Apportionment Decision Package Guide

MINISTRY OF FORESTS LANDS, NATURAL RESOURCE OPERATIONS AND RURAL DEVELOPMENT Apportionment Decision Package Guide April 20, 2018 Forest Tenures Branch

Table of Contents Disclaimer This document contains material to assist with the administration under the Forest Act. This document contains both a summary of the legal requirements and advice/suggestions from the non-legal realm. The latter are not legal requirements that you must follow, nor are they government policy. Warranty While every effort has been made to ensure the accuracy of the information herein, no warranties of any kind are made as to the precision or longevity of the contents. Readers are advised to refer to the wording of the legislation and regulations themselves, and obtain legal advice from their own sources. This information is provided as a public service by the Ministry of Forests, Lands, Natural Resource Operations and Rural Development. This document, and all of the information it contains, are provided "as is" without warranty of any kind, whether express or implied. All implied warranties, including, without limitation, implied warranties of merchantability, fitness for a particular purpose, and non-infringement, are hereby expressly disclaimed. Limitation of Liabilities Under no circumstances will the Government of British Columbia be liable to any person or business entity for any direct, indirect, special, incidental, consequential, or other damages based on any use of this information or any other document or material to which this document is linked, including, without limitation, any lost profits, business interruption, or loss of programs or information, even if the Government of British Columbia has been specifically advised of the possibility of such damages. All rights reserved Copyright 2018, Province of British Columbia This material is owned by the Province of British Columbia and protected by copyright law. It may not be reproduced or redistributed without prior written permission from the Province of British Columbia. Permission or questions regarding copyright Guidance on intellectual property disposal from the Province of British Columbia s Intellectual Property Program: http://www2.gov.bc.ca/gov/content/governments/services-for-government/policies-procedures/intellectualproperty/intellectual-property-program Document Change Control Version / Date Key Changes February 16, 2018 Version 1.0 ii April 20, 2018 ii

Table of Contents Questions or comments should be directed to: Forest Tenures Branch Ministry of Forests, Lands, Natural Resource Operations and Rural Development ForestTenuresBranch@gov.bc.ca iii April 20, 2018 iii

Table of Contents Table of Contents 1 Introduction... 6 1.1 About this Guide... 6 1.1.1 Purpose... 6 1.1.2 Approach... 6 1.2 Apportionment and Related Decisions... 6 1.2.1 AAC Determination... 6 1.2.2 Apportionment... 6 1.2.3 Proportionate Reduction... 7 1.2.4 Decision Flow... 7 1.3 General Principles... 8 2... 10 2.1 Background... 10 2.1.1 TSA Overview... 10 2.1.2 AAC History... 11 2.1.3 Reference AAC... 11 2.1.4 Current AAC Commitments... 13 2.1.5 Harvest Performance... 14 2.2 Engagement and Consultation... 15 2.2.1 First Nations Engagement... 15 2.2.2 Licensee Engagement... 15 2.2.3 BCTS Engagement... 16 2.2.4 Engagement with Other Stakeholders/Public... 16 2.3 Discussion... 17 2.4 Apportionment Scenarios... 17 2.4.1 Guiding Principles... 17 2.4.2 Example: If the AAC is Reduced but Remains Above Reference AAC... 18 iv April 20, 2018 iv

Table of Contents 2.4.3 Example: If AAC is Reduced Below the Reference AAC... 20 2.4.4 Presenting the Apportionment Scenarios... 22 2.5 Recommended Apportionment... 26 2.6 Attachments... 27 3 Business Process Map and Sample Letter... 28 v April 20, 2018 v

Introduction 1 Introduction 1.1 About this Guide 1.1.1 Purpose This guide is for use by staff when preparing a decision package for the Minister of Forests, Lands, Natural Resource Operations and Rural Development (FLNRORD) for an apportionment decision under Section 10 of the Forest Act of the allowable annual cut (AAC) for a timber supply area (TSA). 1.1.2 Approach Part 1 of this guide provides general information and guidance regarding apportionment decisions. Part 2 of this guide follows the structure of the apportionment decision package and provides guidance for the content of each section. Part 3 contains a business process map. Other resources may be added in future updates. 1.2 Apportionment and Related Decisions 1.2.1 AAC Determination Under Section 8 of the Forest Act, the chief forester must determine an AAC for each TSA in the province. In general terms, an AAC determination must occur at least once every ten years for a TSA unless the AAC is extended for a total period of up to fifteen years. The chief forester can also determine an AAC at any time. An AAC determination for a TSA does not directly affect the AAC of existing licences in the TSA. 1.2.2 Apportionment Section 10 of the Forest Act states that the minister may specify that a portion of the allowable annual cut determined for the Crown land in a timber supply area under 6 April 20, 2018 6

Introduction Section 8(1)(a) is available for granting under a form of agreement This is known as apportioning the AAC. The minister can make an apportionment decision at any time; however, it is typically done following a TSA AAC determination by the chief forester. An apportionment decision establishes the minister s direction to ministry staff for allocating the AAC to different forms of forest tenure in a TSA. The apportionment decision has a direct impact on the volume of timber allocated to BC Timber Sales (BCTS) and the AAC available for new tenure opportunities in the TSA. However, the apportionment decision does not directly affect the AAC of existing licences in the TSA. Therefore, the sum of licence AACs may not align with the apportionment. 1.2.3 Proportionate Reduction If the TSA AAC has been reduced by the chief forester s AAC determination, the minister may consider making a proportionate reduction decision under Section 63 of the Forest Act. Proportionate reduction affects all non-exempted forest licences (exempted licences are those with an AAC of less than 10,001 m 3 /year) within a TSA. This includes both replaceable and non-replaceable forest licences. An apportionment decision may indicate a need for a proportionate reduction decision, but the apportionment decision does not require that a proportionate reduction decision be made. This guide describes the circumstances when it is appropriate for an apportionment decision package to include an apportionment scenario indicating that a proportionate reduction decision should be made. 1.2.4 Decision Flow AAC determinations, apportionment decisions and proportionate reduction decisions are not directly linked under the Forest Act; however, an AAC determination is normally followed by an apportionment decision. If the TSA AAC has been reduced, the apportionment decision may indicate that a subsequent proportionate reduction decision should also be made. Only AAC determinations have a timeframe defined in the Forest Act. Apportionment decisions and proportionate reduction decisions (if applicable) are discretionary (i.e. may ) and do not have mandated timeframes in the Act. Typically, an apportionment decision is expected within six months of an AAC determination. A proportionate reduction decision (if applicable) could be made concurrent with an apportionment decision. However, since they are separate decisions, it is strongly recommended that there be two separate decision packages completed (1) one for the apportionment decision and, (2) one for the proportionate reduction decision (if applicable). These can be presented to the Minister simultaneously, but must be distinct 7 April 20, 2018 7

Introduction packages. If a proportionate reduction decision is indicated, and is not included with the apportionment decision, it should be submitted within three months of the approval of the apportionment decision. The following diagram illustrates the ideal flow of the various decisions. The dashed lines in the diagram emphasize that a proportionate reduction decision will only be applicable in some circumstances. Section 2.4 Apportionment Scenarios provides guidance on when a proportionate reduction decision should be indicated in an apportionment decision. 1.3 General Principles In making an apportionment decision, the minister relies on staff to provide information, considerations and implications so that an informed decision can be made. The following principles should guide ministry staff on when and how apportionment decision packages should be prepared: 1. Apportionment decision packages should be based on the same set of principles and a consistent methodology and format regardless of the TSA to which they apply. 2. The minister must be provided with information that will enable him/her to make an informed decision, including understanding the potential implications of the apportionment decision to government, licence holders, First Nations, communities, stakeholders and the public. 3. Apportionment decision packages should be provided to the minister in a timely manner following a TSA AAC determination (normally within six months). 8 April 20, 2018 8

Introduction 4. If appropriate, a proportionate reduction decision package should be prepared concurrently with the apportionment decision package or within three months of the apportionment decision. 9 April 20, 2018 9

2 The decision package should contain: Decision Briefing Note: Background; Summary of engagement and consultation; Discussion; Apportionment scenarios; and Recommended apportionment. Apportionment letter Attachments: TSA and AAC background details (if additional information is warranted); Complete First Nations engagement and consultation record; Table showing First Nations tenures in TSA (include tenures, AACs, TSA AAC percentage, cubic metres per capita, etc. (information could also be included in body of package); BCTS analysis of apportionment AAC needs; and Complete record of engagement with licensees, other stakeholders or the public. 2.1 Background In the background section of the decision briefing note, provide the minister with key facts about the TSA and its AAC. Additional detail can be included as attachments. TSA overview; Current AAC and AAC history; Reference AAC; Current AAC commitments; and Harvest history and unused volume. Each of these key points is explained in the following sections. 2.1.1 TSA Overview In the TSA overview, include relevant information such as: 10 April 20, 2018 10

Major licensees, timber processing facilities (if any in TSA) licensees operate and the tenures they hold in the TSA; Ratio of timber volumes currently under tenure versus timber required to be purchased; Other timber processing facilities that operate in the TSA (if any in TSA); How much TSA harvesting activity is primarily used for log export markets (if any); Is there even any domestic timber processing or export markets in TSA; First Nations whose traditional territories overlap with the TSA; Communities within the TSA and the relative community dependence that each community has on the forest sector; and An assessment of the current demands or trends (i.e. potential land removals for area-based tenures or Treaty lands, new entrants, other developments, etc.) on the AAC from existing and potential licensees in the TSA. This information can be either contained in the body of the document or as a stand-alone Appendix. 2.1.2 AAC History Provide a table with relevant AAC history for the TSA including the most recent AAC determined by the chief forester. Provide information from the AAC rationale that may be relevant to the apportionment decision such as partitions, the predicted trend for the TSA AAC and whether unused volume or Grade 4 crediting was factored into the AAC. AAC History Table (example) Date AAC (m 3 /year) Comments 2015 1,900,000 2010 1,900,000 2005 1,900,000 Area-based tenures removed. 2000 2,000,000 2.1.3 Reference AAC If the TSA AAC has been reduced by the chief forester, then a reference AAC needs to be established for use in the apportionment decision package. The reference AAC is an estimate of the stable or pre-uplift AAC (pre-mountain pine beetle impacts) minus any land base deletions from the TSA. The reference AAC provides a reference point for assisting the minister in evaluating apportionment and proportionate reduction options (see Section 2.4 Apportionment Scenarios). The chief forester s AAC determination rationale often contains information that 11 April 20, 2018 11

will allow for approximating a reference AAC. However, Forest Analysis and Inventory Branch (FAIB) working with staff from the area and district will establish the formal reference AAC for the purposes of an apportionment decision. If a reference AAC is established, the briefing note s AAC history should indicate the reference AAC and provide a brief explanation for why it is a reference point. Where the TSA AAC had been relatively stable, prior to a reduction by the chief forester, the reference AAC would typically be the AAC in place prior to the reduced AAC. For example, if the 2015 AAC (see above AAC History) had been reduced to reflect forest policy changes or overharvest, FAIB would establish reference AAC at 1,900,000 m 3 /year (shown in below table). AAC History Table (example of AAC reduction after stable period without uplifts) Date AAC (m 3 /year) Comments 2015 1,500,000 Reference AAC: 1,900,000 2010 1,900,000 2005 1,900,000 Area-based tenures removed. 2000 2,000,000 Where a TSA AAC had previous AAC uplifts to deal with catastrophic events such as the mountain pine beetle, large wild fires or any other large salvage event, the reference AAC would typically be at or close to the AAC that was in place prior to those uplifts. In the example below, the reference AAC for the reduced AAC reduction in 2015 is the 2000 AAC of 1,500,000 m 3 /year. This was the last AAC before the uplifts to address the mountain pine beetle. (This assumes that the AAC was stable at that time and that FAIB did not adjust for other factors than just the beetle uplifts.) AAC History Table (example of AAC reduction after a period of uplifts) Date AAC (m 3 /year) Comments 2015 1,300,000 Reference AAC: 1,500,000 2010 2,000,000 Beetle uplift continued 2005 2,000,000 500,000 beetle uplift 2000 1,500,000 12 April 20, 2018 12

Once a reference AAC has been established, the reference AAC for any subsequent AAC reduction(s) would typically be the AAC in place immediately before the reduction, rather than the previous reference AAC. In the example below, the reduction in 2010 had a reference AAC based on the AAC prior to the uplifts. The reference AAC for the subsequent reduction in 2015 is based on the 2010 AAC. AAC History Table (example of AAC reduction after a previous reduction) Date AAC (m 3 /year) Comments 2015 2,100,000 Reference AAC: 2,300,00 2010 2,300,000 Reference AAC: 2,500,00 2005 3,500,000 500,000 Beetle uplift 2000 3,000,000 500,000 Beetle uplift 1995 2,500,000 1990 2,500,000 The reference AAC will be established by FAIB and then made available to licensees, First Nations and others prior to engagement regarding an apportionment decision (see Section 2.2). Any comments or concerns on the established reference AAC should be referred to Forest Analysis and Inventory Branch for consideration. At the conclusion of the engagement process, if there are unresolved comments or concerns regarding the reference AAC, they should be documented in the apportionment decision package for the minister s consideration. 2.1.4 Current AAC Commitments Provide a table that lists the previous two apportionment decisions, the existing AAC issued under tenures and any additional volume that has been committed but not yet issued. AAC Commitment Table (example) 2005 2010 2015 TSA AAC 3,000,000 3,500,000 3,000,000 Apportionment Apportioned AAC Apportioned AAC Current Commitments 13 April 20, 2018 13

Forest Licences Replaceable Forest Licences Non-Replaceable 2,000,000 2,000,000 2,000,000 500,000 800,000 750,000 BCTS 350,000 400,000 400,000 CFAs 50,000 100,000 50,000 Woodlot Licences 0 10,000 10,000 First Nations (FNWL & other direct award tenures) 50,000 150,000 100,000 Forest Service Reserve 50,000 40,000 20,000 Total 3,000,000 3,500,000 3,330,000 The above table can also be modified to include partitions (if required). This is applicable for NRFLs that may be partition specific or include volume from several partitions. The table can also be modified to include various sub-categories of First Nations licences (if required). 2.1.5 Harvest Performance Indicate the harvest history of the TSA over the same period covered in the AAC Commitment Table. The following Harvest History Table is an example where, from 2005 to 2010, the average harvest under all apportionment categories was 2,900,000 m 3 /year and from 2010 to 2015, the average harvest was 3,450,000 m 3 /year. Harvest History Table (example) 2005-2009 2010-2014 Average harvest in all apportionment categories 2,900,000 m3/yr 3,450,000 m3/yr In this section of the briefing note, also indicate how much, if any, of the following is currently available for disposition in the TSA and any plans for disposition of that AAC: unharvested volume = volume that could have been harvested within a licence holder s cut control period, but was not. uncommitted volume = volume that was apportioned to a licence category, but was not committed under a licence. unused BCTS volume = volume that was apportioned to BCTS, but was not committed under a licence or was committed under a licence, but was not harvested. 14 April 20, 2018 14

Note: Please see the Policy Regarding the Administration of Unharvested Volumes, Uncommitted Volumes and Unused BCTS Volumes for further details on how to manage these volumes. In most cases the amount of old volume available will be low. Note: In TSAs with declining AACs there should not be any of these volumes available. 2.2 Engagement and Consultation Provide the minister with the issues and concerns raised during the engagement and consultations regarding the apportionment decision. When engagement and consultation is conducted, ensure that people understand the key concepts contained in this guide including the relationship between the apportionment, AAC determination and proportionate reduction as described in Section 1.2. If a proportionate reduction decision is indicated as an option that the minister should consider, it may be possible to conduct engagement and consultation for both the apportionment and proportionate reduction decision at the same time. Otherwise, it would require separate engagement and consultation on the proportionate reduction decision following the apportionment decision. This may not be the most efficient use of resources. 2.2.1 First Nations Engagement As a statutory decision, government is required to engage and consult with First Nations in accordance with ministry and government policies prior to an apportionment decision being made. Many First Nations have also expressed a strong desire for greater involvement in the development of apportionment decision options. The apportionment decision package must include a summary of the First Nations consultations and other engagements including, for each of the consulted First Nations, information regarding the assessed impacts of the apportionment decision on aboriginal rights and title, a summary of feedback received from the First Nation, details regarding information sharing, and an analysis of provided and/or proposed accommodation measures. Further information will be added in the future as government policy regarding First Nations engagement and involvement in forest management decisions evolves. 2.2.2 Licensee Engagement The holders of major licences within the TSA should be provided at least one opportunity to provide input into the decision. These opportunities for input can be in various forms including 15 April 20, 2018 15

meetings or conference calls with individual or groups of licence holders, or requests for written submissions from licence holders. Through this engagement, licence holders should be advised of the most recent AAC determination for the TSA, the current licence commitments in the TSA, the current demands on the AAC and the range of options that the minister may consider for the apportionment decision. Licence holders should be provided with the opportunity to provide input regarding how the apportionment decision may impact their logging operations and processing facilities and the apportionment decision package should contain a summary of all input provided by major licence holders. 2.2.3 BCTS Engagement The appropriate staff from BCTS should be engaged to determine the amount of apportioned AAC that is required to deliver their mandate, including maintaining the market pricing system. The apportionment AAC requirement for BCTS should consider the current apportionment AAC available to BCTS for the TSA, the harvest history for BCTS apportionment AAC, the current AAC and AAC history of the TSA. It should also consider volume available to BCTS through: unused apportionment volume carried forward; timber disposition agreements (Section 22.2, Forest Act); reservations of timber on non-bcts tenures; and licences issued under provisions of Bill 12 (2016) where volume is reserved for sale through BCTS. Indicate the potential implications to BCTS and their mandate if the requested apportionment AAC is not provided within the TSA. 2.2.4 Engagement with Other Stakeholders/Public Include a summary of points raised during any consultation with, or feedback received from, stakeholders and the public regarding the potential impacts of the apportionment decision (i.e. staff from municipalities, regional districts, etc.). 16 April 20, 2018 16

2.3 Discussion In the Discussion section of the decision briefing note, discuss the main issues associated with the apportionment of AAC in the TSA. Draw on the key points from the Background and Engagement and Consultation Sections. The main issues raised in the discussion should logically lead to the Apportionment Scenarios presented in the next section of the decision briefing note. 2.4 Apportionment Scenarios This section of the decision briefing note should present the minister with apportionment scenarios (typically three scenarios are presented). Note: While this document only provides examples of when there is a reduction in AACs, a similar process and format should be followed for apportionment decisions in circumstances where the AAC remains the same or is increased. The concept of reference AAC should be considered as a starting point for any proportionate reductions that may flow from an Apportionment decision. The reference AAC should only be considered as a general starting point for discussions since most TSAs have areas removed for reasons such as new area based tenures, protected areas, etc. Program in this guide refers to the following apportionment categories: BCTS, CFA, First Nations (includes new First Nations woodland licences and other direct award First Nations tenures), woodlot licence, and forest service reserve. 2.4.1 Guiding Principles These principles are intended to guide ministry staff during the development of apportionment scenarios for the decision package: 1. In each scenario, the sum of proposed apportionments should normally equal the current TSA AAC. 2. If total current licence commitments in the TSA exceed the total TSA apportionment in a proposed apportionment scenario, an assessment of stewardship risk should accompany that scenario. FAIB should be involved in determining stewardship risk assessments. 17 April 20, 2018 17

3. The recommended apportionment scenario should, as much as possible, support the BCTS mandate, including the market pricing system objectives for the BCTS pricing area(s) that includes the TSA, and considering sources of additional timber volumes available to BCTS within the TSA above and beyond the BCTS apportionment AAC. 4. Apportionment scenarios would usually only include a reduction to the replaceable forest licence apportionment category if the current AAC drops below the reference AAC as described in Section 2.1.3. In cases where a proportionate reduction is planned. 5. The maximum recommended reduction to replaceable forest licence apportionment would usually be based on the difference between the current AAC and the reference AAC expressed as a percentage of the reference AAC (see the example in Section 2.4.3). There may be exceptions to this principle. 6. Where possible, an apportionment should be made for unexpired non-replaceable forest licences based on the average annual AAC needed to support the licences over the projected term of the apportionment. 7. The Forest Service Reserve apportionment category should reflect the forecast requirements for volume from salvage tenures, occupant and forestry licences to cut and other needs based on historic use. 2.4.2 Example: If the AAC is Reduced but Remains Above Reference AAC In this example, the TSA AAC has had uplifts (e.g. from one or more increases due to salvage of timber related to bark beetle, wildfire or other events). The AAC has subsequently been reduced, but remains at or above the reference AAC. (Reference AAC is explained in Section 2.1.3) In accordance with the principles above, reductions to the replaceable forest licence category (indicating proportionate reduction under Section 63) would normally not be recommended in this situation because the TSA AAC remains above the reference AAC. Instead, this scenario suggests that reductions to various program AACs and the expiry of non-replaceable forest licences (NRFLs) should balance the current AAC with apportionments and licence commitments. Apportionment Scenario: Reduce program apportionments and NRFL apportionments to the current AAC. Example: 18 April 20, 2018 18

Current (new) TSA AAC 3,000,000 TSA AAC immediately prior to current AAC 3,500,000 Reference AAC (AAC prior to uplift) 2,500,000 Current AAC status Current total apportionment (FL and Programs) Current FL apportionment (RFL and NRFL) Current FL commitments (RFL and NRFL) 500,000 below prior AAC and 500,000 above reference AAC 3,500,000 (2,800,000 FL, 600,000 BCTS, 100,000 CFA) 2,800,000 (2,000,000 RFL, 800,000 NRFL) 2,800,000 (2,000,000 RFL, 800,000 NRFL) Proposed Apportionment Proposed total apportionment (FL and Program) Proposed FL apportionment (RFL, NRFL) 3,000,000 (2,500,000 FL, 500,000 BCTS, 0 CFA) 2,500,000 (2,000,000 RFL, 500,000 NRFL) In this scenario, the RFL apportionment category remains unchanged at 2,000,000; NRFL is reduced by 300,000 from 800,000 to 500,000; BCTS is reduced by 100,000 from 600,000 to 500,000; and CFAs are reduced 100,000 from 100,000 to 0. Since apportionment decisions do not directly affect issued licences, licence commitments for NRFLs would remain unchanged at 800,000 despite the NRFL apportionment being reduced to 500,000. Therefore, in this scenario, the apportionment would be in line with the AAC, but licence commitments would exceed the apportionment and the TSA AAC. It appears that this scenario would represent a stewardship risk because the committed AAC is greater than the total apportionment and TSA AAC. However, if the NRFLs will be expiring and are not extended and/or the NRFLs are restricted to pine types or dead types, the stewardship risk assessment may determine that the over-commitment does not represent a significant stewardship risk. To illustrate this, the example is continued with the following information about AAC commitments for NRFLs, which will be expiring in the near future: NRFL 2017 2018 2019 2020 2021 19 April 20, 2018 19

Commitments NRFL A 300,000 300,000 300,000 300,000 0 NRFL B 300,000 300,000 0 0 0 NRFL C 200,000 200,000 200,000 200,000 0 Total 800,000 800,000 500,000 500,000 0 On average, over the period from 2017 to 2021, 520,000 m 3 /year (2,600,000 m 3 /5 years) is needed to support the NRFL commitments. This is very close to the proposed apportionment of 500,000 for NRFLs in this example scenario. If the apportionment decision includes a NRFL apportionment that is lower than the current committed volume of NRFLs (as in this example), that will be an indication from the minister to staff that existing NRFLs should be allowed to expire and no new NRFLs should be issued until licence commitments are in-line with the apportionment. Each situation will be unique and, as indicated in the guiding principles, FAIB should be consulted to determine the level of stewardship risk associated with apportionment scenarios where a proposed apportionment scenario or licence commitments exceed the current AAC. 2.4.3 Example: If AAC is Reduced Below the Reference AAC In this example, as in the previous example, the TSA AAC has had one or more increases due to salvage of bark beetle, wildfire or other events. But in this case, the TSA AAC has now been reduced below the reference AAC. (Reference AAC defined in Section 2.1.3) Since the current AAC is below the reference AAC, at least one apportionment scenario should include the maximum reduction (as specified in Guiding Principle #5 in Section 2.4.1 above) to the replaceable forest licence category, which would indicate a need for a proportionate reduction decision to forest licences under Section 63 by that amount. Apportionment Scenario: Reduce RFL apportionment based on the percentage reduction between the current TSA AAC and the reference AAC. Adjust various program and NRFL apportionment categories as necessary. Example: Current (new) TSA AAC 2,000,000 Prior TSA AAC 3,500,000 20 April 20, 2018 20

Reference AAC 2,500,000 AAC status Current total apportionment (FL, and program) Current FL apportionment (by RFL and NRFL) Current FL commitments (by RFL and NRFL) 1,500,000 below Prior TSA AAC, 500,000 below Reference AAC 3,500,000 (2,800,000 FL, 700,000 program) 2,800,000 (2,000,000 RFL, 800,000 NRFL) 2,800,000 (2,000,000 RFL, 800,000 NRFL) In accordance with the guiding principles, the maximum recommended reduction to RFLs should be based on the current AAC s drop below the reference AAC as a percentage of the reference AAC. In this example, the current AAC is 2,000,000, and the reference AAC is 2,500,000 so the maximum percentage reduction is 500,000/2,500,000 = 20 percent. The total forest licence commitments in this example are 2,800,000. A 20 percent reduction would reduce the total forest licence commitments to 2,240,000 or a total reduction of 560,000 m 3 to forest licences, which would result in a 400,000 m 3 reduction to replaceable forest licences and 160,000 to non-replaceable forest licences. A proposed reduction could be less, depending on the specific circumstances of the TSA, but it should not be greater. Once the maximum reduction for replaceable forest licences has been determined (which will result in that same reduction for all forest licences other than exempted licences), the remainder of the apportionment can be determined. For this example: Proposed Apportionment RFL 1,600,000 NRFL 0 BCTS 350,000 First Nations (FNWL) 45,000 FSR 5,000 Total 2,000,000 21 April 20, 2018 21

A 20 percent proportionate reduction would reduce NRFL commitments to 640,000 m 3, but this apportionment scenario sets the NRFL apportionment to zero. As in the previous example (Section 2.4.2), setting the NRFL category to zero may or may not create a stewardship risk. FAIB should assist with establishing the level of risk. 2.4.4 Presenting the Apportionment Scenarios For each apportionment scenario, use a table to present the current and proposed apportionment of AAC to each category. Describe the key features and implications of each scenario. Following the presentation of each scenario, provide a summary table that compares the current apportionment and all of the scenarios presented. The following example is based on the example described in Section 2.4.3 above. Two additional scenarios have been added. Example AAC for the Scenarios Current AAC: 2,000,000 Prior AAC: 3,500,000 Reference AAC: 2,500,000 Example Scenario #1: Apport. Category Current Apport. Scenario #1 % change Total FL 2,800,000 1,650,000 41% RFL 2,000,000 1,600,000 20% NRFL 800,000 50,000 94% Total Program 700,000 350,000 50% BCTS 500,000 300,000 40% FN (FNWL) 100,000 50,000 50% CFA 50,000 0 100% FSR 50,000 0 100% Total all categories 3,500,000 2,000,000 43% Example Key Changes: 20 percent reduction to RFL apportionment. 22 April 20, 2018 22

NRFL apportionment reduced to 50,000. Total FL apportionment reduced to 1,650,000. FL share of TSA AAC increases slightly from 80 percent to 82.5 percent. BCTS apportionment reduced to 300,000. BCTS share of TSA AAC increased slightly from 14 percent to 15.0 percent. FN (FNWL) apportionment is reduced from 100,000 to 50,000. CFA and FSR apportionment are each reduced from 50,000 to zero. Example Implications: Proportionate reduction under Section 63 is indicated based on the 20 percent reduction to RFLs. This would also reduce the licence AACs of NRFLs by 20 percent to a total of 640,000. The term of NRFLs would be automatically extended under Section 58. This reduction will have impacts on the operations of existing licence holders and may cause at least some reductions to timber processing facility operations in the area. The 50,000 m 3 apportionment to NRFLs represents a short-term over-commitment of 590,000 m 3 in the NRFLs apportionment, which poses a moderate stewardship risk due to licence expiry dates, licence restrictions and availability of (restricted) timber. The chief forester s office has indicated this level of risk is at the limit of acceptability based on how the AAC determination dealt with restricted timber. The slight increase in the percentage of the total AAC for BCTS reflects the level of apportionment AAC requested by BCTS to maintain market pricing in this business area. The 50,000 m 3 reduction to FN apportionment will cause significant issues in meeting previous tenure obligations with local First Nations. The elimination of the 50,000 m 3 apportionment for community forest agreements will cause significant issues to the two communities that have been strongly advocating for the opportunity. The elimination of the FSR apportionment will impact the Salvage Program, which has had a historic level of 20,000 m 3. Example Scenario #2: Apport. Category Current Apport. Scenario #2 % change Total FL 2,800,000 1,700,000 39% RFL 2,000,000 1,700,000 15% NRFL 800,000 0 100% 23 April 20, 2018 23

Total Program 700,000 300,000 57% BCTS 500,000 250,000 50% FN (FNWL) 100,000 50,000 50% CFA 50,000 0 100% FSR 50,000 0 100% Total all categories 3,500,000 2,000,000 43% Example Key Changes: 15 percent reduction to RFL apportionment. NRFL apportionment reduced to zero. Total FL apportionment reduced to 1,700,000. FL share of TSA AAC increases from 80 percent to 85 percent. BCTS apportionment decreased to 250,000. BCTS share of TSA AAC reduced from 14 percent to 12.5 percent. FN (FNWL) apportionment is reduced by 50,000 to 50,000. CFA and FSR apportionment is reduced to zero. Example Implications: Proportionate reduction under Section 63 is indicated based on the 15 percent reduction to RFLs. This would also reduce NRFLs licence AACs by 15 percent to 680,000). The term of NRFLs would be automatically extended under Section 58. This reduction will have impacts on the operations of existing licence holders and may cause at least some reductions to timber processing facility operations in the area, but the impacts would be less than in Scenario 1. The 0 m 3 apportionment to NRFLs represents a short-term over-commitment of 800,000 in NRFLs and poses a moderate stewardship risk according to the chief forester s office. The reduced apportionment to BCTS is below the level that they indicated is necessary to maintain the integrity of the Market Pricing System and may impact their ability to meet market pricing objectives in this business area. The 50,000 m 3 reduction to FN apportionment will cause significant issues to meeting tenure obligations with local First Nations. The elimination of the 100,000 m 3 community forest apportionment will cause significant issues to the two communities that have been strongly advocating for the opportunity. The elimination of the FSR apportionment will impact the Salvage Program, which has had a historic level of 20,000 m 3 and harvest levels were near that amount. 24 April 20, 2018 24

Example Scenario #3 Apport. Category Current Apport. Scenario #3 % change Total FL 2,800,000 1,650,000 41% RFL 2,000,000 1,650,000 18% NRFL 800,000 0 100% Total Program 700,000 350,000 50% BCTS 500,000 200,000 60% FN (FNWL) 100,000 90,000 10% CFA 50,000 45,000 10% FSR 50,000 15,000 70% Total all categories 3,500,000 2,000,000 43% Example Key Changes: 18 percent reduction to RFL apportionment. NRFL apportionment reduced to zero. Total FL apportionment reduced to 1,650,000. FL share of TSA AAC increases slightly from 80 percent to 82.5 percent. BCTS apportionment decreased to 200,000. BCTS share of TSA AAC reduced from 14 percent to 10 percent. FN (FNWL) apportionment is reduced by 10,000 to 90,000. CFA apportionment is reduced by 10,000 to 90,000. FSR apportionment is reduced to 15,000. Example Implications: Proportionate reduction under Section 63 is indicated based on the 18 percent reduction to RFLs. This would also reduce the licence AACs of NRFLs by 18 percent (to 656,000). The term of NRFLs would be automatically extended under Section 58. This reduction will have impacts on the operations of existing licence holders and may cause at least some reductions to timber processing facility operations in the area. The elimination of an apportionment to NRFLs represents a short-term overcommitment of 656,000 in NRFLs, which poses a moderate stewardship risk due to licence expiry dates, licence restrictions, availability of (restricted) timber. The chief forester s office has indicated this level of risk is acceptable based on how the AAC determination dealt with restricted timber. 25 April 20, 2018 25

The reduced apportionment to BCTS is well below the level they indicated is necessary to maintain the integrity of the Market Pricing System. Unless BCTS can acquire volume through other means (e.g. disposition agreements under Section 22.2 or under reserves on new agreements enabled under 2016 Bill 12) this reduction to BCTS apportionment will likely impact their ability to maintain market pricing in this business area. The 10,000 m 3 reduction to FN apportionment should not cause significant issues to meeting tenure obligations with local First Nations. The 10,000 m 3 reduction to the community forest apportionment should not cause significant issues for the communities advocating for the opportunity. The apportionment of 15,000 m 3 for FSR is under the historic level of use of 20,000 m 3, but should maintain the Salvage Program. Example Summary Current AAC: 2,000,000 Prior AAC: 3,500,000 Reference AAC: 2,500,000 Apport. Category Current Apport. % Scenario #1 % Scenario #2 % Scenario #3 % Total FL 2,800,000 80 1,650,000 82.5 1,700,000 85 1,650,000 82.5 RFL 2,000,000 1,600,000 1,700,000 1,650,000 NRFL 800,000 50,000 0 0 All Programs 700,000 20 350,000 17.5 300,000 15 350,000 17.5 BCTS 500,000 14.3 300,000 15 250,000 12.5 200,000 10 FN (FNWL) 100,000 50,000 50,000 90,000 CFA 50,000 0 0 45,000 FSR 50,000 0 0 15,000 Total 3,500,000 2,000,000 2,000,000 2,000,000 2.5 Recommended Apportionment The decision briefing note should include a recommended apportionment scenario. 26 April 20, 2018 26

The recommended apportionment should also be documented in an apportionment letter that the minister can sign if the recommended apportionment scenario is approved. The letter should be addressed to the district manager or regional executive director and should include: the current AAC for the TSA and the date of the chief forester s determination; the new apportionment in table format; the effective date of the apportionment; and where appropriate, comments or rationale for the AAC apportioned to each form of licence and program. This letter will serve as documentation of the apportionment decision. Contact staff in the Forest Tenures Branch to obtain further advice and a copy of previous letters relevant to your TSA s circumstances. 2.6 Attachments The apportionment decision package should contain the following attachments: First Nations Engagement and Consultation Summaries of Stakeholder Input BCTS Rationale for AAC Needs 27 April 20, 2018 27

Business Process Map and Sample Letter 3 Business Process Map and Sample Letter 28 April 20, 2018 28

Business Process Map and Sample Letter Sample Apportionment Letter Ref: Date <CLIFF numbers Apportionment/Disposition Plan/Etc.> District Manager Name District Manager (Name) Natural Resource District (Address) Community, BC (Postal Code) Dear District Manager: Below I have communicated the rationale for my apportionment decision related to the (year and/or date) Allowable Annual Cut (AAC) Determination by the Chief Forester for the (Name) Timber Supply Area (TSA). TSA Overview (provide details) The (Name) Timber Supply Area (TSA) in (geographic location descriptor) British Columbia (BC). It covers (list amount) million hectares and is administered out of the (District Name) Natural Resource District in (reference community). There are (list number) replaceable forest licences and (amount) significant timber processing facilities in the TSA. (Other details as required). (Name) TSA Apportionment My apportionment decision is shown in the table below and described in further detail below. Table 1 (Name) TSA apportionment decision Forest Licence (replaceable) Partitions (if required) Total Percent of total AAC (Description) (Description) Forest Licence (non-replaceable) % BC Timber Sales Community Forest Agreement % Woodlot Licence Forest Service Reserve (FSR) % First Nations Woodland Licence % Total % % % 29 April 20, 2018 29

Business Process Map and Sample Letter BC Timber Sales Category (BCTS). Describe BCTS Apportionment, changes from previous Apportionment, etc. Forest Licences Category. There is currently (number) of RFLs and (number) of NRFLs within the (name) TSA. Add any other details that need to be communicated for RFL and NRFL categories. Forest Service Reserve (FSR). FSR volume supports (list activities examples such as mining activity, hydropower, transmission lines, First Nations cultural, domestic and traditional use, and small, miscellaneous non-first Nation tenures). Many activities and industrial harvest takes place outside the THLB. I have apportioned a (amount) FSR apportionment based on history of use and anticipated future activity. First Nations Woodland Licence Category (FNWL). List volumes anticipated for the issuance of FNWLs (if any). Include any other applicable information. Woodlots Category (WL) Community Forest Agreement Category (CFA) List volumes anticipated for the issuance of WLs (if any). Include any other applicable information. Conclusion With this apportionment decision in place I look forward to you and your staff working with the First Nations, communities and the public to ensure that this information is communicated and understood. As this decision affects both the availability and distribution of timber volumes, ongoing cooperation with all interested parties will be particularly important. Sincerely, Doug Donaldson Minister 30 April 20, 2018 30