8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (date of earliest event reported): December 20, 2006

MAXXAM INC.

(Exact name of Registrant as Specified in its Charter)

Delaware

(State or other jurisdiction of incorporation)

1-3924

(Commission File Number)

95-2078752

(I.R.S. Employer Identification Number)

1330 Post Oak Boulevard Suite 2000 Houston, Texas (Address of Principal Executive Offices)   77056 (Zip Code)

Registrant's telephone number, including area code: (713) 975-7600

Not Applicable

(Former name, former address and

former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01. Other Events.

The Registrant has on many occasions described the March 1999 Headwaters Agreement among the United States, the State of California, Registrant's wholly owned subsidiary, The Pacific Lumber Company ("Palco"), Palco's subsidiary, Scotia Pacific Company LLC ("ScoPac"), and another Palco subsidiary. On December 20, 2006, Palco issued a press release announcing that Palco and Scopac had filed suit against the State of California seeking to recover damages for the serious harm that has been inflicted on both companies by the State's breach of the Headwaters Agreement. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference into this Form 8-K.

Item 9.01. Financial Statements and Exhibits.

c) Exhibits

99.1 Palco Press Release, dated December 20, 2006

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

MAXXAM INC.

Date: December 21, 2006                                                             By:/s/ Bernard L. Birkel

Name: Bernard L. Birkel

Title: Secretary

0401FMS6.VM.DOC

EX-99

Exhibit 99.1

FOR IMMEDIATE RELEASE

Contact: Andrea Arnot

Director of Corporate Communications

(707) 764-4216

PACIFIC LUMBER COMPANY BRINGS ACTION

AGAINST THE STATE OF CALIFORNIA FOR BREACH OF

THE HISTORIC HEADWATERS AGREEMENT

Company Seeks Damages for Substantial Losses

DATELINE -- December 20, 2006 -- The Pacific Lumber Company, and its subsidiary, Scotia Pacific Company LLC, today filed a lawsuit to recover damages for the serious harm that has been inflicted on both companies by the State of California's breach of the historic Headwaters Agreement.

The lawsuit, filed in Superior Court in Fresno, California, alleges that the State's actions have restricted the companies' ability to harvest their timberlands to a degree that prevents the companies from remaining economically viable.

"When the Headwaters Agreement was entered into in 1996, it was a formal contract between The Pacific Lumber Company, the federal government, and the State of California. The agreement included the most stringent environmental restrictions ever placed on the management of private timberlands. Our companies have lived up to their obligations, but unfortunately the state and its agencies have not," said George O'Brien, President and CEO of The Pacific Lumber Company. "The state has not met its contractual agreement with respect to the management and harvest of our timberlands," O'Brien added.

The Headwaters Agreement, named for the Headwaters Forest area in Humboldt County, was funded through the passage of special California and federal legislation. The main provisions of the agreement included the following:

• The Pacific Lumber Company and its affiliates agreed to transfer to the United States and the State of California the Headwaters Forest and additional land—the largest remaining privately owned old-growth redwood forest—for the purpose of creating a permanent preserve of more than 7,000 acres for wildlife and its habitat

• The companies were promised comprehensive, long-term permits, from the United States and State of California, specifically providing for the management and harvest of Pacific Lumber's remaining timberlands on an economically viable basis.

• Finally, the companies, the U.S. government, and the State of California agreed to cooperate and act in good faith to preserve and defend any challenge to the 1996 agreement and the permits provided for by the agreement.

As evidence of The Pacific Lumber Company's commitment to honor the agreement, during the past seven years, approximately $60 million has been spent on science and environmental mitigations related to implementation of the agreement.

"The Headwaters Agreement was entered into following intense negotiations involving all concerned parties, including the State of California," O'Brien said. "The State must honor its contractual obligations. This principle is important not only to The Pacific Lumber Company, but to any company doing business in California."

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