 years, has helped counsel many of the 300 workers seeking help here.

"I think it's been a comfort to them to have somebody they can talk to who they've talked to all these years," he says. "When they say they've got that ache in the gut, I know what they're talking about." Caring counselors

"These people care and they're positive, which is a big plus," says Mr. Brown, just after huddling with Mr. Hargett in the busy reemployment center. Brown has decided to go back to school and study environmental technology.

"I see it as a booming industry, and it's exciting to get into something new," he says. He is a bit apprehensive about school, however. "I'm always on my kids to get better grades in high school, and now I'm going to have to perform."

The plant had been losing $1 million a month due to the high cost of pulpwood and low prices for paper products. The corporations were unsuccessful in their attempts to find a buyer, but a coalition of local business and labor leaders now hopes to form an employee stock-ownership program and attract a joint-venture investor.

They have formed a corporation called "HarborMill" and hired a consultant to produce a financial analysis and business plan. They are offering a "strike-free" environment, according to a corporation statement, and union representatives have agreed to "some reductions from the previous wage and benefit levels." All parties have affirmed that "the top priorities are customer satisfaction, quality, and never-ending improvement."

"We're looking for a new paradigm in labor relations," said Ernest Hensley, executive director of the Grays Harbor Economic Development Council. Still, most see this plan as a long shot, particularly since it is likely to take millions of dollars in modifications to make the mill competitive.

"We've had some very interesting nibbles," says paper chemist Bob Martin, who worked here for 17 years and now chairs the HarborMill corporation. "But it's a long way from a nibble to a full strike and having it flop around in the boat." While the companies are in no hurry to unload their equipment and real estate, they are discussing with US and foreign sources the sale of valuable items like the two paper machines.

There is talk of drawing more tourists to an area that is physically beautiful, although tourism jobs rarely pay what millworkers have been earning - an average of $37,000 a year. Meanwhile, local leaders are working hard to attract new industries. There have been a few small successes here, but there are big things holding the area back: an hour's distance to an interstate highway, even farther to an international airport, a lack of warehouse and industrial space.

"It's going to be a rough two years," Shrauger says, "But in the long run, I think we'll be better off because we'll be forced to diversify."

The timber summit to be convened this spring will be the first chance for the Clinton team to prove its campaign assertion that environmental and economic well-being do not have to be at odds.

"If Clinton and Gore can bring everybody to the table and walk away with some decisions, then I say God bless them," the mayor says. "I really do hope and pray that they are successful."