BCTS/FFT Reforestation Collaboration – March 2012BCTS/FFT Reforestation Collaboration – March 2012Thompson Okanagan RegionThompson Okanagan Region

Case study Case study

By Mike Madill, FFT FLNRO Thompson Okanagan Region

And John Hopper BCTS, Kamloops Timber Sales Office

Description of Issue/ProblemDescription of Issue/Problem

There is over 500,000 Ha’s There is over 500,000 Ha’s of Pli leading stands of Pli leading stands (unharvested stands) in the (unharvested stands) in the Thompson Okanagan Thompson Okanagan Region on which the MPB Region on which the MPB killed timber has killed timber has deteriorated to the point deteriorated to the point where the log/fibre values where the log/fibre values are are lessless than development than development and reforestation costsand reforestation costs

Background Background ContinuedContinued•Salvaging of these Salvaging of these stands provides fibre stands provides fibre to industryto industry•Revenue used to Revenue used to reduce or cover reduce or cover development costs development costs •Overstory removal Overstory removal allows for effective allows for effective reforestation reforestation •Reforestation of Reforestation of these stands will these stands will reduce the mid and reduce the mid and long term AAC fall long term AAC fall downdown

FFT/BCTS Collaboration FFT/BCTS Collaboration

The Innovative Timber Sale The Innovative Timber Sale Harvesting License and/or Harvesting License and/or lump sum Timber Sales are lump sum Timber Sales are the mechanisms being the mechanisms being used to remove MPB killed used to remove MPB killed overstories to allow for FFT overstories to allow for FFT funded planting to take funded planting to take placeplace

Prompt reforestation will Prompt reforestation will reduce both the short and reduce both the short and long term timber supply long term timber supply fall downfall down

Disc Trenched Kamloops Block

FFT/BCTS CollaborationFFT/BCTS Collaboration

FFT Staff evaluate each FFT Staff evaluate each proposed area and approve proposed area and approve only those areas which meet only those areas which meet the FFT eligibility criteriathe FFT eligibility criteria

• BCTS staff manage the BCTS staff manage the overstory removal. Revenue overstory removal. Revenue from the sale of Timber from the sale of Timber covers development costscovers development costs

• BCTS staff manages contracts BCTS staff manages contracts to identify and survey to identify and survey potentially eligible ground potentially eligible ground within BCTS operating areaswithin BCTS operating areas

Small diameter high density MPB killed standsSmall diameter high density MPB killed standsGrade 4 going to pulp mill, grade 6 ground for Grade 4 going to pulp mill, grade 6 ground for

Hog fuelHog fuel

Photo of FFT FLTC in Kamloops Photo of FFT FLTC in Kamloops 20102010

Rivercity chipping Facility Rivercity chipping Facility

Overstory Removal resulted in better growing Overstory Removal resulted in better growing environment for seedlingsenvironment for seedlings

Alternative reforestation strategies to over Alternative reforestation strategies to over story removal includes underplantingstory removal includes underplanting

We have experienced We have experienced lower survival and lower survival and reduced performance reduced performance where seedlings have where seedlings have been planted below been planted below MPB killed Pine MPB killed Pine

overstoriesoverstories

FFT underplanting 2009FFT underplanting 2009

Cat crushing doesn’t provide the economics Cat crushing doesn’t provide the economics benefits of salvaging and as the crushed material benefits of salvaging and as the crushed material decays it gives off Co2decays it gives off Co2

FFT funded cat crushing blocks FFT funded cat crushing blocks 20092009

Accomplishments Accomplishments to dateto date

Since 2009 in the Since 2009 in the Thompson Okanagan Thompson Okanagan Region over 1,000,000 Region over 1,000,000 m3 m3 (net merch*)(net merch*) of MPB of MPB killed timber has been killed timber has been salvaged to enable the salvaged to enable the planting of over 7 planting of over 7 million seedlings on million seedlings on 4,000 ha’s4,000 ha’s

* * Total volume harvested and used as Total volume harvested and used as fiber for chips and Bio-energy is higher fiber for chips and Bio-energy is higher

Photo of BCTS ITSLPhoto of BCTS ITSL

Salvaging of the overstory provides both revenue to Salvaging of the overstory provides both revenue to pay for the development of blocks, and provides pay for the development of blocks, and provides

jobs in the following areas:jobs in the following areas:

Development (layout, Development (layout, cruising, surveying etc)cruising, surveying etc)

Road buildingRoad building Harvesting Harvesting

(buncher/skidder operators (buncher/skidder operators etc)etc)

TruckingTrucking Manufacturing (milling, Manufacturing (milling,

pulp mills, bio energy etc)pulp mills, bio energy etc)

Demand exists for grade 4, 6 logs in Demand exists for grade 4, 6 logs in the Thompson Okanagan (Orphaned the Thompson Okanagan (Orphaned

Pulp Mills)Pulp Mills) There is a demand for low There is a demand for low

grade fiber in the Southern grade fiber in the Southern InteriorInterior

Sawmill curtailments have Sawmill curtailments have reduced Mercer (Castlegar) reduced Mercer (Castlegar) and Domtar’s (Kamloops) and Domtar’s (Kamloops) residual chip supply by 2 residual chip supply by 2 million m3/yr million m3/yr

Chipping of low grade Chipping of low grade timber is making up the timber is making up the chip deficitchip deficit

Benefits of using BCTS as our delivery agentBenefits of using BCTS as our delivery agent

BCTS charges a flat 10% overheadBCTS charges a flat 10% overhead

BCTS management of the FFT current reforestation program in the BCTS management of the FFT current reforestation program in the Thompson Okanagan is saving the FFT program over $900K a yearThompson Okanagan is saving the FFT program over $900K a year..

John Hopper BCTS FFT Co-ordinator (left with John Hopper BCTS FFT Co-ordinator (left with foreman from Coast Range Silviculture June foreman from Coast Range Silviculture June

20112011) )

Example of checking and crackingExample of checking and cracking

Kamloops FFT staff will only approve reforestation Kamloops FFT staff will only approve reforestation funding for those stands where the timber revenue funding for those stands where the timber revenue

(from the sale of the overstory) is insufficient to (from the sale of the overstory) is insufficient to cover off development, BCTS Overhead and cover off development, BCTS Overhead and

silviculture costssilviculture costs. .

Scotty CreekScotty Creek

What’s in it for Forests for What’s in it for Forests for Tomorrow ProgramTomorrow Program

Forecasted FFT current reforestation expenditures Forecasted FFT current reforestation expenditures have been reduced by over $9,000,000 Thompson have been reduced by over $9,000,000 Thompson Okanagan. Reduction due to not having to pay for Okanagan. Reduction due to not having to pay for over story removal treatments and by using BCTS over story removal treatments and by using BCTS to deliver the FFT current reforestation programto deliver the FFT current reforestation program

The FFT dollars saved can used to reforest or The FFT dollars saved can used to reforest or space more areaspace more area

Economies of scale results in lower per unit costs Economies of scale results in lower per unit costs e.g. price/ seedling $.28/treee.g. price/ seedling $.28/tree

FFT staff resources can be directed to reforestation FFT staff resources can be directed to reforestation and incremental activities instead of over story and incremental activities instead of over story removal issues removal issues

Over to JohnOver to John

Why BCTS needs FFTWhy BCTS needs FFT

Harvesting MPB impacted stands Harvesting MPB impacted stands has accounted for the majority of has accounted for the majority of BCTS operations in the Kamloops BCTS operations in the Kamloops Business Area since 2003.Business Area since 2003.

Over time the volume per hectare Over time the volume per hectare and piece size has decreased and and piece size has decreased and the damage to the stands has the damage to the stands has increased. These damaged increased. These damaged stands generally yield low bid stands generally yield low bid prices on the open market. prices on the open market.

Without FFT Without FFT reforestation funding reforestation funding BCTS could not BCTS could not economically develop economically develop these stands and they these stands and they would be left untreated. would be left untreated.

This would have a This would have a significant effect on significant effect on utilization of the dead Pli utilization of the dead Pli and future mid and long and future mid and long term timber supplies. term timber supplies.

What’s in it for BCTS?What’s in it for BCTS?

The ability to limit loses associated with The ability to limit loses associated with development and reforestation of low development and reforestation of low value/volume insect killed salesvalue/volume insect killed sales

Reduced number of no bidsReduced number of no bids Good stewardshipGood stewardship Improved future timber supply for BCTSImproved future timber supply for BCTS A strategy to provide less expensive fiber A strategy to provide less expensive fiber

to the emerging bio-energy marketto the emerging bio-energy market

Is FFT paying for reforestation Is FFT paying for reforestation of ITSL’s a subsidy?of ITSL’s a subsidy?

Answer Answer No BCTS/FFT ITSL’s and/or lump sum sales No BCTS/FFT ITSL’s and/or lump sum sales

are competitively auctioned on the open are competitively auctioned on the open market just like other BCTS TSL’s. In fact market just like other BCTS TSL’s. In fact because sales are lump sum, stumpage because sales are lump sum, stumpage is not adversely impacted by log grades. is not adversely impacted by log grades.

Lump Sum TSL’sLump Sum TSL’s

The total price for the TSL (total upset plus bonus) is The total price for the TSL (total upset plus bonus) is determined at the time sale and is not affected by determined at the time sale and is not affected by lumber grades.lumber grades.

The lump sum upset price for FFT eligible TSL’s The lump sum upset price for FFT eligible TSL’s incorporates actual costs of development, access and incorporates actual costs of development, access and may include overhead, but excludes silviculture. may include overhead, but excludes silviculture.

Cruising is completed to the same standards as other Cruising is completed to the same standards as other BCTS sales.BCTS sales.

The bid reflects the actual market value of the wood The bid reflects the actual market value of the wood profile and not is not determined at the scale. profile and not is not determined at the scale.

What if Lump Sum TSL’s sellWhat if Lump Sum TSL’s sell for more than total cost ? for more than total cost ?

The current MOU states that if the bid price exceeds the The current MOU states that if the bid price exceeds the total cost of development, silviculture and overhead (TCU) total cost of development, silviculture and overhead (TCU) the TSL is not eligible for FFT funding.the TSL is not eligible for FFT funding.

This can create problems with planning and budgeting as This can create problems with planning and budgeting as the TSL may meet all FFT eligibility criteria but sell for the TSL may meet all FFT eligibility criteria but sell for >TCU so it reverts back to BCTS reforestation obligations >TCU so it reverts back to BCTS reforestation obligations after sale date. after sale date.

BCTS PROPOSALBCTS PROPOSAL

To create higher reliability in our planning we To create higher reliability in our planning we have proposed a 20% tolerance over TCU for FFT have proposed a 20% tolerance over TCU for FFT eligible TSL’s.eligible TSL’s.

Individual TSL’s with sold rates >TCU but within Individual TSL’s with sold rates >TCU but within 20% will remain FFT eligible providing the 20% will remain FFT eligible providing the average sale price for all eligible TSL’s is below average sale price for all eligible TSL’s is below TCU. This is monitored by quarter and fiscal year. TCU. This is monitored by quarter and fiscal year.

In fiscal 11/12 to date the average sale price is In fiscal 11/12 to date the average sale price is <$1.87/m3> below the total cost estimate for all <$1.87/m3> below the total cost estimate for all FFT eligible TSL’s with the 20% tolerance applied.FFT eligible TSL’s with the 20% tolerance applied.

A process to amend the current MOU to include A process to amend the current MOU to include the tolerance is underway.the tolerance is underway.

BCTS/FFT PROCESSBCTS/FFT PROCESS FFT criteria ( >70 Pli, >70% dead) is FFT criteria ( >70 Pli, >70% dead) is

incorporated into preliminary block incorporated into preliminary block layout. layout.

FFT ITSL surveys are scheduled and FFT ITSL surveys are scheduled and prioritized to obtain results prior to prioritized to obtain results prior to sale date (results are utilized to set sale date (results are utilized to set rate).rate).

Packages are prepared for each Packages are prepared for each eligible TSL for review and signing:eligible TSL for review and signing:

Reforestation Obligation Reforestation Obligation letter.letter.

Eligibility Criteria for Eligibility Criteria for Rehabilitation checklist.Rehabilitation checklist.

Completed FFT ITSL Completed FFT ITSL SURVEY and photosSURVEY and photos

Lump Sum TSL Bid record.Lump Sum TSL Bid record. Interior Cruise Based Cost Interior Cruise Based Cost

Calculation (fs1355).Calculation (fs1355).

FFT Reforestation Obligation Letter FFT Reforestation Obligation Letter

Eligibility Criteria formEligibility Criteria form

SurveySurvey

BCTS/FFT PROCESS BCTS/FFT PROCESS (post)(post)

Once eligibility is confirmed status in Once eligibility is confirmed status in Cengea Resources is updated to FFT.Cengea Resources is updated to FFT.

Operational FFT activities are combined Operational FFT activities are combined with the BCTS program for economies of with the BCTS program for economies of scale (stand alone contracts are not scale (stand alone contracts are not required). FFT units are coded out for required). FFT units are coded out for payment. payment.

FFT Sowing requests and budgets are FFT Sowing requests and budgets are completed by BCTS.completed by BCTS.

Program Goals and ResultsProgram Goals and Results

First FFT funded BCTS First FFT funded BCTS administered work in administered work in Kamloops was 365 ha. of Kamloops was 365 ha. of MSP in 2009.MSP in 2009.

In 2011 the Kamloops In 2011 the Kamloops Business Area planted 2.5 Business Area planted 2.5 million FFT trees and site million FFT trees and site prepared 1200 ha. prepared 1200 ha.

The program will increase in The program will increase in 2012 to 3.4 million trees and 2012 to 3.4 million trees and 2100 ha. of MSP. 2100 ha. of MSP.

In 2013 the program will In 2013 the program will peak at 5.1 million trees peak at 5.1 million trees and 1600 ha. of MSP.and 1600 ha. of MSP.

Questions?Questions?

Area north of Cache CreekArea north of Cache Creek