A Blue Knob lumber mill that has been operating for 81 years and most recently doing business with China may soon be filing for reorganization under bankruptcy laws because of the downturn in the economy, according to its president, Charles Salyards Jr.

At one time, Helsel Lumber Mill of 3446 Johnstown Road [Route 164] did $6 million to $8 million in business annually and had 85 employees, Salyards said.

The demand for wood products, however, dropped dramatically in the past 18 months because of the lack of new housing construction and rehabilitation on the domestic side and the high cost of fuel, which affected the international market.

Business dropped to one-third of peak levels in 2008, Salyards said. As of late last year, the mill has been shut down.

"Every tree we cut, we were losing money," Salyards said.

Company officials have been working with Pittsburgh attorney Robert O. Lampl, Salyards said.

"We are in the process of filing for Chapter 11 [under the bankruptcy laws]," he said.

While most Pennsylvanians are aware of problems in the auto and financial industries and of government efforts to bail them out, most don't realize the plight of the hardwood industry, one of the state's largest.

Keith Craig, executive director of Pennsylvania's Hardwood Development Council - part of the Department of Agriculture - said thousands of businesses from lumber companies to furniture-making companies are involved in the wood industry.

He said Pennsylvania has the highest-quality hardwoods in the world, and the industry at one point had a $25 billion impact on the economy with 85,000 employees and ranked as the 10th largest manufacturing industry in the state.

Mills like Helsel Lumber provide the wood to furniture makers. While once many furniture makers were in North Carolina, in recent years, the business shifted to China.

The wood producers followed the manufacturers, but the overseas business suffered when the bottom fell out of the housing market worldwide, Craig said.

Production of wood products in the state is down 40 percent, he said.

Wood products producers may receive some federal stimulus money, but generally, little is being done by the government to bring it back, Craig said.

He does believe, however, just like Salyards, that the industry has a future.

Craig said, "because of the recession, some companies are not going to weather the storm."

Tina Taylor, international trade manager for the Southern Alleghenies Planning & Development Commission, which has worked with the hardwood industry for many years, said the industry is hurting. She said hopefully the market will be back up when there is a resurgence in the housing industry.

Helsel Lumber has come into the news recently because the Pennsylvania Game Commission filed a lawsuit contending Helsel did not fulfill contracts it signed to cut timber on state game lands.

The company agreed to cut in Bedford, Cambria and Bedford counties and intended to pay the game commission $311,478 for the wood.

The bottom dropped out of the market, Salyards said, and it couldn't fulfill the contract.

When the state rebid the contract, the highest price it could get for the job was $111,000, so the state is suing for the $201,478 it lost out on.

Salyards said the game commission has been friendly, not demanding, and he understands it had to file the lawsuit. But he said the amount his company agreed to pay the state for wood during good times ($311,000) and the amount the state received on the second bid in bad times ($111,000) shows the problems in the industry.

Records at the Blair County Courthouse also show that AgChoice Farm Credit of Butler has filed papers stating that Helsel owes $758,229 on its mortgage, and Farm Credit Leasing Service Corp. of Minneapolis says the lumber mill owes it $415,813.