Hemlock

1. Hemlock the ugly stepsister or the new Cinderella species Ralph WinterStand Management OfficerJanuary 30, 2008

2. Objectives • To present some MFR perspectives regarding the management of Hemlock (Hw) • Current and future markets and product preferences • Volume, value and quality of second growth • Tree species diversity • Timber supply considerations • Forest Health • Stand establishment and tending

3. Introduction • We need to acknowledge the name of the BGC Zone we do most of our management in is "The coastal Western Hemlock Zone" • The standing timber inventory in the THLB is 60% Hw • 63% of the current FSPs standards have Hw as a preferred or acceptable species • Hemlock has, therefore, a substantial impact on the financial results of the B.C. Coast both now and into the future

4. Current Old Growth Hemlock • A critical constraint for old growth hemlock-balsam timber is variability in the wood quality, rot, compression wood, moisture content and other properties. • This variability makes harvesting hemlock-balsam forests somewhat of a lottery:

5. Current Markets • On a global basis, the B.C. Coast Douglas fir and hemlock-balsam costs today are at the higher end of North America log costs • Higher valued western red cedar and Douglas fir are normally able to offset these higher costs, • Hemlock-balsam is more uneconomic due to the inherent wood quality constraints and lower sales returns. • There are profitable processing operations on the Coast, but most of these are not processing hemlock balsam timber • The most profitable segments are in western red cedar, Douglas fir and other unique species

6. Coastal Action Plan • The B.C. Coast is not really limited by any market or product restrictions or limitations • mainly limited by higher costs relative to competing products or suppliers. • Cost reduction in delivered log costs and processing are key themes in any coastal industry strategy. • Silviculturists have a key role in establishing and managing Hw stands that will be • low cost to harvest • valuable to mill

7. future markets and product preferences for Hemlock • The Coast's future is quite bright due to the volume of 2nd growth Fdc and Hw • The 2nd growth product does not have the decay issue that old growth has • Operations in the Pacific Northwest have had a lot of success with drying lumber from the smaller 2nd growth trees.  • Hw when dried is stable and takes paint and stain very well.  • There has been a growing market for 2nd growth Hw in Asia. 

8. The Future • Low-cost, high-volume commodity hemlock-balsam sawmills depend on achieving consistently low manufacturing costs per unit of lumber produced. • These mills utilize state-of-the-art computer scanning and optimization technology to enable high-speed log processing • In-bound log uniformity and quality are critical to capture all of the benefits that computer optimization offers. • Second-growth and plantation forests produce logs that are uniform in size and age with limited defects • Silviculturists need to implement species, regeneration and stand management practices that enable low harvesting costs while producing high value stands

9. Tree species diversity and current deployment on the entire coast • To ensure sustainable and valuable future harvests, Foresters need to monitor and strategically manage the • harvesting, regeneration, • and tending practices on all species

10. Managing the stockportfolio over time • Foresters need to actively manage the proportion of the stock portfolio they are liquidating over time… • Is it appropriate to • remove 20% of the total cedar inventory while • Only removing 6% of the other species inventory • In a period of 15 years? cedar Other species

11. Harvesting information for the North Coast TSA • In a number of TSAs and TFLs we seen some key changes: • harvesting heavily focussed on high value species – I.e. red and yellow cedar • leaving hemlock and balsam behind • Significant increase in partial cutting

12. Planting information for the North Coast TSA Compared to the significant shifts in the types of species being harvested, there has not been commensurate increases in red cedar planting

13. Harvesting and free growinginformation for the North Coast TSA In recent years some obligation holders have focussed on meeting free growing obligations by using old growth or residual Hemlock balsam leave trees Free growing obligations are declared within 1-2 years instead of 15 years

14. January 16 Forest Practices Board Report on high retention harvesting • On the blocks reviewed there was a species profile shift from high cedar composition to lower value Hw-dominated stands. • Depending upon the remaining value, there may be limited options for subsequent harvest entries. • None of the site plans projected a reduction in volume production or a species shift as a result of the partial harvest approach, when there clearly would be. • There was usually a “disconnect” between what site plans prescribed and what was implemented on the ground

15. Forest PracticesBoard Report • Blocks were often not planted. Instead there was reliance on release of understory, or natural regeneration, which will almost certainly encourage hemlock and true fir growth, rather than regeneration of higher-value cedar. • mistletoe is not always being managed appropriately, leaving abundant infected trees in residual stands, which will negatively impact strategies for natural regeneration of vulnerable hemlock.

16. Managing the Stock portfolio more strategically • Your personal RRSP or investment counsellors do active management of your stock portfolio to ensure the right balance of stocks • As stock portfolio managers, foresters have a responsibility to the public to properly managing the growing stock on coastal forests • I would think that the public isn’t expecting forester’s to manage junk bonds and sub-prime mortgage funds • I would think that the public would expect foresters to maintain options, minimize risk and produce valuable growing stocks

17. Managing TreeSpecies Diversity We have block level control over tree species but we are not managing the aggregate forest level species compositions To effectively manage for volume, value, health and climate change professional foresters should be managing species composition at the forest level also

18. Timber supply considerations with regard to Hw deployment • The choice of what species should be deployed has profound value and volume implications for the public. • As stewards of the ¼ trillion dollar public asset, professional foresters must have a clear understanding of the impacts of the choices they are making

19. 800 Base Case Harvest Level New Harvest Level 700 600 Stand conversion Douglas-fir Harvest 500 400 300 200 100 Base Case Douglas-fir Harvest 0 200 250 0 100 150 50 Choice of species affects the volume and value of the future crop! Long term harvest level increases 8%! Douglas-fir is about 40% more valuable than hemlock! Harvest Level (000’s m3/yr) About 120,000 m3/yr more Douglas-fir harvest in long term. What happens when 1/2 the area SI 27+ that would naturally regenerate to hemlock is converted to Douglas-fir? Years from now TFL 39 Blk 1 Type II Silviculture Analysis

20. Partial cutting issuesand forest health • With the coast action plan we will see trends of intensifying forest harvesting and silviculture on a diminishing forest land-base • Key issue will be to ensure we don't end up with lots of mistletoe infested stands • Mistletoe is a serious concern in some variable retention areas.

21. On the coast the significant change in partial cutting has the potential to result in different types of retention and regeneration and growth

22. Partial cutting issuesand forest health • Previously, even-aged silvicultural regimes almost completely eradicated mistletoe-infested trees. • Recent increases in Variable Retention has often left mistletoe-infested trees • mistletoe infestations can reduce tree volume growth by 15 to 40 percent • Silviculturists need to actively manage forest health

23. Stocking Standards • Just because Hw grows on a site does not mean we should manage for it on that site.  • Stocking standards should reflect the species we are focussing our management efforts on - should not be based on ad hoc approach of "it occurs it must be good".  • The selection of a tree species must include consideration for growth rates, forest health and commercial value. • Hemlock may be commercial on the island but at the back-end of a remote coastal drainage it may not be economically feasible to harvest that stand in the future.  • The choice of a species as a regeneration option should not foreclose on future harvest options. 

24. Doing good basic silviculture • Prompt stocking of denuded sites needs to be a key coast strategy • Improved Hw stock can result in 20-30% increases in volumes and carbon sequestration • natural regeneration with Hw can be a viable strategy but there are risks to loss of stand productivity if there are regen delays and stocking is patchy

25. Hemlock stand value • A Queen Charlotte Island study indicates lots of biologically mature Hemlock on the island, but its not economically operable. • “Although the physical dimension of the second growth resource is impressive, its economic operability is questionable” • There is considerable value in having stands achieve a merchantable size at an earlier date.

26. Economic operabilityand harvest availability • Harvest-origin hemlock-leading stands have also reached cutting age (40-60 years) but are currently not economically operable, unless other, higher-value stands can carry the operating costs • Economic operability and early harvest availability will be a key issue as we move forward in this period of constrained landbase and harvest levels on the coast.

27. Economic operabilityand harvest availability • We should look at managing stands that will produce logs that are of appropriate dimension for small to medium sized log mills and market-demanded products. • Need to consider designing stands to harvested with Mechanized systems as they are: • cost effective • capable of producing a high quality log

28. Stand tending • To produce economically valuable Hw stands which are low cost to harvest, some tending will be required • Over-dense stands have more stems at harvesting age • These stems need to be handled if harvesting occurs. • The added cost exceeds the value.

29. Stand tending • Foresters should consider early stocking or density control to concentrate growth on crop trees • Key issue will be to have wood available on time, provide options for early harvest and scheduling flexibility

30. Forest Level Volume Impacts of Spacing – A Case Example – TFL 24 • Serious shortage of stands for harvest in 50 years • Spacing young stands will allow them to reach a harvestable size sooner than unspaced stands • Stand level – spacing assumed a slight volume loss • Forest level – spacing provided an additional 13.9% (16,000 m3/yr) by producing desired piece sizes 10–15 years sooner • Stand level NPVs are only increased by $102,000/yr • Forest level NPVs are increased by $608,000/yr

31. Stand Management for value • Early stocking control or density management can • reduce the % of pulp grade logs • ensure stands achieve a higher % of J-grade logs • produce a higher % of H grade logs which have a significantly higher value,

32. Stand Management for value • One thing that we have not analysed well is the impacts on stand value of spacing and favoring other species • Spacing Hw leading stands with other tree species can lead to significant increases in value • I.e. by spacing a SI 27 m stand with Hw9Fdc1-9000 sph and converting the stand to Fdc 9 Hw to 900 sph • 29% increase in stand value • Whether density management is appropriate will be dependant on Merch volume and value objectives

33. Fertilization of Hw • Fertilizing of SHIRP type sites is still an important forest level timber supply option

34. Climate change • BC forests and the forest sector can contribute to a climate mitigation strategy • A sustainable forest management strategy aimed at • maintaining or increasing forest carbon stocks, • while producing an annual sustained yield of timber, fibre or energy from the forest, • will generate the largest sustained mitigation benefit (IPCC AR4). • The coast strategy and climate change objectives can work together in a complementary sense.

35. Coast Action Plan for silviculture • Site productivity fixes • Genetic improvement • fertilization

36. Silviculture Investment trends • 2002 - $3 million province wide • 2008 - $64 million province wide • New Community Trust – Federal provincial program being developed

37. Summary • Coastal Silviculturists • have the defining impact on the future forests for a precious public asset • must have up to date information and clear objectives for the growing stock portfolio they are managing for future generations. • are responsible to ensure that the owner of the portfolio doesn’t end up with junk bonds and low value assets • Forest Management Plans, FSPs and silviculture strategies need to contain clear objectives as to the type and proportion of Hemlock stands that are going to be managed in the portfolio. • Our generation is responsible for ensuring that today’s harvesting and silviculture practices result in healthy, valuable stands that will be available in a timely manner for the next generation

38. THANK YOU! • Peter Jacobson – Economics and Trade • International Wood Markets Group • Doug Williams, Andy Howard – Cortex Consultants • Al Powelson, Pat Martin, Brian Raymer – Forest Practices Branch • Rod Negrave, Kevin Derow, Craig Wickland, Scott Dunn, Paul Barolet, Louise de Montigny, Brian Barber, Charlie Cartwright - MoFR • John Muir, Mei Ching Tsoi - Consultants