UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549


                                 FORM 10-Q

                              ---------------

            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                    THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997

                       Commission File Number 1-8857


                             MAXXAM GROUP INC.
           (Exact name of Registrant as specified in its charter)



           DELAWARE                          13-1310680
 (State or other jurisdiction             (I.R.S. Employer
      of incorporation or              Identification Number)
         organization)


  5847 SAN FELIPE, SUITE 2600                   77057
        HOUSTON, TEXAS                       (Zip Code)
     (Address of Principal
      Executive Offices)


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



     Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes /X/   No /  /

    Number of shares of common stock outstanding at August 1, 1997:  100


     Registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the
reduced disclosure format.

                             MAXXAM GROUP INC.

                                   INDEX



PART I.  -  FINANCIAL INFORMATION                                     PAGE

     Item 1.   Financial Statements

          Consolidated Balance Sheet at June 30, 1997 and
               December 31, 1996                                      3
          Consolidated Statement of Operations for the three and
               six months ended June 30, 1997 and 1996                4
          Consolidated Statement of Cash Flows for the six months
               ended June 30, 1997 and 1996                           5
          Condensed Notes to Consolidated Financial Statements        6

     Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                         11

PART II.  -  OTHER INFORMATION

     Item 1.   Legal Proceedings                                      15
     Item 6.   Exhibits and Reports on Form 8-K                       15
     Signature                                                        S-1

                     MAXXAM GROUP INC. AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEET
                         (IN THOUSANDS OF DOLLARS)


<TABLE>

                                                     June 30,    December 31,
                                                       1997          1996
                                                  ------------- -------------
                                                   (Unaudited)
                      ASSETS
<S>                                               <C>           <C>
Current assets:
     Cash and cash equivalents                    $    102,268  $     72,418 
     Marketable securities                              27,678        31,423 
     Receivables:
          Trade                                         13,850        18,850 
          Other                                          2,497         2,542 
     Inventories                                        59,096        69,307 
     Prepaid expenses and other current assets           5,508         5,474 
                                                  ------------- -------------
          Total current assets                         210,897       200,014 
Timber and timberlands, net of accumulated
     depletion of $228,018 and $221,063,
     respectively                                      325,815       324,986 
Property, plant and equipment, net of accumulated
     depreciation of $80,796 and $76,753,
     respectively                                      101,776       102,029 
Deferred financing costs, net                           22,881        24,249 
Deferred income taxes                                   51,955        55,047 
Restricted cash                                         29,765        29,967 
Other assets                                             8,857         6,455 
                                                  ------------- -------------
                                                  $    751,946  $    742,747 
                                                  ============= =============
      LIABILITIES AND STOCKHOLDER'S DEFICIT

Current liabilities:
     Accounts payable                             $      4,406  $      3,928 
     Accrued interest                                   24,548        24,899 
     Accrued compensation and related benefits          10,329        10,033 
     Deferred income taxes                              10,173        10,173 
     Other accrued liabilities                           2,384         3,335 
     Long-term debt, current maturities                 18,319        16,258 
                                                  ------------- ------------- 
          Total current liabilities                     70,159        68,626 
Long-term debt, less current maturities                761,700       759,769 
Other noncurrent liabilities                            27,556        26,387 
                                                  ------------- ------------- 
          Total liabilities                            859,415       854,782 
                                                  ------------- ------------- 
Contingencies

Stockholder's deficit:
     Common stock, $.08-1/3 par value; 1,000
          shares authorized; 100 shares issued              --            -- 
     Additional capital                                 81,287        81,287 
     Accumulated deficit                              (188,756)     (193,322)
                                                  ------------- ------------- 
          Total stockholder's deficit                 (107,469)     (112,035)
                                                  ------------- ------------- 
                                                  $    751,946  $    742,747 
                                                  ============= ============= 

<FN>

The accompanying notes are an integral part of these financial statements.

</TABLE>

                     MAXXAM GROUP INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENT OF OPERATIONS
                         (IN THOUSANDS OF DOLLARS)


<TABLE>

                                         Three Months Ended           Six Months Ended
                                              June 30,                    June 30,
                                    --------------------------- ---------------------------
                                         1997          1996          1997          1996
                                    ------------- ------------- ------------- -------------
                                                          (Unaudited)

<S>                                 <C>           <C>           <C>           <C>
Net sales:
     Lumber and logs                $     70,139  $     66,471  $    130,405  $    121,196 
     Other                                 6,709         4,832        13,258         9,911 
                                    ------------- ------------- ------------- -------------
                                          76,848        71,303       143,663       131,107 
                                    ------------- ------------- ------------- -------------

Operating expenses:
     Cost of goods sold (exclusive
          of depletion and
          depreciation)                   42,057        41,417        80,102        74,495 
     Selling, general and
          administrative expenses          3,715         3,600         7,096         7,230 
     Depletion and depreciation            6,951         7,276        13,653        13,955 
                                    ------------- ------------- ------------- -------------
                                          52,723        52,293       100,851        95,680 
                                    ------------- ------------- ------------- -------------

Operating income                          24,125        19,010        42,812        35,427 

Other income (expense):
     Investment, interest and
          other income (expense)           4,251         2,750         5,213         6,048 
     Interest expense                    (19,546)      (19,494)      (39,165)      (38,992)
                                    ------------- ------------- ------------- -------------
Income before income taxes                 8,830         2,266         8,860         2,483 
Credit (provision) in lieu of
     income taxes                         (3,479)        1,643        (3,494)        1,550 
                                    ------------- ------------- ------------- -------------
Net income                          $      5,351  $      3,909  $      5,366  $      4,033 
                                    ============= ============= ============= =============


<FN>

The accompanying notes are an integral part of these financial statements.

</TABLE>

                     MAXXAM GROUP INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENT OF CASH FLOWS
                         (IN THOUSANDS OF DOLLARS)

<TABLE>

                                                         Six Months Ended
                                                             June 30,
                                                   ---------------------------
                                                        1997          1996
                                                   ------------- -------------
                                                           (Unaudited)
<S>                                                <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                    $      5,366  $      4,033 
     Adjustments to reconcile net income to net
          cash provided by operating activities:
          Depletion and depreciation                     13,653        13,955 
          Amortization of deferred financing
               costs and discounts on long-term
               debt                                       7,748         7,190 
          Net sales of marketable securities              6,941         9,551 
          Net gains on marketable securities             (3,196)       (2,041)
     Increase (decrease) in cash resulting from
          changes in:
          Receivables                                     4,788         5,033 
          Inventories, net of depletion                   8,256         6,310 
          Prepaid expenses and other assets              (2,436)          153 
          Accounts payable                                  440           793 
          Accrued interest                                 (351)         (291)
          Other liabilities                                 575       (11,513)
          Accrued and deferred income taxes               3,322           911 
     Other                                                  108            (5)
                                                   ------------- -------------
               Net cash provided by operating
                    activities                           45,214        34,079 
                                                   ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital expenditures                                (6,034)       (5,908)
     Net proceeds from sale of assets                        69            94 
                                                   ------------- -------------
               Net cash used for investing
                    activities                           (5,965)       (5,814)
                                                   ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Redemptions, repurchases of and principal
          payments on long-term debt                     (8,801)       (8,539)
     Dividends paid                                        (800)       (1,600)
     Restricted cash withdrawals, net                       202           300 
                                                   ------------- ------------- 
               Net cash used for financing
                    activities                           (9,399)       (9,839)
                                                   ------------- ------------- 

NET INCREASE IN CASH AND CASH EQUIVALENTS                29,850        18,426 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD         72,418        48,396 
                                                   ------------- ------------- 
CASH AND CASH EQUIVALENTS AT END OF PERIOD         $    102,268  $     66,822 
                                                   ============= ============= 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Interest paid, net of capitalized interest    $     31,757  $     32,093 
     Tax allocation payments to MAXXAM Inc.        $        172  $        167 

SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING
     AND FINANCING ACTIVITIES:
     Timber and timberlands acquired subject to
          long-term debt                           $      6,413  $         -- 



<FN>

The accompanying notes are an integral part of these financial statements.

</TABLE>

                     MAXXAM GROUP INC. AND SUBSIDIARIES

            CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         (IN THOUSANDS OF DOLLARS)


1.        GENERAL

          The information contained in the following notes to the
consolidated financial statements is condensed from that which would appear
in the annual consolidated financial statements; accordingly, the
consolidated financial statements included herein should be reviewed in
conjunction with the consolidated financial statements and related notes
thereto contained in the Annual Report on Form 10-K filed by MAXXAM Group
Inc. with the Securities and Exchange Commission for the fiscal year ended
December 31, 1996 (the "Form 10-K").  Any capitalized terms used but not
defined in these Condensed Notes to Consolidated Financial Statements have
the same meaning given to them in the Form 10-K.  All references to the
"Company" include MAXXAM Group Inc. and its subsidiary companies unless
otherwise noted or the context indicates otherwise.  Accounting
measurements at interim dates inherently involve greater reliance on
estimates than at year end.  The results of operations for the interim
periods presented are not necessarily indicative of the results to be
expected for the entire year.

          The consolidated financial statements included herein are
unaudited; however, they include all adjustments of a normal recurring
nature which, in the opinion of management, are necessary to present fairly
the consolidated financial position of the Company at June 30, 1997, the
consolidated results of operations for the three and six months ended June
30, 1997 and 1996 and consolidated cash flows for the six months ended June
30, 1997 and 1996.  Certain reclassifications of prior period information
have been made to conform to the current presentation.  The Company is a
wholly owned subsidiary of MGHI which in turn is a wholly owned subsidiary
of MAXXAM.

2.        INVENTORIES

          Inventories consist of the following:

<TABLE>

                                                  June 30,    December 31,
                                                    1997          1996
                                               ------------- -------------
<S>                                            <C>           <C>
Lumber                                         $      44,777 $      49,829
Logs                                                  14,319        19,478
                                               ------------- -------------
                                               $      59,096 $      69,307
                                               ============= =============

</TABLE>


3.        RESTRICTED CASH

          Restricted cash represents the amount held by the Trustee under
the indenture governing the Timber Notes of the Company's indirect wholly
owned subsidiary, Scotia Pacific.

4.        LONG-TERM DEBT

          Long-term debt consists of the following:


<TABLE>

                                                  June 30,    December 31,
                                                    1997          1996
                                               ------------- -------------
<S>                                            <C>           <C>
7.95% Scotia Pacific Timber Collateralized
     Notes due July 20, 2015                   $    327,418  $    336,130 
10-1/2% Pacific Lumber Senior Notes due March
     1, 2003                                        235,000       235,000 
11-1/4% MGI Senior Secured Notes due August 1,
     2003                                           100,000       100,000 
12-1/4% MGI Senior Secured Discount Notes due
     August 1, 2003, net of discount                110,553       104,173 
Pacific Lumber Credit Agreement                       6,413             - 
Other                                                   635           724 
                                               ------------- -------------
                                                    780,019       776,027 
Less: current maturities                            (18,319)      (16,258)
                                               ------------- -------------
                                               $    761,700  $    759,769 
                                               ============= =============

</TABLE>


5.        CONTINGENCIES

          Pacific Lumber's operations are subject to a variety of
California and federal laws and regulations dealing with timber harvesting,
endangered species and critical habitat, and air and water quality. 
Moreover, these laws and regulations are modified from time to time and are
subject to judicial and administrative interpretation.  Compliance with
such laws, regulations and judicial and administrative interpretations,
together with the cost of litigation incurred in connection with certain
timber harvesting operations of Pacific Lumber, have increased the cost of
logging operations.  Pacific Lumber is subject to certain pending matters
described below which could have a material adverse effect on the
consolidated financial position, results of operations or liquidity of
Pacific Lumber, and in turn the Company.  There can be no assurance that
certain pending or future governmental regulations, legislation, judicial
or administrative decisions or California ballot initiatives will not have
a material adverse effect on the Company.

          In May 1996, the USFWS published the Final Designation of
critical habitat for the marbled murrelet, a coastal seabird,  which
designated over four million acres as critical habitat for the marbled
murrelet.  Although nearly all of the designated habitat is public land,
approximately 33,000 acres of Pacific Lumber's timberlands are included in
the Final Designation, the substantial portion of such acreage being young
growth timberlands.  In order to mitigate the impact of the Final
Designation, particularly with respect to timberlands occupied by the
marbled murrelet, Pacific Lumber attempted to develop the Murrelet HCP. 
Due to, among other things, the unfavorable response of the USFWS to
Pacific Lumber's initial Murrelet HCP efforts, Pacific Lumber and its
subsidiaries filed the Takings Litigation alleging that certain portions of
their timberlands had been "taken" and seeking just compensation.  Pursuant
to the Headwaters Agreement entered into by Pacific Lumber, MAXXAM, the
United States and California on September 28, 1996 and described in Note 6
below, the Takings Litigation has been stayed at the request of the
parties.

          It is impossible for the Company to determine the potential
adverse effect of the Final Designation on the Company's consolidated
financial position, results of operations or liquidity until such time as
various regulatory and legal issues are resolved; however, if Pacific
Lumber is unable to harvest, or is severely limited in harvesting, on
timberlands designated as critical habitat for the marbled murrelet, such
effect could be materially adverse to Pacific Lumber, and in turn the
Company.  If Pacific Lumber is unable to harvest or is severely limited in
harvesting, it intends to seek just compensation from the appropriate
governmental agencies on the grounds that such restrictions constitute a
governmental taking.  There continue to be other regulatory actions and
lawsuits seeking to have other species listed as threatened or endangered
under the ESA and/or the CESA and to designate critical habitat for such
species.  For example, on April 25, 1997 the NMFS announced the listing of
the coho salmon under the ESA in northern California, including lands owned
by Pacific Lumber.  It is uncertain what impact, if any, such listings
and/or designations of critical habitat would have on the consolidated
financial position, results of operations or liquidity of Pacific Lumber,
and in turn the Company.

          In 1994, the BOF adopted certain regulations regarding compliance
with long-term sustained yield ("LTSY") objectives.  These regulations
require that timber companies project timber growth and harvest on their
timberlands over a 100-year planning period and establish a LTSY harvest
level that takes into account environmental and economic considerations. 
Timber companies must submit an SYP demonstrating that the average annual
harvest over any rolling ten-year period will not exceed the LTSY harvest
level and that their projected timber inventory is capable of sustaining
the LTSY harvest level in the last decade of the 100-year planning period. 
On December 17, 1996, Pacific Lumber submitted a proposed SYP to the CDF. 
The proposed SYP sets forth an LTSY harvest level substantially the same as
Pacific Lumber's average annual timber harvest over the last six years. 
The proposed SYP also indicates that Pacific Lumber's average annual timber
harvest during the first decade of the SYP would approximate the LTSY
harvest level.  During the second decade of the proposed SYP, Pacific
Lumber's average annual timber harvest would be approximately 8% less than
that proposed for the first decade.  The SYP, when approved, will be valid
for ten years.  Thereafter, revised SYPs will be prepared every decade that
will address the LTSY harvest level based upon reassessment of changes in
the resource base and protection of public resources.

          The proposed SYP assumes that the transactions contemplated by
the Headwaters Agreement will be consummated and that the Multi-Species HCP
will permit Pacific Lumber to harvest its timberlands (including over the
next two decades a substantial portion of its old growth timberlands not
transferred pursuant to the Headwaters Agreement) to achieve maximum
sustained yield.  The SYP is subject to review and approval by the CDF, and
there can be no assurance that the SYP will be approved in its proposed
form.  Until the SYP is reviewed and approved, the Company is unable to
predict the impact that these regulations will have on Pacific Lumber's
future timber harvesting practices. It is possible that the results of the
review and approval process could require Pacific Lumber to reduce its
timber harvest in future years from the harvest levels set forth in the
proposed SYP.  The Company believes Pacific Lumber would be able to
mitigate the effect of any required reduction in harvest level by
acquisitions of additional timberlands and making corresponding amendments
to the SYP; however, there can be no assurance that Pacific Lumber would be
able to do so and the amount of such acquisitions would be limited by
Pacific Lumber's available financial resources.  The Company is unable to
predict the ultimate impact the sustained yield regulations will have on
its future financial position, results of operations or liquidity.

          Various groups and individuals have filed objections with the CDF
and the BOF regarding the CDF's and the BOF's actions and rulings with
respect to certain of Pacific Lumber's THPs and other timber harvesting
operations, and Pacific Lumber expects that such groups and individuals
will continue to file such objections.  In addition, lawsuits are pending
or threatened which seek to prevent Pacific Lumber from implementing
certain of its approved THPs or which challenge other operations by Pacific
Lumber.  These challenges have severely restricted Pacific Lumber's ability
to harvest old growth timber on its property.  To date, challenges with
respect to Pacific Lumber's THPs relating to young growth timber and to its
other operations have been limited; however, no assurance can be given as
to the extent of such challenges in the future.  Pacific Lumber believes
that environmentally focused challenges to its timber harvesting and other
operations are likely to occur in the future, particularly with respect to
virgin and residual old growth timber.  Although such challenges have
delayed or prevented Pacific Lumber from conducting a portion of its
operations, they have not had a material adverse effect on Pacific Lumber's
consolidated financial position, results of operations or liquidity. 
Nevertheless, it is impossible to predict the future nature or degree of
such challenges or their ultimate impact on the consolidated financial
position, results of operations or liquidity of Pacific Lumber, and in turn
the Company.

          The Company is also involved in various claims, lawsuits and
proceedings.  While there are uncertainties inherent in the ultimate
outcome of such matters and it is impossible to presently determine the
ultimate costs that may be incurred, management believes that the
resolution of such uncertainties and the incurrence of such costs should
not have a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity.

6.        HEADWATERS AGREEMENT

          On September 28, 1996, the Pacific Lumber Parties entered into
the Headwaters Agreement with the United States and California.  The
Headwaters Agreement provides the framework for the acquisition by the
United States and California of approximately 5,600 acres of Pacific
Lumber's timberlands commonly referred to as the Headwaters Forest and the
Elk Head Springs Forest (collectively, the "Headwaters Timberlands").  A
substantial portion of the Headwaters Timberlands consists of virgin old
growth timberlands.  The Headwaters Timberlands would be transferred in
exchange for (a) property and other consideration (possibly including cash)
from the United States and California having an aggregate fair market value
of $300 million and (b) approximately 7,755 acres of adjacent timberlands
(the "Elk River Timberlands") to be acquired by the United States and
California from a third party.  The United States and California would
also acquire and retain an additional 1,900 acres of timberlands from such
third party.

          The Headwaters Agreement also provides, among other things, for
the expedited processing by the United States of a Permit (an incidental
take permit) to be based upon a Multi-Species HCP covering (a) the
Resulting Pacific Lumber Timber Property (the property Pacific Lumber will
own after consummation of the Headwaters Agreement) and (b) the Headwaters
Timberlands and the 1,900 acres of additional timberlands to be acquired
and retained by the United States and  California (both of the latter as
conserved habitat).  The agreement also requires expedited processing by
California of an SYP covering the Resulting Pacific Lumber Timber Property.

          As part of the Headwaters Agreement, the Pacific Lumber Parties
agreed to not enter the Headwaters Forest or the Elk Head Forest to conduct
logging operations, including salvage logging (the "Moratorium").  The
Moratorium was to terminate if by July 28, 1997 the parties had not
achieved the Specified Items to their respective satisfaction.  On March
11, 1997, the Pacific Lumber Parties agreed to amend the Headwaters
Agreement to extend to February 17, 1998 the period of time during which
these closing conditions must be met.  The extension is, however, subject
to the achievement of certain milestones toward completion of the
Headwaters Agreement, including satisfaction of the Pacific Lumber Parties
with the progress of the United States and California toward providing for
the consideration to be transferred at the closing.

          The United States has recently focused its efforts on furnishing
the federal portion of the required consideration through a federal budget
appropriation.  The Budget Agreement between President Clinton and the
Republican Congressional leadership would allocate $250,000 for the 
acquisition pursuant to the Headwaters Agreement.  In July 1997, the Senate
Appropriations Committee approved the interior appropriations bill, which
contained provisions allowing the expenditure of $700,000 for priority land
acquisitions, including the $250,000 for the acquisition pursuant to the
Headwaters Agreement.  This bill does, however, contain a provision
requiring the passage of authorizing legislation for the Headwaters
acquisition.  The corresponding appropriations bill approved by the House
of Representatives did not contain any part of the $700,000 priority land
acquisitions. Whether a federal budget appropriation for the Headwaters
acquisition will be enacted, or the terms of any such appropriation, is
uncertain as the full Senate must still consider the interior
appropriations bill, and a conference would have to resolve any differences
between the final Senate bill and the House version.

          Although California has not enacted legislation providing funds
for its portion of the acquisition contemplated by the Headwaters
Agreement, representatives of the State of California continue to indicate
that they are considering various methods of furnishing the required
consideration.

          Closing of the Headwaters Agreement is subject to various
conditions, including (a) acquisition by the government of the Elk River
Timberlands, (b) approval of an SYP and a Multi-Species HCP and issuance of
a Permit, each in form and substance satisfactory to Pacific Lumber, (c)
the issuance by the Internal Revenue Service and the California Franchise
Tax Board of closing agreements in form and substance sought by and
satisfactory to the Pacific Lumber Parties, (d) the absence of a judicial
decision in any litigation brought by third parties that any party
reasonably believes will significantly delay or impair the transactions
described in the Headwaters Agreement, and (e) the dismissal with prejudice
at closing of the Takings Litigation.  The parties to the Headwaters
Agreement are working to satisfy these conditions; however, there can be no
assurance that the Headwaters Agreement will be consummated.

                             MAXXAM GROUP INC.

ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS


          The following should be read in conjunction with the response to
Part I, Item 1 of this Report and Items 7 and 8 of the Form 10-K.  Any
capitalized terms used but not defined in this Item have the same meaning
given to them in the Form 10-K.

          This section contains statements which constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995.  These statements appear in several places in this Form
10-Q.  Such statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "estimates," "will,"
"should," "plans" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of
strategy.  Readers are cautioned that any such forward-looking statements
are not guarantees of future performance and involve significant risks and
uncertainties, and that actual results may vary materially from those in
the forward-looking statements as a result of various factors.  These
factors include the effectiveness of management's strategies and decisions,
general economic and business conditions, developments in technology, new
or modified statutory or regulatory requirements and changing prices and
market conditions.  This section and the Company's Form 10-K identify other
factors that could cause such differences.  No assurance can be given that
these are all of the factors that could cause actual results to vary
materially from the forward-looking statements.

RESULTS OF OPERATIONS

          The Company and its principal operating subsidiaries, Pacific
Lumber and Britt, are engaged in forest products operations.  The Company's
business is seasonal in that the Company generally experiences lower first
quarter sales due largely to the general decline in construction-related
activity during the winter months.  Accordingly, the Company's results for
any one quarter are not necessarily indicative of results to be expected
for the full year.  The following table presents selected operational and
financial information for the three and six months ended June 30, 1997 and
1996.

<TABLE>

                                    Three Months Ended           Six Months Ended
                                         June 30,                    June 30,
                               --------------------------- ---------------------------
                                    1997          1996          1997          1996
                               ------------- ------------- ------------- -------------
                                (In millions of dollars, except shipments and prices)
<S>                            <C>           <C>           <C>           <C>
Shipments:
     Lumber: (1) 
          Redwood upper grades         13.3          12.9          26.3          23.3 
          Redwood common
               grades                  67.6          60.8         124.8         118.1 
          Douglas-fir upper
               grades                   2.5           2.8           5.0           5.0 
          Douglas-fir common
               grades                  17.1          18.6          36.5          37.9 
          Other                         4.9           8.4           8.8          10.3 
                               ------------- ------------- ------------- -------------
               Total lumber           105.4         103.5         201.4         194.6 
                               ============= ============= ============= =============
     Logs (2)                           4.1           5.7           6.6          11.6 
                               ============= ============= ============= =============
     Wood chips (3)                    62.1          52.4         122.3         101.4 
                               ============= ============= ============= =============

Average sales price:
     Lumber: (4)
          Redwood upper grades $      1,423  $      1,392  $      1,373  $      1,389 
          Redwood common
                grades                  546           525           527           504 
          Douglas-fir upper
               grades                 1,153         1,158         1,181         1,156 
          Douglas-fir common
               grades                   497           438           491           407 
     Logs (4)                           359           544           404           505 
     Wood chips (5)                      76            67            76            77 

Net sales:                                    
     Lumber, net of discount   $       68.6  $       63.5  $      127.7  $      115.4 
     Logs                               1.5           3.0           2.7           5.8 
     Wood chips                         4.7           3.5           9.2           7.8 
     Cogeneration power                 1.2            .9           2.2           1.3 
     Other                               .8            .4           1.9            .8 
                               ------------- ------------- ------------- ------------- 
               Total net sales $       76.8  $       71.3  $      143.7  $      131.1 
                               ============= ============= ============= ============= 
Operating income               $       24.1  $       19.0  $       42.8  $       35.4 
                               ============= ============= ============= ============= 
Operating cash flow (6)        $       31.1  $       26.3  $       56.5  $       49.4 
                               ============= ============= ============= ============= 
Income before income taxes     $        8.8  $        2.3  $        8.9  $        2.5 
                               ============= ============= ============= ============= 
Net income                     $        5.4  $        3.9  $        5.4  $        4.0 
                               ============= ============= ============= ============= 


<FN>

---------------

(1)  Lumber shipments are expressed in millions of board feet.
(2)  Log shipments are expressed in millions of feet, net Scribner scale.
(3)  Wood chip shipments are expressed in thousands of bone dry units of
     2,400 pounds.
(4)  Dollars per thousand board feet.
(5)  Dollars per bone dry unit.
(6)  Operating income before depletion and depreciation, also referred to
     as "EBITDA."

</TABLE>

          Net sales
          Net sales for the quarter ended June 30, 1997 increased from the
comparable prior year quarter due to higher average realized prices for
common grade redwood and Douglas-fir lumber and higher volumes of common
grade redwood lumber.  This improvement was partially offset by lower
volumes in most other categories of lumber.  In addition to these factors,
net sales for the six months ended June 30, 1997 increased from the
comparable prior year period due to higher volumes for upper grade redwood
lumber.

          Operating income
          Operating income for the three and six months ended June 30, 1997
increased from the comparable prior year periods, principally due to the
increase in net sales discussed above.

          Income before income taxes
          Income before income taxes for the three and six months ended
June 30, 1997 increased from the comparable 1996 periods principally due to
higher operating income as discussed above. 

          Credit (provision) in lieu of income taxes
          The credit in lieu of income taxes for the second quarter of 1996
includes a benefit of $2.6 million relating to the refund of taxes
previously paid in connection with a settlement of certain federal income
tax matters in June 1996.

FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES

          The Pacific Lumber Credit Agreement and the indentures governing
the Pacific Lumber Senior Notes and the Timber Notes contain various
covenants which, among other things, limit the ability of Pacific Lumber
and Scotia Pacific to incur additional indebtedness and liens, to engage in
transactions with affiliates, to pay dividends and to make investments.  As
of June 30, 1997, under the most restrictive of these covenants,
approximately $15.9 million of dividends could be paid by Pacific Lumber to
the Company.

          As of June 30, 1997, $27.1 million of borrowings was available
under the Pacific Lumber Credit Agreement, of which $3.5 million was
available for letters of credit and $23.6 million for timberland
acquisitions.  As of June 30, 1997, $6.4 million was outstanding and
letters of credit outstanding amounted to $16.2 million.

          The indenture governing the MGI Notes, among other things,
restricts the ability of the Company to incur additional indebtedness,
engage in transactions with affiliates, pay dividends and make investments. 
During the six months ended June 30, 1997, the Company paid dividends of
$.8 million.  As of June 30, 1997, under the most restrictive of these
covenants, $2.7 million of dividends could be paid by the Company.

          As of June 30, 1997, the Company had consolidated long-term debt
of $731.9 million (net of current maturities and restricted cash deposited
in the Liquidity Account) as compared to $729.8 million at December 31,
1996.  The increase in long-term debt was primarily due to $6.4 million of
borrowings under the Pacific Lumber Credit Agreement and $6.4 million in
accretion of discount on the MGI Discount Notes offset by $8.7 million in
principal payments on the Timber Notes.  The Company and its subsidiaries
anticipate that cash flow from operations, together with existing cash,
cash equivalents, marketable securities and available sources of financing,
will be sufficient to fund their working capital and capital expenditure
requirements for the next year.  With respect to their long-term liquidity,
the Company and its subsidiaries believe that their existing cash and cash
equivalents, together with their ability to generate sufficient cash from
operations and to obtain both short- and long-term financing, should
provide sufficient funds to meet their working capital and capital
expenditure requirements.  However, due to their highly leveraged
condition, the Company and its subsidiaries are more sensitive than less
leveraged companies to factors affecting their operations, including
governmental regulation affecting timber harvesting practices, increased
competition from other lumber producers or alternative building products
and general economic conditions.

TRENDS

          This section contains statements which constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995.  See above  for cautionary information with respect to
such forward-looking statements.

          Pacific Lumber's operations are subject to a variety of
California and federal laws, regulations  and judicial and administrative
interpretations dealing with timber harvesting, endangered species and
critical habitat, and air and water quality.  Moreover, these laws and
regulations are modified from time to time and are subject to judicial and
administrative interpretation.  Compliance with such laws, regulations and
judicial and administrative interpretations, together with the cost of
litigation incurred in connection with certain timber harvesting operations
of Pacific Lumber, have increased the cost of logging operations.  Pacific
Lumber is subject to certain pending matters which could have a material
adverse effect on the Company's consolidated financial position, results of
operations or liquidity.  There can be no assurance that these pending
matters or future governmental regulations, legislation or judicial or
administrative decisions would not have a material adverse effect on the
Company.  See Part II. Item 1. "Legal Proceedings" and Note 5 to the
Condensed Consolidated Financial Statements for further information
regarding regulatory and environmental factors affecting the Company's
operations.  See also Note 6 to the Condensed Consolidated Financial
Statements for the agreement to extend the Headwaters Agreement to February
17, 1998.

          Judicial or regulatory actions adverse to Pacific Lumber,
increased regulatory delays and inclement weather in northern California,
independently or collectively, could impair Pacific Lumber's ability to
maintain adequate log inventories and force Pacific Lumber to temporarily
idle or curtail operations at certain lumber mills from time to time.

                             MAXXAM GROUP INC.

                        PART II.  OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

          Reference is made to Item 3 of the Form 10-K for information
concerning material legal proceedings with respect to the Company.  The
following material developments have occurred with respect to such legal
proceedings.

          With respect to the Marbled Murrelet action described under
"Timber Harvesting Litigation," on April 18, 1997, the U.S. Ninth Circuit
Court of Appeals reversed the trial court's decision which had
preliminarily enjoined eight already-approved THPs to the extent they rely
on the Federal Owl Plan.  On June 18, 1997, the court granted the
defendants' motions for summary judgment disposing of the remaining issues
in this case in favor of the defendants.

          With respect to the Redway action described under "Timber
Harvesting Litigation," the trial was held on June 23, 1997; the court has
not yet issued its decision.

          With respect to the Takings Litigation described under "Timber
Harvesting Litigation," the Pacific Lumber Parties have offered to continue
and extend the stay of proceedings through September 15, 1997 in response
to the request of the United States for an extension of the stay of
proceedings.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

          A.        EXHIBITS:

                    27   Financial Data Schedule

          B.   REPORTS ON FORM 8-K:

                    None.

                                 SIGNATURE


          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 thereunto duly authorized, who has signed this report on
behalf of the Registrant and as the principal accounting officer of the
Registrant.


                                       MAXXAM GROUP INC.




Date:  August 1, 1997         By:      /S/ GARY L. CLARK         
                                         Gary L. Clark
                                        Vice President