My
understanding is that they are harvested by loggers, who put them on a
skider or forwarder, and then put them on logging trucks, and then
they get taken to the mill. Is this correct? If so, are all these
people employed by the paper company, or are they indepant
contractors?

Here in Upper Michigan most loggers are independent contractors. They buy
stumpage and sell wood to the paper mills. The mill gives loggers quarterly
quotas that they are allowed to sell. These can vary widely from quarter to
quarter depending on how much wood the mill needs or has on hand. Loggers try
to have a steady amount of timber lined up and ready to cut at all times of
year. This timber comes from private or public land through timber sales. The
mills call this open market wood, and demand fluctuates. Logging is a very
difficult way to make money.
Loggers cutting wood on the land owned by the paper companies here are still
independent contractors, but are more assured of the market for the wood since
the mill owns the supply and the market.

If paper use is skyrocketing, and demand is
increasing, why would they be closing factories and selling off land?
Are they moving their production to other parts of the country or to
other countries?

Some paper mills are old and obsolete so can't compete anymore. Building a
new mill is very expensive and there are a lot of restrictions due to pollution
laws. It is a global market and labor costs are higher in this country than in
most others.
It is difficult to say if land use restrictions play a part yet but that
will certainly be true in the future.