Canadian Forest Products Ltd.

RA-Cert Division Headquarters

65 Millet St. Suite 201 Richmond, VT 05477 USA

Tel: 802-434-5491 Fax: 802-434-3116

www.rainforest-alliance.org

Audit Managed by:

Canada Regional Office

P.O. Box 1771 Chelsea, QC, Canada

J9B 1T9 Tel: 613-986-2841 Fax : 866-438-1971

Contact person: Krista West Email: [email protected]

ACCREDITED FSC-ACC-004

FM-06 19 April 2012

Forest Management 2013 Annual audit

Report for:

Canadian Forest Products Ltd.

In Cranbrook, British Columbia,

Canada

Report Finalized: November 18, 2013

Audit Dates: September 10 - 12, 2013

Audit Team: Keith Moore, RPF Glen Dunsworth

Certificate code: SW-FM/COC-001348

Certificate issued: October 29, 2009

Certificate expiration: October 28, 2014

Organization Contact: Chris Stagg R.P.F. Chief Forester, BC Division

Address: 5162 Northwood Pulp Mill Road Prince George, BC V2L 4W2

FM-06 19 April 2012 of 45

TABLE OF CONTENTS

Acronyms ........................................................................................................................................................ 3

1. INTRODUCTION ............................................................................................................................ 4

2. AUDIT FINDINGS AND RESULTS ................................................................................................ 4

2.1. AUDIT CONCLUSION ........................................................................................................................... 4 2.2. CHANGES IN FME’S FOREST MANAGEMENT AND ASSOCIATED EFFECTS ON CONFORMANCE TO

STANDARD REQUIREMENTS ................................................................................................................ 5 2.3 EXCISION OF AREAS FROM THE SCOPE OF CERTIFICATE ....................................................................... 5 2.4 STAKEHOLDER ISSUES (COMPLAINTS/DISPUTES RAISED BY STAKEHOLDERS TO FME OR RAINFOREST

ALLIANCE SINCE PREVIOUS EVALUATION) ........................................................................................... 5 2.5 COMMENTS FROM INTERESTED PARTIES (CONCERNS/COMMENTS RAISED BY ABORIGINAL GROUPS AND

STAKEHOLDERS TO THE AUDIT TEAM DURING THE ANNUAL AUDIT) ........................................................ 6 2.6 CONFORMANCE WITH APPLICABLE NON-CONFORMITY REPORTS ........................................................... 9 2.7 NEW NON-CONFORMITY REPORTS ISSUED AS A RESULT OF THIS AUDIT ............................................... 12 2.8 AUDIT OBSERVATIONS ..................................................................................................................... 13 2.9 NOTES FROM PREVIOUS AUDIT TEAMS .............................................................................................. 13 2.10 NOTES FOR FUTURE AUDIT TEAMS .................................................................................................... 19

3 AUDIT PROCESS ........................................................................................................................ 19

3.1 AUDITORS AND QUALIFICATIONS ....................................................................................................... 19 3.2 AUDIT SCHEDULE ............................................................................................................................ 20 3.3 SAMPLING METHODOLOGY ............................................................................................................... 20 3.4 CONSULTATION PROCESS ................................................................................................................ 21 3.5 CHANGES TO CERTIFICATION STANDARDS ........................................................................................ 21 3.6 REVIEW OF FME DOCUMENTATION AND REQUIRED RECORDS............................................................ 21

APPENDIX II: List of visited sites (confidential) .......................................................................................... 25

APPENDIX III: List of Persons Consulted (confidential).............................................................................. 26

APPENDIX IV: Forest management standard conformance (confidential) ................................................. 27

APPENDIX V: Chain-of-Custody Conformance (confidential) .................................................................... 37

APPENDIX VI: Rainforest Alliance Database Update Form ....................................................................... 44

Acronyms AAC Annual Allowable Cut AMA Access Management Area ATV All-terrain Vehicle CRSC Concerned Residents of Sheep Creek CCVF Cultural Conservation Value Forest CoC Chain of Custody COPI Creating Opportunities for Public Involvement – data based recording all

public interactions COS Conservation Officer Service DCS Documented Control System DFA Defined Forest Area FL Forest Licence FM Forest Management FMG Forest Management Group (Canfor) FMP Forest Management Plan FSC Forest Stewardship Council HCV High Conservation Value HCVF High Conservation Value Forest MFLNRO Ministry of Forests, Lands and Natural Resource Operations NCR Non-conformity Report NGO Non-government Organization OBS Observation OGMA Old Growth Management Area RA Rainforest Alliance SFMP Sustainable Forest Management Plan TSA Timber Supply Area TFL Tree Farm Licence WTP Wildlife Tree Patch

FM-06 19 April 2012 of 45

1. INTRODUCTION The purpose of this report is to document annual audit conformance of Canadian Forest Products Ltd., East Kootenays, hereafter referred to as Canfor, on a defined forest area in the East Kootenay region of British Columbia. This is the 4th annual audit following a re-assessment in 2009. The report presents the findings of Rainforest Alliance auditors who have evaluated company systems and performance against the Forest Stewardship Council™ (FSC®) forest management standards and policies. Section 2 of this report provides the audit conclusions and any necessary follow-up actions by the company through non-conformity reports. The Rainforest Alliance founded its previous SmartWood program in 1989 to certify responsible forestry practices and has grown to provide a variety of auditing services. Rainforest Alliance certification and auditing services are managed and implemented within its RA-Cert Division. All related personnel responsible for audit design, evaluation, and certification/verification/validation decisions are under the purview of the RA-Cert Division, hereafter referred to as Rainforest Alliance or RA. This report includes information which will become public information. Sections 1-3 and Appendix I will be posted on the FSC website according to FSC requirements. All other appendices will remain confidential. A copy of the public summary of this report can be obtained on the FSC website at http://info.fsc.org/. Dispute resolution: If Rainforest Alliance clients encounter organizations or individuals having concerns or comments about Rainforest Alliance and our services, these parties are strongly encouraged to contact Rainforest Alliance regional or Headquarters offices directly (see contact information on report cover). Formal complaints or concerns should be sent in writing.

2. AUDIT FINDINGS AND RESULTS

2.1. Audit conclusion

Based on Company’s conformance with FSC and Rainforest Alliance requirements, the audit team makes the following recommendation:

Certification requirements met, certificate maintenance recommended Two Minor NCRs are issued

Certification requirements not met:

Additional comments: None

Issues identified as controversial or hard to evaluate.

None

FM-06 19 April 2012 of 45

2.2. Changes in FME’s forest management and associated effects on conformance to standard requirements

There are no changes in Canfor’s management of the defined forest area and the area of the certified forest area is unchanged. Several of the short-term non-replaceable forest licences which had been granted by the provincial government within the certified area have now been completed and have expired. Canfor is presently revising the Sustainable Forest Management plan for the area, and is amalgamating it with the management plans for Canfor operations adjacent to the certified area. Some of the revisions are based on experiences with the past SFMP and with monitoring reported in the Sustainability Report. Canfor is also engaged, with a technical advisory committee in a process to review and potentially revise the HCVF areas and management strategies. 2.3 Excision of areas from the scope of certificate

Not applicable. Check this box if the FME has not excised areas from the FMU(s) included in the certificate scope as defined by FSC-POL-20-003. (delete the rows below if not applicable) 2.4 Stakeholder issues (complaints/disputes raised by stakeholders to FME or Rainforest

Alliance since previous evaluation) A number of issues were brought to the attention of Rainforest Alliance or Canfor since the last audit.

1. In November 2012 stakeholders raised concerns with road maintenance on a multi-use road in the Parsons area. Rainforest Alliance requested a map of the area in question. The road of concern was determined to be outside the certified forest area and thus out of the scope of the certificate.

2. Also in November 2012 one local mill owner wrote to Rainforest Alliance with concerns

that Canfor was not making a diversity of products from the management unit available to local processors. The mill owner was in process with negotiations with Canfor at the time and withdrew the concern.

3. In addition, a stakeholder has contacted Rainforest Alliance on several occasions in

regard to dust and noise on a private road on Canfor private land near the Elko mill. This road is not within the certified forest area and is therefore outside the scope of the certificate.

4. The Concerned Residents of Sheep Creek (CRSC) wrote to Rainforest Alliance in

October 2012 after the 2012 annual audit. Rainforest Alliance promised that the 2013 audit team would meet with the CRSC and a face to face meeting was held in this annual audit. The outcome of this meeting is outlined in Note 4/11 in Section 2.6 below.

5. Over the period since the last annual audit, Canfor received other complaints from a

variety of groups. These are all recorded and documented in the extensive Canfor COPI (Creating Opportunities for Public Involvement) data base (76 pages) where all public interactions, concerns and complaints are recorded. These included concerns about

FM-06 19 April 2012 of 45

dust from roads in the Yahk/Moyie Lake area, logging traffic near Blue Lake Camp, speeding logging trucks in the vicinity of the Nipika Lodge nordic trails in the Palliser and a variety of other minor issues and concerns. These did not come to the attention of Rainforest Alliance and are all appear to have been addressed and resolved promptly by Canfor.

None of the above issues is considered a “dispute”, as defined in the Glossary of the FSC BC Standard. 2.5 Comments from Interested Parties (concerns/comments raised by Aboriginal groups

and stakeholders to the audit team during the annual audit) During the audit, the audit team spoke with a total of 21 individuals including representatives of the Ktunaxa Nation, provincial government, WorkSafe BC, an NGO, a community organization, and a forest worker, a forest contractor, a guide, and a trapper. Those individuals were contacted in regard to specific NCRs, Notes, or criterion evaluation, and provided the following comments. These comments may not be representative of a wider sample of interested persons and organizations. Individuals’ comments are in the centre column. The audit team response is in the right hand column.

FSC Principle Comments Rainforest Alliance response

P3: Indigenous Peoples Rights

Ktunaxa Nation representatives expressed concern about the current slow pace of negotiation in regard to completing and signing a Protocol agreement to replace the previous agreement with Tembec.

The audit team is aware that the previous protocol agreement involving Ktunaxa Nation Council and Tembec lapsed in early 2012 when the sale of Tembec to Canfor was completed. Since then, Ktunaxa has requested a Protocol Agreement with Canfor. As a result Canfor and Ktunaxa have been engaged in a process to seek to agree on and sign a new Protocol Agreement in the certified area. A significant time has elapsed. Although some progress was made, and there is an agreement to maintain the spirit and intent of the previous agreement, at present there is no Protocol Agreement in place. RA is aware that both parties desire to complete an agreement and that some elements of the previous agreement remain in place while negotiations continue. However, the absence of an agreement when one has been requested is a non-conformity with Indicator 3.1.2 NCR 01/13 is recorded.

P3: Indigenous Peoples Rights

Ktunaxa Nation representatives expressed concern that they have not been able to engage with Canfor on strategic-level planning initiatives, as provided in the Consultation Matrix, developed as part of the original

These issues will be addressed by the completion of a Protocol Agreement.

FM-06 19 April 2012 of 45

Protocol Agreement. They receive a great deal of information and referrals of operational plans from Canfor. This is more information than Ktunaxa wish – and they do not have the capacity to deal with the number of referrals. They would prefer to work on a more strategic level.

P4 Community Relations and Workers Rights

Some individuals expressed concern that new contractors had been brought into the certified area from northern BC. Individuals are concerned that these new contractors may not be familiar with FSC requirements in P6. In addition, by bringing in new contractors, Canfor is reducing contract rates and forcing established contractors, experienced with meeting FSC requirements, out of business.

The audit received no comments from any contractors and has no evidence to suggest any non-conformities with Principle 4. Conformance with Indicator 4.1.6 and other indicators in P4 will be fully re-evaluted in the upcoming 2014 re-assessment of this certificate.

P4 Community Relations and Workers Rights P4 Community Relations and Workers Rights

Some individuals expressed concern that Canfor may not have sufficient staff to address the large number of public interactions involving rights holders (P2) and many diverse interests in the East Kootenays (P4).

The audit team did not observe any instances where public concerns or interests and those of rights holders had not been appropriately responded too. The COPI data base demonstrates the large number of issues that staff have responded to. In controversial areas in the Flathead River Valley there has been extensive engagement with interest groups and rights holders.

One contractor said that the move to short log processing and refitting of trucks is making it tough for him to remain profitable.

This does not appear to be within the scope of the FSC BC Standard.

P5 Benefits from the Forest

A number of individuals expressed concern that Canfor is harvesting at an excessive rate of harvest.

The audit team is aware that Canfor has a situation of “undercut” on a Forest Licence in the Invermere TSA according to provincial regulations, as a result of a long shutdown. Canfor is actively harvesting in this area to address the undercut and hence appears to be exceeding the annual harvest levels described in Indicator 5.6.6. However the area of this harvest is not within the certified forest area. Auditors have been monitoring the rate of harvest on the certified area as a single cumulative harvest level for the whole certified area, not the individual harvest level on each parcel within the certified area. As reported for Criterion 5.6, Canfor is meeting the FSC requirements in regard to the rate of harvest both on an annual basis and over a 5 year period.

P6: Environmental

Representatives of an NGO raised a concern that an insufficient number

The audit team also identified a problem with snag retention. This is documented

FM-06 19 April 2012 of 45

Impact snags are maintained and that snags can be seen in waste piles.

in Canfor data showing that the FSC required snag retention target of 25% of total retention was not met post-harvest in a number of blocks where sufficient snags to achieve the target were present prior to harvest. This is a non-conformity with Indicator 6.3.9 and NCR 02/13 is issued.

P6: Environmental Impact

Several individuals expressed concerns that a number of Canfor’s practices in the field are not meeting FSC requirements. These assertions involved the maintenance of inadequate riparian zones and machine free zones, inadequate or non-representative wildlife tree patches, excessive waste in cut-to-length blocks, logging to the edge of avalanche tracks, inadequate culverts on small streams in winter blocks, and other operational practices. These individuals say that it appears that Canfor staff and consultants now spend less time in the field engineering blocks and that site specific features are being missed through implementation of standardized procedures with less field time and the use of standardized templates to reduce cost. In addition there is concern that contractors brought in from northern BC are not aware of the FSC requirements on this certified area. The logging equipment imported from northern BC makes conformance with the standard more difficult. The audit team was told that there is monitoring work underway in a number of cutblocks distributed across the certified forest and in areas outside the certified forest.The audit team was also told that this work could identify a number of situations where non-conformities with the FSC standard, similar to those described above, exist.

Field work conducted by the audit team in this annual audit did reveal some minor and site specific non-conformities in regard to machine free zones and rutting. The non-conformities were not widespread or systemic and other stand-level operational practices were deemed to be in conformance. However, the field work this year was limited to one area of the certified forest and the team did not visit the area where most of the assertions are made. The monitoring work described by the interested party was not complete at the time of the field audit, and was not available to the audit team and some of the findings may be outside the certified area. The team does not have evidence from its own observations or from other reports of significant non-conformity with the standard. Thus, with the exception of the NCR on snag retention, no non-conformities are recorded. These stand level requirements of Principle 6 will be fully re-evaluated in field work in the upcoming re-assessment.

P6: Environmental Impact

An individual raised concerns that Canfor’s current harvesting is concentrated in lower elevation, conventional harvest sites. Thus the harvest is not consistent with the “profile” which includes steeper ground and requires a balance of cable and conventional harvesting.

The audit team did not address this concern. This does not appear to be within the scope of the BC standard.

FM-06 19 April 2012 of 45

P8 Monitoring

An individual expressed concern about Canfor’s commitment to maintaining the staff capacity and budgets necessary to maintain its monitoring programs, including the HCVF monitoring.

The audit team is aware of the expanded roles of the staff undertaking monitoring and of the Canfor commitments to cost reduction. However, there was no evidence of any non-conformity with monitoring programs in this annual audit. This will be assessed in the upcoming re-assessment.

2.6 Conformance with applicable non-conformity reports

The section below describes the activities of the certificate holder to address each applicable non- conformity report (NCR) issued during previous evaluations. For each NCR a finding is presented along with a description of its current status using the following categories. Failure to meet NCRs will result in non-conformances being upgraded from minor to major status with conformance required within 3 months with risk of suspension or termination of the Rainforest Alliance certificate if Major NCRs are not met. The following classification is used to indicate the status of the NCR:

Status Categories Explanation

Closed Operation has successfully met the NCR.

Open Operation has either not met or has partially met the NCR.

Two NCRs from the 2012 annual audit were evaluated. Both are closed.

NCR#: 01/12 NC Classification: Major Minor X

Standard & Requirement: FSC-BC Regional Standards – October 2005. Indicator 1.5.1

Report Section: Appendix IV: Forest management standard conformance, Criterion 1.5

Description of Non-conformance and Related Evidence: There does not appear to be any Canfor operational guidance to staff that requires the reporting of encounters with motorized vehicles that are in areas that are closed to un-permitted vehicle use for any purpose within the DFA. The Tembec Non-conformity & Corrective and Preventive Action SOP (Tembec BCF-F452.01– v. 5 rev Sept 2009) does not address illegal activities. Based on the comments from all parties, it appears very likely that there are encounters with illegal vehicles in Access Management Areas that Canfor staff do not report to the appropriate authorities. Corrective Action Request: Organization shall implement corrective actions to demonstrate

conformance with the requirement(s) referenced above. Note: Effective corrective actions focus on addressing the specific occurrence described in evidence above, as well as the root cause to eliminate and prevent recurrence of the non-conformance.

Timeline for Conformance: By the next annual audit

Evidence Provided by Organization:

Canfor provided the following documents: A procedure and reporting form titled Access Management

Area/Poaching Reporting. The procedure included as Section 9 in Kootenay 2013 Site Specific Document of the Forest Management Group Occupational Health and Safety Program, May 1, 2013).

FM-06 19 April 2012 of 45

This is referred to as the blue book.

E-mails to report apparently illegal harvest of large and very old larch trees reserved from cutting in an OGMA to MFLNRO enforcement staff.

Findings for Evaluation of Evidence:

Canfor developed a 2 page procedure to direct staff to report observations of vehicles in areas where motorized vehicle use is prohibited by provincial law. The Access Management Area/Poaching Reporting section of the Kootenay region supplement to the FMG Occupational Health and Safety Guide (blue book) states that:

“Staff should report any observed violations of vehicle closure areas or poaching. … If you observe a vehicle entering or exiting an access management area (AMA) or other vehicle closure area or a potential poaching violation, please record the incident using the form below. Provide your observations to the BC CO Service as soon as practicable”.

Canfor obtained the assistance of the BC government Conservation Officer Service (COS) in developing this guidance and used a brochure developed by the COS as a template. Canfor also provided staff with a map showing all the AMA’s, which they received from the Conservation Officer. Canfor has maintained contact with the Officer through the Elk Valley Integrated Task Force. Canfor staff are aware of the guidance and it appears to be implemented. One instance of a contractor reporting ATVs in an AMA is recorded in the COPI data base. The COS reported that they are satisfied with the initiative by Canfor on this illegal activity issue. As reported in other annual audits and confirmed in this audit, Canfor has a suite of other procedures to meet Criterion 5.1. The specific omission identified in the 2012 audit in regard to vehicles in Access management Areas has been rectified. Canfor also provided evidence, in the form of an email report regarding cutting of old larch in an Old Growth Management Area, that they do report apparently illegal activities to enforcement authorities. Indicator 1.5.1 is met and the NCR is closed.

NCR Status: CLOSED

Comments (optional): None.


Standard & Requirement: FSC-BC Regional Standards – October 2005. Indicator 4.2.1

Report Section: Section 2.4 and 2.8 (Note 04/10)

Description of Non-conformance and Related Evidence: In January 2010, there was a fatality of a truck driver. The WorkSafe BC investigation report was completed on September 9, 2011. The report outlines the nature of the incident and the findings of the investigator. The report notes that several standard and best safety practices were not followed by the worker. The investigation included a review of the employer’s (a Tembec contractor) safety systems and noted that while a safety program existed, there was evidence that the program was not functioning. The FSC-BC Standard requires that the manager (Canfor) can demonstrate that a safety program has been developed and implemented for all forest workers, which includes contractors and their employees.

FM-06 19 April 2012 of 45

Corrective Action Request: Organization shall implement corrective actions to demonstrate conformance with the requirement(s) referenced above. Note: Effective corrective actions focus on addressing the specific occurrence described in evidence above, as well as the root cause to eliminate and prevent recurrence of the non-conformance.



Canfor provided the following documents:

Forest Management Group Occupational Health and Safety Program May 1, 2013 (136 pages). Section 5.0, page 21 addresses “Contractor Responsibilities.

A 2 page document titled “FMG Contractor Safety Certification

Expectations”. A 16 page document titled 2013/14 Forest Management Group,

Contractor Safety Guidelines May 2013. A 1 page checklist titled “FMG Contractor Safety Standards” to be

completed annually. A 1 page Standard Work Procedure for General Contractor Pre-

work conference.


This NCR required Canfor to demonstrate that their safety program was implemented for all forest workers, including contractors and their employees. In May 2013, Canfor revised the safety guidance documents specifically related to the implementation of safety requirements by all contractors. The policies are clear that Canfor’s safety certification expectations apply to all Contractors and Consultants working in the certified area. The 16 page Contractor Guidelines set out specific requirements for contractors for emergency preparedness, safe transportation, personal protective equipment, workplace signage, accident reporting, communications, near miss reporting. This manual also establishes the monitoring and inspection regime for contractors to be carried out by Canfor supervisors and includes standard inspection forms. These demonstrate work by Canfor to ensure safety programs are extended to include all contractors and sub-contractors. Based on interviews with Canfor supervisors and with contractors in the field, these measures appear to be largely implemented in the field. Inspection reports and Pre-work conference records were reviewed and were completed as required. In the field, some instances of missing signage (especially related to a requirement for signs on page 14 of the manual) to provide phone numbers for a “near-miss/road concern hotline” were noted. Overall, however, the guidance documents and the implementation of safety expectations for contractors demonstrate that a safety program has been developed and implemented for all forest workers, including contractors and their employees as required by Indicator 4.2.1. A WorkSafe BC official told the audit team that he believes there is a heightened awareness among contractors and that contractors are meeting safety requirements.

FM-06 19 April 2012 of 45

The NCR is closed.

NCR Status: CLOSED

Comments (optional): None.

2.7 New non-conformity reports issued as a result of this audit

Two Minor NCRs are issued in this annual audit.


Standard & Requirement: FSC BC Regional Standard, Indicator 3.1.2

Report Section: Appendix IV, Criterion 3.1

Description of Non-conformance and Related Evidence: At present there is no Protocol Agreement in place that outlines the nature of the relationship between Canfor and the Ktunaxa Nation Council. An agreement has been requested by Ktunaxa. RA is aware that both parties desire to complete an agreement and that some elements of the previous agreement remain in place while negotiations continue. However the absence of an agreement when one is requested is a non-conformity with Indicator 3.1.2. Corrective Action Request: Organization shall implement corrective actions to demonstrate




PENDING


PENDING

NCR Status: OPEN

Comments (optional):


Standard & Requirement: FSC BC Regional Standard, Indicator 6.3.9

Report Section: Appendix IV, Criterion 6.3

Description of Non-conformance and Related Evidence: Canfor provided evidence of conformance to retention targets in the Standard but identified that in about 20% of the blocks reviewed where sufficient pre-harvest snags were available to meet the target, the snag target was not met post-harvest (6.3.9). This is a non-conformance with Indicator 6.3.9 which requires 25% of the retention to be snags where those are present in the stand prior to harvest. Corrective Action Request: Organization shall implement corrective actions to demonstrate


Timeline for Conformance: Prior to the re-assessment.

Evidence Provided by PENDING

FM-06 19 April 2012 of 45

Organization:


PENDING

NCR Status: OPEN

Comments (optional):

2.8 Audit observations

Observations can be raised when issues or the early stages of a problem are identified which does not of itself constitute a non-conformance, but which the auditor considers may lead to a future non-conformance if not addressed by the client. An observation may be a warning signal on a particular issue that, if not addressed, could turn into a NCR in the future (or a pre-condition or condition during a 5 year re-assessment). One Observation is recorded in this annual audit.

OBS 01/13 Reference Standard & Requirement:

Description of findings leading to observation: Rainforest Alliance will be issuing new codes for all clients, changing from a “SW” identifier to a “RA” identifier (i.e., SW-COC-123456 will change to RA-COC-123456).

Observation: Organization should update all documents, including sales invoices and shipping documents, to reflect the new certificate code prior to the expiration of the certificate in October 2014.

2.9 Notes from previous audit teams Notes are recorded for the benefit of future audit teams. They are items that were not fully addressed in an audit or assessment but that do not constitute non-conformance. They were recorded for monitoring by future audit teams. Four Notes from previous audits were evaluated in this annual audit. All four are Closed. Note 05/10 Reference Standard: FSC BC-Regional Standard (Oct. 2005)

Indicator 9.3.2b Note for Future Annual Audits: Once the non-compliance issue regarding motorized use in HCVF 1113 has been resolved check to see that Tembec has investigated, with the MoFR, opportunities for access control measures that are consistent with the management strategy for HCVF 1113 and other tenure holder rights.

Closed Followed-up but still open Not followed-up this year 2011 audit team response: The MFLNRO has not completed its investigation so this note remains open. 2012 audit team response: The MFLNRO advised by e-mail that they have not yet completed this investigation. They have looked at the area with a biologist and are going to meet with the person who upgraded the trail. The Note remains open.2013 audit team response: The MFLNRO provided an email confirming that the investigation has been close and that actions have been taken with the licensee to ensure that there will be no future occurrence of unauthorized trail clearing in the HCVF 1113 in the Upper Spillimacheen. The Note is Closed.

FM-06 19 April 2012 of 45

Note 01/11 Reference Standard: FSC BC-Regional Standard (Oct. 2005)

Indicator 2.2.2 Note: Future audit teams should assess whether Tembec has implemented forest management practices as agreed to with the trapper in East Lussier Creek.

Closed Followed-up but still open Not followed-up this year 2012 audit team response: The audit team spoke with staff who summarized that the trapper was seeking to have access maintained to the trapline. Tembec committed to not deter access to the trapline. The audit team also spoke with the trapper who expressed concern about the piles of log butts left on the main road going into the Top of the World, and questioned whether the piles would be burned. The trapper also expressed an interest in having a log put across the Lussier creek to replace the bridge that was removed. Canfor reported that part of the post-harvest reclamation has been done, but the full reclamation will not be complete until later this Fall. This Note remains open so the next audit team can review the completed reclamation activities and talk with the trapper to determine if the management practices were implemented as discussed between the parties.2013 audit team response: The auditor met with the trapper and followed up his concerns (described in the note) that his discussions with representatives of the former tenure owner (Tembec) had not been met. The trapper reported that the debris piles have been burned. He remains concerned however that there has been no action by Canfor to meet a commitment that he believes was made to him to maintain access to his trapline after logging and road deactivation. He also is concerned that his request to a logging contractor at the time of logging to place two logs across a stream on old bridge crib logs to give him access to an unlogged area of his line was not carried out. The auditor reviewed e-mails and notes from 2011 in regard to communication with this trapper by Canfor’s predecessor (Tembec). Tembec did provide notification to the trapper in June 2011 about the planned logging activities and the trapper did respond to the notice and discussed his interests with Tembec staff in July 2011. Handwritten notes in the file and an e-mail of August 19, 2011 confirm that Tembec made a commitment to leave access to the back of the block passable for an ATV for the trapper’s use. Other trails were to be rehabilitated as normal. This “commitment” appears not to have been passed on to operational staff supervising the logging and deactivation after Canfor took over Tembec. The staff person who had made the commitment was not retained by Canfor. Canfor staff also confirm that the request to the contractor to place logs across the stream was communicated to them. However, Canfor staff instructed the contractor not to do this, because of concern that this would not be permitted by MFLNRO for liability reasons. This reason why the logs were not put in place was communicated to the trapper. The auditor did not visit the site and did not verify if the commitment to maintain access has been met or not. However, the road deactivation work in the area of 42K on the East Lussier Road to Top of the World Park has not yet been fully completed. Further work in the area is planned and there may still be opportunities to meet the “commitment” made to the trapper to assist him by maintaining access trail to his line. The auditor advised both Canfor and the trapper that they should communicate to determine if there is work that can be done to meet the commitment to maintain access for the trapper to his trapline. The COPI data base records numerous interactions with trappers in regard to logging and road activities in the area of their traplines. Based on the database, it appears that Canfor provides regular notice to trappers, maintains generally good relationships with trappers, and obtains their consent for activities. This is acknowledged by the trapper. The Note is closed. Conformity with the requirements of Criterion 2.2 will be re-evaluated in the upcoming

FM-06 19 April 2012 of 45

re-assessment. Note 02/11 Reference Standard: FSC BC-Regional Standard (Oct. 2005)

Indicator 2.2.2 Note: Future audit teams should assess whether the guide-outfitter/commercial backcountry tenure holder/lodge owner in Lake Creek has provided free and informed consent to Tembec’s planned harvesting and road construction and whether Tembec has implemented the agreed-to forest management practices.

Closed Followed-up but still open Not followed-up this year 2012 audit team response: Tembec and the guide-outfitter developed and signed a work plan on Oct. 5, 2011 to address the timing of harvest, road deactivation, maintenance of horse trails, and pulp harvest. During the audit, Canfor reported that the first two items of the work plan had been completed. Canfor left a message for the guide-outfitter requesting a field meeting so the parties could discuss the remaining items, however the guide-outfitter has not yet been available to meet. Generally, the guide-outfitter expressed frustration about the level of access that now surrounds his lodge, as there are multiple licencees around the lodge. Lines of communication between the guide-outfitter and Canfor are still open, and additional time is required for the parties to complete the signed work plan. This Note remains open so future audit teams can review progress on the work plan, which is anticipated in the fall of 2012.2013 audit team response: The auditor spoke with the guide outfitter and his wife, interviewed Canfor staff and reviewed the Work Plan signed in 2011. There has been very limited communication between Canfor and the guide outfitter since the last annual audit, although Canfor provided evidence that they have tried to reach the guide outfitter. He confirmed that phone messages were left but that he has been away on business for extended periods, and there has been little communication. The outfitter continues to express frustration with the access to his lodge and the surrounding area that has been created by logging and roads close to his lodge. This has significantly negatively affected the wilderness and hunting experiences of his guests and has negatively impacted his business. He and his wife acknowledge that his main concern is the amount of visible logging and the significantly changed landscape, and the vehicle and ATV access to an area formerly accessible only on foot or horseback. They also feel that the agreed work plan has not been met. The agreed work plan has five points. The first relates to the timing of logging and hauling in 2011 and 2012. This was met. The second point is titled “road deactivation”. This refers to the removal of 2 culverts, and the “reclamation (full pull back)” of a road section before the little lake bridge. Canfor maintains that this work has been done. They report that approximately 100 metres of full pull-back was completed in 2012 and again in early September 2013 at the start of hunting season. The deactivation on the 17.5 m hill and on the Cherry Mather connector road will block vehicle access on the Loop Road for the first time, but will likely not block ATV access. The de-activation is not permanent, as there are future blocks still to be accessed by the road. The guide outfitter has not seen the recent work, but expects it to be inadequate as he expected more permanent road closure and desires no ATV access as well. Canfor does not believe this was agreed, or is possible, and there is a disagreement or misunderstanding about what was intended as “deactivation” in the agreed work plan. The third and fourth points refer to the cleaning of blowdown and logging debris from horse trails to make them usable and passable for horses. This work has not been done but the agreement states that Canfor and the outfitter will meet on site to agree on what trails to clean before any work is done. To date this has not occurred. Canfor has made attempts to meet with the guide outfitter but the outfitter has been away and has not been available for an on-site meeting. Canfor told the auditor that they remain willing to do this work but wish to meet on site to agree on what trails and what work to do. The fifth point is an agreement to look into the cost of moving the lodge and of splitting the cost of doing so. There has not been any further discussion on this since the Work Plan was signed.

FM-06 19 April 2012 of 45

The auditor concludes that while the guide outfitter remains unsatisfied that the work plan has not been met, some of his concerns about access and the protection of the previously remote environment of his lodge accessed only by horseback are larger land use issues that cannot be met by Canfor. The road deactivation appears to meet the requirements of point #2. Additionally, the guide outfitter has not met with Canfor to agree on work on the horse trails (points 3 and 4) or the moving of his lodge (point 5). Canfor remains open to meeting to discuss those points in the work plan. The guide-outfitter has not provided any formal notice to Canfor regarding concerns for progress on the Work Plan. Thus there is not a “dispute” or any non-conformity with Indicator 2.2.2. The COPI data base records several interactions with guide outfitters and backcountry recreational rights holders in regard to their concerns about access management. Based on the database, it appears that Canfor maintains generally good relationships with these outfitters and obtains their consent for activities. This Note is closed. Conformity with the requirements of Criterion 2.2 will be re-evaluated in the upcoming re-assessment. Note 04/11 Reference Standard: FSC BC-Regional Standard (Oct. 2005)

Indicator 4.4.3 Note: Future audit teams should assess whether Tembec and the Sheep Creek residents agree to and Tembec implements steps to protect the interests of the group.

Closed Followed-up but still open Not followed-up this year 2012 audit team response: The audit team received a written submission from the Concerned Residents of Sheep Creek (CRSC) outlining several items of concern, and then reviewed these concerns with Canfor. A summary of each concern, along with the team’s response follows below. 1. Residents noted that Canfor mentioned mandatory public input has been removed under the current government legislation. The residents wondered how sincere the company is about meeting with them in the future. Team Finding: Public input is still required by legislation for Forest Stewardship Plans, but not operational plans. Regardless, FSC-BC Standard indicator 4.4.1 requires that a company “develops and implements a plan for ongoing public participation that accommodates the needs and preferences of directly affected persons”. Canfor’s public participation process is defined in the Tembec SFMP, which Canfor has committed to continue implementing until a new SFMP has been written. Canfor has told the audit team that it is fully committed to meeting all the FSC requirements. Canfor indicated that it would remind staff that there is a corporate commitment to fully meet FSC requirements. Canfor has demonstrated implementation of their public participation with the CRSC by: holding meetings and field trips to describe proposed harvest and road plan; soliciting information about how proposed plans might impact the group; and adjusting plans to reduce these impacts. 2. The CRSC acknowledged that the planning department has spent considerable time working with them, and commended the planners for many good practices. However, the CRSC also expressed concern that during personnel changes and transfers within the company, commitments that were made to them have not been passed on to the new personnel. Communication processes that were established have had to be re-established. The CRSC noted that specific commitments made that have not been followed through on include:

Being assured of notification when logging was to begin; Logging certain blocks in the winter; Receiving an access plan for residents and recreationalists during operations; and Clean up of the Canal Pasture, or supplying updates on the area.

FM-06 19 April 2012 of 45

Further, the CRSC was concerned that information has not been proactively provided by the company. Team Finding: Canfor acknowledged that a collaborative plan was developed with the CRSC. When the staff person responsible for development of this plan left the company, the plan was not passed on and development of a new plan began. When this error was raised (about 2 years ago), two staff were assigned as the point persons for communication with the CRSC and they have been working to re-establish the relationship. On the specific concerns outlined above, Canfor provided a letter to the audit team, dated October 17, 2011, that had been emailed to the CRSC. In this letter:

Canfor confirmed that winter logging was planned in 2011. However, this logging was dependant on mill requirements. The blocks discussed for winter logging (blocks 1-3) have not yet been logged.

Canfor outlined that residents and recreationalists would have a way to communicate with the logging contractor in order to safely pass through active logging sites. When access was agreed upon, residents and recreationalists would be escorted through the setting by a company employee. Canfor reported that they had not yet had a request for access through an active site.

Canfor summarized that they were seeking a salvage license for downed timber in Canal Pasture, and that the Ministry would be contacted about grass seeding. Since this update was provided, Canfor has proceeded with some seeding and has ripped some landings. The company acknowledged to the audit team that this new information has not yet been communicated to the CRSC.

As for notifying the CRSC prior to all logging, Canfor acknowledged that some notifications have been missed during the transition and company sale. After the transfer from Tembec, one of the priority systems that Canfor has implemented is the COPI database, which records all public input and ties it to the cutting permits. This system ensures that even if there is a personnel change, commitments associated with cutting permits will not be lost. The effectiveness of this system will be monitored by future audit teams. 3. Residents expressed concern about the delayed deactivation of a road in close proximity to private property. Canfor had planned to deactivate the road prior to the 2012 hunting season, but did not because slash piles have not yet been burned. Interested parties are concerned that keeping the road open from now until the spring will become a safety hazard. Team Finding: Canfor confirmed their intention to deactivate the road once harvesting was complete, but harvesting has not been completed. A short spur has been deactivated to keep people out of the area, but full deactivation cannot be done until harvesting is completed and the piles are burned. 4. Residents expressed concern about areas that have suffered machine damage down to mineral soil, and about very large slash piles. Team Finding: Canfor was not specifically aware of where this machine damage might have taken place, and the company had not received reports about this damage. Canfor’s monitoring of operations in the area report that site degradation was all within the site plan limits. Canfor further noted that operations had been curtailed in the area due to wet weather. The audit team did not do field visits in this area during this audit, but a review of other operating areas did not reveal any site degradation issues. The CRSC are encouraged to provide details on this issue to the company. As for the slash piles, Canfor acknowledges that there are still piles that have not been burned. The company traditionally burns in the fall in order to give the piles 6 months to dry. 5. Residents expressed concern that some recreationalists are creating and pushing through their own roads in some areas.

FM-06 19 April 2012 of 45

Team Finding: Canfor was not specifically aware of where these unauthorized roads were, and the company had not received reports about the roads. The CRSC are encouraged to provide details on this issue to the company. NCR 01/12 has been issued in another section of this audit report requiring Canfor to implement measures to ensure that staff routinely report potential illegal vehicle use. Summary: The relationship between CRSC and the companies that historically held the tenure before Canfor has been difficult. However, considerable work was done by Tembec to build this relationship and improve communication. Over the past half year during the transition from Tembec to Canfor, the company acknowledges that communications have not been maintained at the desired level. Canfor has told the audit team that is it committed to continue working with the CRSC. As with any developing relationship, there is always room for improvement. The audit team finds that the efforts made to date by Canfor are consistent with the requirements of the Standard, and future audits will continue to monitor the Canfor/CRSC relationship to see how it develops now that the company transition is closer to completion. This Note remains open, and the next audit team commits to meet with the CRSC in person during the 2013 annual audit. 2013 audit team response: The auditor met with representatives of the Concerned Residents of Sheep Creek (CRSC) and reviewed the interactions and the significant amount of communication back and forth between Canfor and the CRSC since the 2012 audit. A controversy arose in April, 2013 when Canfor notified the CRSC that they planned to begin logging very soon in May or early June within cutblocks of interest to the CRSC. The CRSC has understood there would be no logging in that time period and felt the notice was much too short and not consistent with a “gentleman’s agreement” promise they felt that Canfor (Tembec representatives) had made to them to only log and haul in the watershed in winter months. CRSC felt that there were many reasons for their opposition to logging in the spring or early summer and these were understood by Canfor. Thus the notice of Canfor plans prompted correspondence from the CRSC and a meeting on May 13, 2013. Numerous issues were discussed at the May 13 meeting. The logging plans were cancelled and apart from road maintenance, there has been little activity in the Sheep Creek watershed since. Since the last annual audit Canfor has provided advance notice of road work, and maintained correspondence in the form of e-mails, phone calls and face to face meetings. Since no logging has been underway or planned since the May 13 meeting there have not been any specific notices provided by Canfor. Canfor believes the communication with CRSC is going reasonably well but CRSC continues to express frustration that there is still a “communications gap” and that there is little trust of Canfor by the CRSC. The frustration was described as an “accumulation of persistent petty things”. It is also rooted in a disagreement about whether Canfor (and Tembec before them) has made a firm promise to log in winter months only. Canfor provided a letter of October 17, 2011 which states, “It will most likely be that all the blocks in CP 324 will be harvested in winter, but we cannot make a firm commitment to harvest them all in winter”. The minutes of the meeting of the May 13, 2013 meeting include a similar statement that they will try to log only in winter but cannot make a firm and unalterable commitment. CRSC feels the commitment to log only in winter has been made verbally, but is then changed in follow-up correspondence or meeting minutes. The meeting of May 13 did confirm and improve past agreement on some communication protocols. The parties agree that they will communicate on an as-needed basis, that Canfor will notify at least 2 weeks in advance of all planned activities, that CRSC will be represented by three individuals who would undertake to communicate with the wider community, that three individuals will represent Canfor and finally, that there is not a need for regular meetings. Indicator 4.4.3 requires that “steps to protect the rights or interests of directly affected persons are developed and agreed to through the public participation process, and implemented by the manager”.

FM-06 19 April 2012 of 45

Based on the interviews conducted in this audit, Canfor and CRSC have agreed on the steps to provide information and to communicate about interests. Canfor is implementing them, although because of the limited activity since May 2013, this is not obvious to the CRSC. The mechanics for consultation required by the Indicator 4.4.3 are in place. The CRSC retains some specific concerns about the need for a commitment to “winter harvest only” and “a full commitment to real communication”. These require on-going attention from both parties, but despite the mistrust that remains on the part of CRSC, there is no non-conformity with the standard, as the steps for communication are in place and are being implemented. The COPI data base records interactions with at least one other groups of local citizens with similar concerns about Canfor activities near their community. Based on the database, it appears that Canfor has maintained a generally good relationships with that community group. The note is closed. Conformity with the requirements of Criterion 4.4 will be re-evaluated in the upcoming re-assessment. The audit team anticipates that auditors will speak with the CRSC again during the re-assessment.

2.10 Notes for future audit teams No new Notes are issued in this annual audit and no Notes are carried over from previous audits.

3 AUDIT PROCESS

3.1 Auditors and qualifications

Auditor Name Keith Moore Auditor role Lead and Forestry

Qualifications:

Keith is a registered professional forester (RPF in BC) and has an M.A. in Geography from the University of British Columbia. He has been working in forestland management and environmental assessment in Canada and other countries since 1976. From 1995 to 2000, Keith was the Chair of British Columbia’s Forest Practices Board. Since 2000, he has been a team member or team leader with RA on over 80 different FSC pre-assessments, assessments, annual audits and major NCR verification audits in five provinces of Canada, in Russia, Australia, Guatemala, Indonesia, the US and Cameroon. He is very familiar with three of the regional FSC standards in Canada and has also been involved in the development of regional standards in Russia, Montenegro, Kenya and Australia. Keith participated in the recent processes to revise the FSC Principles and Criteria and to write International Generic Indicators and has participated in FSC policy development at regional, national and international levels. He is a member of the Policy and Standards Committee of the FSC International Board. Keith is an RA-trained FSC Forest Management lead auditor and has ISO 9001 Lead Auditor certification.

Auditor Name Glen Dunsworth Auditor role Ecologist

Qualifications:

Glen has over 35 years experience in forest renewal, biodiversity and forest genetics research in coastal British Columbia and Alberta. His post-graduate training was in Forest Genetics followed by a two-year period leading a reclamation-breeding program for native woody species on the Great Canadian Oil Sands site in Fort McMurray. His exposure to a wide range of operational silvicultural problems related to stand establishment began with MacMillan

FM-06 19 April 2012 of 45

Bloedel in 1978 and he continued with the Land Use Planning Advisory Team to 2004. Glen has extensive corporate experience in forest renewal and genetics as well as in silvicultural systems, landscape ecology, spatial habitat supply modeling and conservation biology. During 1999 to 2004 he led the Ecology Team for the Forest Project – MacMillan Bloedel’s and Weyerhaeuser’s phasing-in of variable retention and stewardship zoning. The Team won the Ecological Society of America Corporate Award for Excellence in 2002. He was responsible for the development and implementation of the Adaptive Management and Monitoring Program in support of the Forest Project. Glen has worked on two CSA certifications and twenty-five FSC audit teams in BC, Alberta, and Ontario. He is currently a forest ecology consultant and has recently co-authored a book with Dr. F. Bunnell on forest biodiversity conservation and adaptive management through UBC Press.

3.2 Audit schedule

Date Location /Main sites Principal Activities Sept 9, 2013 Auditors travel to Cranbrook. Interview with Canfor staff and

logistical arrangements. Auditor meeting in evening Sept 10 Cranbrook Opening meeting. Interviews and document review with

Canfor staff Sept 11 Cranbrook and

Kimberley (KM) Flathead Valley (GD)

Field day (GD). Interviews with Canfor staff. Interviews with government employees, tenure holders and one community group and an NGO representative.

Sept 12 Cranbrook Interviews. Auditor meeting. Closing meeting Sept 13 Auditor return travel Nov. 18 Rainforest Alliance

Offices Report finalized

Total number of person days used for the audit: 9.5 = number of auditors participating 2 X average number of days spent in preparation, on site and post site visit follow-up including stakeholder consultation

3.3 Sampling methodology This annual audit focused on visiting and viewing a sample of recent (2012) and historic logging sites that represent issues of concern including; High Conservation Value Forests, riparian protection and stream crossings, structural retention implementation and effectiveness monitoring. These include sites logged by Canfor in both winter and summer operating seasons. Harvest units were selected from the operational planning maps. One day of fieldwork was conducted by helicopter and truck with five Canfor staff. The audit team met with woodlands coordinators and contractors at field stops. The audit team flew a total of 4 hours within the certified area following a route from the upper McEvoy Creek and down the Flathead drainage to near the US border. The audit team drove a total of 8 hours with ground stops and observations of roads, stream crossing protection, debris piles, ground disturbance, stand level retention, protection of wildlife features such as nests and other measures were made in six recent operating blocks. Over-flight observations were made of historic logging, HCVFs and access management areas in the McEvoy and Flathead drainages.

FM-06 19 April 2012 of 45

Sites visited are listed in Appendix II.

3.4 Consultation process A total of 21 individuals were interviewed during the audit.

Interest type (i.e. NGO, government,

local inhabitant etc.) Individuals notified (#)

Individuals consulted or providing input (#)

Ktunaxa Nation 1 3 Government 4 4 NGO 1 2 Rights holders 3 3 Contractors and forest workers

0 3

Community group 1 5 Individuals 1 1

3.5 Changes to Certification Standards

Forest stewardship standard used in audit:

FSC Regional Certification Standard for BC. October 2005

Revisions to the standard since the last audit:

No changes to standard. Standard was changed (detail changes below)

Changes in standard: None

Implications for FME: Conformance verified.

3.6 Review of FME Documentation and required records

a) All certificate types

Required Records Reviewed

Complaints received by FME from stakeholders, actions taken, follow up communication

Y N

Comments: Canfor maintains a complete record of complaints from stakeholders and documents the actions taken. These are maintained in a COPI data base. (Creating Opportunities for Public). Specific complaints are discussed in Section 2.4 and in the Notes.

Accident records Y N

Comments: Canfor maintains very detailed tracking of all incidents and accidents. Canfor is also implementing a system to track near-misses and is requiring that these be reported.

Training records Y N

Comments: Canfor maintains thorough training records and provided those to the audit team.

Operational plan(s) for next twelve months Y N

Comments: Canfor plans to be very active in the next twelve months. All three mills – Radium, Canal Flats and Elko – will be operating. A review of its HCVF areas and the management systems in place for each of the currently identified

FM-06 19 April 2012 of 45

HCVF areas is underway. Effectiveness monitoring is continuing. Canfor is revising the 2005-2012 sustainable forest management plan.

Inventory records Y N

Comments: Site level inventories and assessments were reviewed in each of the cutblocks visited. These types of assessments are on-going in areas planned for future logging activities. As described in previous annual audits and assessments, Canfor has a very complete set of inventories and assessments.

Harvesting records Y N

Comments: Canfor provided a complete set of information related to all harvesting, road construction and other activities in the previous two years. This information provided the base for sampling blocks in this annual audit.

FM-06 19 April 2012 of 45

APPENDIX I: FSC Annual Audit Reporting Form (NOTE: form to be prepared by the client prior to audit, information verified by audit team) Forest management enterprise information: FME legal name: Canadian Forest Products Ltd.

FME Certificate Code: SW-FM/CoC – 001348

Reporting period Previous 12 month period Dates

1. Scope Of Certificate Type of certificate: single FMU SLIMF Certificate: not applicable New FMUs added since previous evaluation Yes No

2. FME Information

No changes since previous report (if no changes since previous report leave section blank) Forest zone

Certified Area under Forest Type

- Natural hectares

- Plantation hectares

Stream sides and water bodies Linear Kilometers

3. Forest Area Classification

No changes since previous report (if no changes since previous report leave section blank) Total certified area (land base) ha

1. Total forest area ha

a. Total production forest area ha b. Total non-productive forest area (no harvesting) ha - Protected forest area (strict reserves) ha - Areas protected from timber harvesting

and managed only for NTFPs or services ha

- Remaining non-productive forest ha

2. Total non-forest area (e.g., water bodies, wetlands, fields, rocky outcrops, etc.) ha

4. High Conservation Values identified via formal HCV assessment by the FME and respective areas

No changes since previous report (if no changes since previous report leave section blank) Code HCV TYPES2 Description: Area HCV1 Forest areas containing globally, regionally or Multiple areas spread 549,000

1 The center point of a contiguous FMU or group of dispersed properties that together comprise a FMU in latitude and longitude decimal degrees with a maximum of 5 decimals. 2 The HCV classification and numbering follows the ProForest HCVF toolkit. The toolkit also provides additional explanation regarding the categories. Toolkit is available at http://hcvnetwork.org/library/global-hcv-toolkits.

Group Certificate: Updated of FMU and group member list provided in Appendix VII-a: Multi-FMU Certificate: List of new FMUs added to the certificate scope:

FMU Name/Description

Area Forest Type

Location Latitude/Longitude1

ha ha ha

FM-06 19 April 2012 of 45

nationally significant concentrations of biodiversity values (e.g. endemism, endangered species, refugia).

throughout the DFA. Most HCVFs have values from several categories within them.

ha

HCV2 Forest areas containing globally, regionally or nationally significant large landscape level forests, contained within, or containing the management unit, where viable populations of most if not all naturally occurring species exist in natural patterns of distribution and abundance.

Multiple areas spread throughout the DFA. Most HCVFs have values from several categories within them.

184,978 ha

HCV3 Forest areas that are in or contain rare, threatened or endangered ecosystems.

Multiple areas spread throughout the DFA. Most HCVFs have values from several categories within them.

32,865 ha

HCV4 Forest areas that provide basic services of nature in critical situations (e.g. watershed protection, erosion control).

Multiple areas spread throughout the DFA.

190,960 ha

HCV5 Forest areas fundamental to meeting basic needs of local communities (e.g. subsistence, health).

Multiple areas spread throughout the DFA. New HCVFs for 2012 include those for Tobacco Plains and St. Mary’s Akisqinuk.

195,511 ha

HCV6 Forest areas critical to local communities’ traditional cultural identity (areas of cultural, ecological, economic or religious significance identified in cooperation with such local communities).

See above. Area of these HCVs contained in the area for HCV5

Number of sites significant to indigenous people and local communities 59 Notes:

1) HCVF in the 6 categories overlap with one another in many cases, so the total area in the DFA within HCVF cannot be determined from the sum of the areas in each HCV category.

2) The area for HCV5 and 6 are combined because they were not separately identified by First Nations during the identification process, and Canfor does not wish to presume which HCVFs fall into which category.

5. Workers Number of workers including employees, part-time and seasonal workers: Total number of workers 65 workers

- Of total workers listed above 60 Male 5 Female

Number of serious accidents 1

Number of fatalities 0

6. Pesticide Use

FME does not use pesticides. (delete rows below)

FM-06 19 April 2012 of 45

APPENDIX II: List of visited sites (confidential)

FMU

or other Location Compartment/

Area Site description /

Audit Focus and Rationale for selection McEvoy Creek 689 Block 3 Retention patches, riparian protection, stream

crossing and road erosion McEvoy Creek 689 Block 1 Retention anchors, snag creation, road rehabilitation,

road deactivation, machine free zones McEvoy Creek 689 Block 2 Retention patches, riparian protection, stream

crossing and road erosion Lower Flathead 581 Block 3 Active logging, retention, machine free zones, snags Lower Flathead 575 Block 2 Road-side screening for Grizzly, access management

area Lower Flathead 575 Block 9 HCVF, access management area, riparian protection,

dispersed retention, snags, culvert/stream crossing and erosion

FM-06 19 April 2012 of 45

APPENDIX III: List of Persons Consulted (confidential)

List of Canfor Staff and Consultants Consulted

Name

Title

Contact

Type of Participation

Baird, Peter Planning Manager [email protected] Phone interview Breton, Chris Clerk 250-349-5294 x102 Document

submission Drader, Steve Operations Supervisor 250-529-7211 x226 Field Driscoll, Geordie Forestry Supervisor 250-349-5294 x103 Interview Freeze, Paul Forestry Supervisor 250-529-7211 x246 Field Havens, Lloyd Operations Superintendent 250-529-7211 x216 Field Johnson, Ian Forestry Supervisor 250-529-7211 Phone interview Jukes, Warren Operations Manager, South Exit Meeting Kovacic, Glen Sr. Operations Supervisor 250-489-9816 Phone interview McCuaig, Andy Tenure Manager 250-426-9209 Interview, Field Messerli, Adrian Forestry Supervisor 250-349-5294 x108 Phone interview,

Field Neville, Grant First Nations & Planning

Coordinator 250-426-9252 Interview

Marra, Jack Sr. Operations Supervisor 250-529-7211 x224 Phone interview, Field

Pope, Bruce WIM Analyst 250-426-9364 Interview Simmons, Keri SFS and Safety Co-

ordinator 250-962-3456 [email protected]

Phone interview

Stagg, Chris Chief Forester 250-426-9247 Interview Streloff, Ken Forestry Supervisor 250-529-7211 x225 Interview Stuart-Smith, Kari Forest Scientist 250-426-9380 Interview, Field Tamelin, Darren Forestry Coordinator 250-347-6111 Phone interview Vernier, Kori Silviculture Coordinator 250-529-7211 X247 Phone interview

FM-06 19 April 2012 of 45

APPENDIX IV: Forest management standard conformance (confidential)

The table below demonstrates conformance or non-conformance with the Forest Stewardship Standard BC Regional Standard. In this 2013 annual audit, all Criteria in Principles 6, 8 and 9 were re-evaluated. In addition,Criteria 1.5, 2.3, 3.2, 4.2, 4.4, and 5.6 were evaluated as required by FSC-STD-20-007 (vers 3-0) sections 6.3.8 b and c. In the 2012 annual audit, all Criteria in Principles 3 and 7 were re-evaluated as well as required Criteria in other Principles. In the 2011 annual audit, all Criteria in Principles 2, 4 and 5 were re-evaluated as well as numerous other Criteria in association with the review of CARs and NCRs and as required by FSC. Findings of conformance or non-conformance are documented at the Criterion level, with reference to the applicable indicator, in the following table and with a reference to an applicable NCR or OBS or Note. The non-conformance and NCR is also summarized in the NCR table in Section 2.6.

P & C

Conformance:

Yes/No/ NE

Findings NCR OBS (#)

Principle 1: COMPLIANCE WITH LAWS AND FSC PRINCIPLES 1.5 Yes Canfor’s conformity with Criteria 1.5 has been documented in the

assessment in 2009 and in each annual audit since. A non-conformity was identified in the 2012 annual audit in regard to the reporting of encounters with vehicles in Access Management Areas that are closed to all motorized transport. NCR 01/12 was issued. That non-conformity has been addressed by the development of guidance to all Canfor staff about reporting such encounters. This is described in NCR 01/12 and the NCR is closed. The Criterion is met.

Principle 2. TENURE AND USE RIGHTS AND RESPONSIBILITIES 2.3 Yes Canfor is developing a dispute resolution process as part of the

current process of revising the SFMP. In the meantime, in the event of a dispute Canfor would implement the dispute resolution procedure outlined in a document titled “Management of Company-wide External Requests and Complaints: Environmental or Health and Safety” in the SFMP that was originally developed by Tembec. Alternatively, Canfor states that it would, in the event of a dispute, develop a mutually-agreed process with the complainant as required by Indicator 2.3.1. As reported in previous audits, this approach is in conformance with Indicator 2.3.1. As defined in the FSC BC Standard, a “dispute” exists when consultative avenues have been exhausted and a party gives written notice to the manager indicating that they wish to pursue a dispute resolution process.

FM-06 19 April 2012 of 45

Canfor maintains a full record of all concerns and complaints brought to its attention by interested parties. This is stored in the COPI data base and responses to all the issues are recorded. In this 2013 annual audit, 78 pages of notations of responses to concerns, complaints or comments are recorded and interactions with many different organizations or individuals are noted. No disputes are identified among these issues. Two issues regarding rights holders were identified in previous audits and were the subject of Notes 01/11 and 02/11 reviewed in this annual audit. These are:

Concerns of a guide outfitter / commercial recreation tenure holder in the Lake Creek area (CP 327) related to harvest timing, roads and horse trails;

Concerns of a trapper (CP 333) related to maintaining access to a trapline; and

In both cases, commitments had been made to the rights holder by Canfor. As described in this report, these commitments have not been fully met. However as described in Note 01/11 and 02/11 neither meets the definition of a “dispute”. Finally, an issue regarding Canfor’s consultation with the Concerned Residents of Sheep Creek (CRSC) to protect their interests was identified in the 2011 annual audit and was the subject of Note 04/11. This note was reviewed in this audit. Although the CRSC is not satisfied that Canfor has agreed on measures to protect those interests – specifically a commitment to only log in winter months, there is a mechanism for regular communication. This situation does not meet the definition of a “dispute”. Based on review of documents and interviews with Canfor staff and the various parties involved, there are no disputes as per the definition of disputes in the FSC BC Standard. This Criterion is met.

Principle 3. INDIGENOUS PEOPLES' RIGHTS 3.1

No The Relationship Protocol Agreement between Ktunaxa Nation Council (KNC) and Tembec lapsed in March 2012 when the purchase of the certified forest area by Canfor from Tembec was completed. In February 2012, when the sale was imminent, the elected leadership of the KNC met with senior executives of Canfor and requested a Relationship Protocol Agreement with Canfor to replace the one with Tembec. As a result, the parties began a process to complete and sign a new Protocol Agreement with subsidiary agreements, including an Engagement and Benefits Agreement and an agreement on Consultation in the certified area. At that time, both parties agreed to follow the spirit and intent of the Tembec protocol and to continue to implement the provisions in good faith. Since 2012, there have been numerous meetings, and some progress on a new Agreement has been made. Although the Joint Management Advisory Committee (JMAC) established under the Protocol has not met, sub-committees have continued to meet,

NCR 01/13

FM-06 19 April 2012 of 45

the provisions of the consultation matrix have been followed and capacity payments have been made by Canfor. At the time of this annual audit, however, there is no Protocol Agreement between KNC and Canfor KNC representatives told the audit team that they believe the negotiation process is presently stalled. Ktunaxa representatives state that they have presented proposals and “creative solutions” to address their interests – specifically in the areas of employment, procurement, benefits and consultation - and wish to conclude an agreement. KNC representatives told the team that they do not believe that their interests are being given due consideration and are not being satisfactorily addressed. Accordingly they are not ready to agree to and sign a protocol agreement. The KNC representatives stated that they wish to continue to work to formalise a relationship with Canfor and expect to continue negotiations that will result in an agreement that addresses their interests in a meaningful way Canfor representatives confirmed there are requests for some different approaches from the KNC, but at the time of the audit, believed that meetings were on-going and that an agreement could be concluded in the near future. Canfor believes they have put offers on the table that address what they understand to be the KNC interests and told the audit team that they also wish to continue to meet and negotiate to reach a mutually agreeable agreement. The absence of a Protocol Agreement, when one is requested by the First Nation, is a non-conformity with Indicator 3.1.2. In this situation, approximately 18 months have elapsed since the previous agreement with Tembec for this certified forest lapsed in early 2012. That agreement had been renewed in 2011 but despite that past agreement, and the discussions since, the parties have not reached a new agreement. RA is aware that both parties desire to complete an agreement and that some elements of the previous agreement remain in place while negotiations continue. However the absence of an agreement when one is requested is a non-conformity with Indicator 3.1.2. NCR 01/13 is issued.

3.2 Yes Tembec and KNC successfully completed a lengthy process to identify Cultural Conservation Value Forests (CCVF). These CCVFs have been recognized, and measures to protect them continue to be implemented, by Canfor. The CCVFs are an important part of protection of Ktunaxa resources and tenure rights. Canfor also provides KNC with a great deal of information in the form of referrals of operational plans that are reviewed by the Director of Land and Resources in association with staff in band offices. Field reviews are conducted as needed. This information is provided to KNC under the terms of a Communication Matrix that was part of the original Protocol Agreement and that is still effectively in place between the parties. The information provided is more extensive than desired by KNC and they do not have capacity to address all the referrals. However the information is consistent with maintaining the resources and rights of Ktunaxa. There is no evidence to suggest that resources are not maintained. Criterion 3.2 is met.

FM-06 19 April 2012 of 45

KNC would prefer to implement a more strategic approach to protecting their rights and interests, as an alternative to the current referral process which provides more information than KNC has the capacity to handle. This issue could be addressed in the Communication Matrix as part of the completion of a Protocol Agreement (see NCR 01/13).

Principle 4. COMMUNITY RELATIONS AND WORKERS' RIGHTS 4.2 Yes Canfor has a complete safety program including policies,

procedures, and guidance documents, and safety checklists in place. The Forest Management Group Occupational Health and Safety Program (136 pages) was updated in May 2013. Documents to ensure that the safety program is implemented throughout the forest by contractors and all workers were revised or developed in May 2013. New programs to require the reporting and tracking of “near misses” as a way to address root causes of accidents were implemented. Observations in the field and in Canfor offices indicate the safety programs are implemented across all operations. Incidents and accident frequencies are documented in the “Safety Pages” tracking system. Indicator 4.2.2 requires “a consistently low accident frequency rate”. Canfor tracks accident numbers in many different ways but does not presently determine an “accident frequency rate” such as a “Medical Incident Rate” (MIR) as is common in other companies in the forest industry. Canfor is in the final stage of developing an MIR frequency. This will be available for the re-assessment in 2014. All current information on accident numbers and interviews with staff and a WorkSafe BC officer suggest that accident numbers have declined in recent years and are considered “low”. The Criterion is met. The accident frequency rate will be reviewed in the 2014 re-assessment.

4.4 Yes Canfor uses a variety of means to engage public participation. Newpaper ads announce major plans, letters are sent to rights holders, known interest groups and individuals, maps are frequently provided and referred for information, and direct contact is initiated by Canfor staff to individuals representing many diverse interests. The extent of Canfor’s outreach, and the nature of their responses to incoming complaints, comments or requests for information is documented in the extensive COPI database (Creating Opportunities for Public Involvement). In specific situations, means of communication are developed and agreed in consultation with the parties involved. These meet Indicators 4.4.1, 4.4.2 and 4.4.3. Canfor does not have a dispute resolution process but a dispute resolution process is being developed in the process of revising the SFMP. In the meantime, Canfor maintains that, in the event of a dispute, a mutually-agreed process would be developed with the complainant as outlined by Indicator 4.4.4. Alternatively, until the SFMP revision process is complete, Canfor would implement the dispute resolution procedure outlined in a document titled “Management of Company-wide External Requests and Complaints: Environmental or Health and Safety” in the SFMP that was originally

FM-06 19 April 2012 of 45

developed by Tembec. This is in conformance with Indicator 4.4.4. The Criterion is met.

Principle 5. BENEFITS FROM THE FOREST 5.6 Yes The documents and analyses establishing the rate of timber harvest

for the certified area are the same ones that were in place and reviewed in detail in the 2009 re-assessment. These meet the requirements of Indicators 5.6.1 and 5.6.2. As noted in previous assessments and annual audits, Canfor does not control the rate of non-timber harvest and Indicator 5.6.3 is not applicable. The long-term harvest rates were determined based on a thorough analysis specific to Canfor’s operating areas. This information is considered confidential, but the analyses were provided to Rainforest Alliance auditors. The projected rates of harvest over the next decade are expected to remain well below the long-term rate and are expected to meet Indicator 5.6.4. Indicator 5.6.5 only applies in a re-certification and will be reviewed in the re-assessment in 2014. In the 2012 annual audit, a benchmark sustainable harvest level for the entire defined forest area as a single unit was established in a September 2012 document prepared by Forsite Consultants, “Tembec Legacy DFA - Assessing Sustainable FSC Harvest Levels”. That document established a long-term harvest rate of 995, 740 m3 per year from the certified area, including TFL 14, Forest Licences A-18979, 19040 and 20212, numerous non-replaceable licences and Managed Forest 72. Annual harvest levels from each of the individual licence areas and from the total certified area are now tracked against this benchmark level. In 2012, the total harvest from the certified forest was 1,185,876 m3. This is 115% of the long term annual rate, and is thus within the 125% allowed by Indicator 5.6.6. Over the last four years, the total harvest is 100% of the long term rate. This rate of harvest meets Indicator 5.6.6. The Criterion is met.

Principle 6. ENVIRONMENTAL IMPACT 6.1 Yes There have been no changes in Canfor’s work to meet this Criterion

and associated Indicators since last annual audit. Canfor has all inventories in place and readily accessible digitally on their information system (6.1.1-6.1.5). The audit team confirmed in the office and the field that Canfor has good stand level inventories and assessments used for planning and layout (6.1.9-6.1.10). Canfor also provided evidence that their stand level comparisons for RONV are conducted through a sub-sample of pre- and post-harvest comparisons of stand structure retained. (6.1.6). Canfor completed their new RONV assessments in 2009 (Davis, 2009) (6.1.7- 6.1.8).

This Criterion continues to be met.

6.2 Yes Canfor provided a complete list of species at risk that occur on the certified area and indicated that both wildlife habitat areas and wildlife tree patches are used for habitat protection for these species (6.2.1-6.2.2, 6.2.5). New Wildlife Habitat Areas (WHA) were

FM-06 19 April 2012 of 45

established in 2011 for Gillette’s Checkerspot butterfly, Western Screech Owl, and Williamson's Sapsucker (nataliae subspecies), as well as good examples of the Antelope-Brush/Bluebunch Wheatgrass and Douglas-fir/ Snowberry/Balsamroot plant communities. These WHAs are automatically designated Category 1 HCVFs and provide important habitat for threatened or endangered species. Currently Canfor is implementing through their HCVF program the applicable parts of the Federal Recovery strategies for Williamson Sapsucker (not released yet), Rocky Mountain Tailed Frog (not released yet), American Badger, jeffersoni subspecies (not approved, submitted for peer review), and Southern Maidenhair Fern (only occurs near hot springs at Fairmont, not in their operating area). Canfor provided documentation of training completed annually for staff and contractors (6.2.4). Canfor documents species at risk and rare ecosystems habitat at the stand and landscape level. The audit team confirmed this with staff interviews and field checks.


6.3 No There has been little change in Canfor’s work to meet this Criterion since the last audit. Canfor continues to provide restoration for both the Ponderosa Pine and Interior Douglas-fir BEC variants using HCVF management strategies (6.3.1). The 2012 Sustainability Report has been completed. Based on field observations during this audit, Canfor continues to conform to the requirements for regeneration and succession (6.3.2 to 6.3.7). The area of “Not sufficiently restocked” is currently at 15%. As confirmed in the 2011 audit, seral stage and patch size issues for early seral conditions remain and will be addressed in the new SFM Plan that is currently under revision (6.3.10). Connectivity is maintaned through an extensive network of riparian reserves, access management areas with vehicle restrictions are used for access-sensitive species like Grizzly bears and unique ecosystems and features are captured and protected duing layout (6.3.11-6.3.13). Canfor ensures that all blocks have detrimental soil disturbance below 7%, this was confirmed in field reviews (6.3.14-6.3.15). No fertilizers are used by Canfor (6.3.16-6.3.17). Field and office reviews indicate that stand structure meets the Indicator requirements and is checked against pre-harvest conditions (6.3.8). Canfor provided evidence of conformance to retention targets in the Standard but identified that in about 20% of the blocks reviewed where sufficient pre-harvest snags were available to meet the target, the snag target was not met post-harvest (6.3.9). This is a non-conformance with Indicator 6.3.9 which requires 25% of the retention to be snags where those are present in the stand prior to harvest. Canfor has implemented a program to increase the retention of ecologically high-value snags. However sufficient data are not yet available to determine the program’s efficacy. This issue was also noted in the 2011 audit in the Canal Flats area. NCR 02/13 is issued.

NCR 02/13

6.4 Yes There has been no change in Canfor’s work to meet this Criterion since the last assessment. Canfor provided evidence that the Protected Areas reserves analysis is completed. Shortfalls in

FM-06 19 April 2012 of 45

meeting the targets for the Ponderosa Pine and Interior Douglas-fir BEC variants are being provided by HCVF restoration areas (6.4.1). As mentioned in 6.3, Canfor’s reserve network is grounded on riparian reserves along with the addition of wildlife habitat areas and wildlife tree patches that help maintain connectivity, habitat protection and maintenance of ecological integrity (6.4.2). Canfor uses static and dynamic reserves, with the dynamic reserves being wildlife tree patches and riparian reserves both of which are to be reviewed after one rotation (6.4.3-6.4.4). All protected reserves are no trespass except Restoration HCVFs (6.4.5). This Criterion continues to be met.

6.5 Yes Canfor continues to maintain guidelines and standard operating procedures to address environmental issues (6.5.1 to 6.5.4). The audit team conducted limited field work to verify conformity with guidelines and FSC requirements and did identify some site specific (non-systemic) non-conformances. These included harvest in high hazard sites (Upper McEvoy, for example), some excessive rutting, and lack of a machine free zone. Some persons that the team interviewed stated that they have observed and documented a variety of non-conformances in a range of cutblocks (6.5.5 to 6.5.7). Field work to confirm on-going conformance with both internal procedures and FSC requirements will be undertaken in the re- assessment in 2014. Non-conformance was not confirmed in this annual audit. Canfor continues to maintain updated equivalent clearcut areas for all watersheds in which operations occur, and continues to undertake hydrological assessments where the threshold is exceeded (6.5.8). Canfor completed a full suite of riparian assessments meeting the requirements of 6.5bis. These are described in the 2009 assessment report and earlier audits. Some persons that the audit team interviewed stated that they have observed and documented a variety of non-conformances in riparian areas. This was not confirmed in the field work conducted by the team during this annual audit and no non-conformance is identified. This will be reviewed in the upcoming re-assessment in 2014. This Criterion continues to be met.

6.6 Yes No chemical pesticides are used in forest management activities on the certified forest. Over the last 9 years, since the first certification of TFL 14, Canfor and its predecessor company Tembec, have made a concerted effort to reduce the amount of chemical used in nurseries on the seedlings that are planted in the certified area. Since 2004, pesticide use has dropped from 71% of seedlings with pesticides to 15% of all seedlings. This has been accomplished by a variety of nursery techniques, and switching to nurseries in zones where pest and fungus risks are lower. Over the same period, the use of Highly Hazardous chemicals in the nurseries has also been greatly

FM-06 19 April 2012 of 45

reduced. Research on pesticide reduction continues. This meets Indicator 6.6.3. This Criterion continues to be met.

6.7 Yes Measures are in place to prevent the unintended release of chemicals and to avoid impacts of their disposal. No evidence of inappropriate disposal of waste has been identified. This Criterion continues to be met.

6.8 Yes No biological control agents or GMOs are used on the certified area. This Criterion continues to be met.

6.9 Yes No exotic tree species are planted on the certified area. The grass seed mix used for erosion control and site stabilization is a mix specifically developed to meet the FSC requirements for non-invasive species and a preference for native species. This Criterion continues to be met.

6.10 Yes Forest conversion to plantations or non-forest land does not occur on Canfor’s tenure. This Criterion continues to be met.

Principle 8. MONITORING AND ASSESSMENT 8.1 Yes Canfor has a well developed monitoring program meeting the

requirements of Criterion 8.1, including the monitoring of HCVFs (see Criterion 9.4). The monitoring is being adapted over time in response to monitoring results, and the monitoring program is being revised at present as part of the revision of the SFMP. Monitoring programs to address operational performance and environmental impacts are being conducted with input and involvement of a variety of organizations and institutions, including a major project with Wildsight at the moment, as required by Indicator 8.1.3. Representatives of the Ktunaxa Nation Council indicated that they are not presently engaged in actual monitoring with Canfor, although they believe they have previously expressed a desire to discuss their involvement in monitoring with Canfor. The re-assessment in 2009 reported that the Ktunaxa had been involved in developing the indicators in the SFMP and in determining the appropriate monitoring plans and programs. Based on the consultation that has been done in developing the on-going monitoring and that continues with different organizations and affected parties, Canfor has met the requirements of Indicator 8.1.3. Discussion of future involvement of KNC in monitoring would be undertaken as part of the Protocol Agreement addressed by NCR 01/13. This Criterion is met.

8.2 Yes As reported in the 2009 assessment and previous annual audit reports, Canfor undertakes very extensive monitoring and is fully in conformance with the Indicators of this Criterion. Monitoring

FM-06 19 April 2012 of 45

includes volumes harvested each year by licence and tracked against long-term sustainable harvest levels, growth and yield, regeneration, forest health, changes in flora and fauna and habitat conditions, wildlife utilization of harvest areas, HCVF effectiveness monitoring, as well as environmental and social impacts and cost and efficiency of production. The environmental monitoring includes hydrological monitoring and sediment source monitoring and monitoring equivalent clearcut areas. There is also monitoring of safety performance. Canfor recently completed the annual 2013 Sustainability report, which assesses performance to meet the targets set out in the 2005-2010 SFMP for environmental and socio economic objectives. This Criterion continues to be met.

8.3 Yes As documented in Appendix V, Canfor has procedures for Chain of Custody. The most recent version of the Documented Control system was revised in August 2013. The BC provincial government requires that all truckloads of logs, and chips, are clearly marked so that the cutblock of origin and the legal cutting permit number can be determined. All wood moving from the certified forest area is tracked within this system using these procedures. This Criterion continues to be met.

8.4 Yes The Sustainable Forest management Plan is currently under revision. Those revisions are incorporating results from various monitoring program, and changes to both the management requirements and the monitoring programs are being made. This Criterion continues to be met.

8.5 Yes A regular summary of monitoring results is compiled in the Sustainability Report. The most recent version of the Sustainability Report was completed in 2013 and is available on the Canfor website, or on request, as required by Indicator 8.5.1. To date no public notice about its availability has been made, but this is not a non-conformance with the standard. This Criterion continues to be met.

Principle 9. MAINTENANCE OF HIGH CONSERVATION VALUE FORESTS 9.1 Yes There has been no change in Canfor’s work to meet this Criterion

since the last assessment. Canfor has all their HCVF assessment, both biological and cultural values completed, management strategies documented, HCVFs mapped and digitally available for planning purposes. HCVF reports are publically available (9.1.1-9.1.5). Canfor is currently reviewing these and their associated management strategies with a broad, multi-stakeholder team (9.1.7). Canfor annually monitors HCVFs for harvest incursion and roads (9.1.6). 2012 harvest blocks have been accounted but roads information has been delayed. HCVFs are recognized in both stand and landscape planning and this was confirmed in field reviews.

FM-06 19 April 2012 of 45


9.2 Yes There has been no change in Canfor’s work to meet this Criterion

since the last assessment. Consultation for the current review involves a broad cross-section of stakeholders and qualified experts (9.2.1). First Nation consultation has been completed in a separate process. Ktunaxa Nation is satisfied with the outcomes of the Cultural Conservation Value Forest (CCVF) assessments. This Criterion continues to be met.

9.3 Yes There has been no change in Canfor’s work to meet this Criterion since the last assessment. HCVFs have been included in the SFMP and accounted for in Timber Supply analyses (9.3.1). HCVF management strategies are in place, are being implemented and appear precautionary with a high probability of securing long-term maintenance and restoration (9.3.2). This Criterion continues to be met.

9.4 Yes There has been no change in Canfor’s work to meet this Criterion since the last audit. Canfor’s HCVF effectiveness monitoring program is exemplary (9.4.1). Canfor ensures that the monitoring is directly related to the conservation objectives. The annual assessments cover 35 different indicators for 30 high conservation value attributes. Canfor also makes good use of external monitoring and partnering with outside organizations (eg. FREP, Wildsight) to meet this Criterion. Canfor’s HCVF monitoring program can alert forest managers (Neville/Baird) of changes in status of forest values. Corporate structure provides for adaptive management feedback where conservation values are determined to be at risk (9.4.2-9.4.3). This Criterion continues to be met.

APPENDIX V: Chain-of-Custody Conformance (confidential)

Note: This CoC Appendix is used for FMEs only selling standing timber, stumpage, logs, chips and/or non-timber forest products (NTFPs) produced within a FMU covered by the scope of the certificate. FME certificate scopes that include primary or secondary processing facilities shall include an evaluation against the full FSC CoC standard: FSC-STD-40-004. Refer to that separate report Appendix.

Note: From the time of the 2012 Annual Audit, Canfor’s CoC systems were the same as reported in the 2012 Annual Audit report and therefore were in full conformance with the CoC Standard. The table below therefore provides information on Canfor’s CoC system. Definition of Forest Gate: (check all that apply)

Standing Tree/Stump: FME sells standing timber via stumpage sales. The Log Landing: FME sells wood from the landing/yarding area. On-site Concentration Yard: Transfer of ownership occurs at a concentration yard under the control of the FME.

Off-site Mill/Log Yard: Transfer of ownership occurs when offloaded at purchaser’s facility. Other: explanation

Comments: Canfor transports virtually all wood from its operating areas to either the Canfor sawmills in Canal Flats, Radium or the sawmill at Elko. A small volume of logs and chips are presently being transported directly to a site located near the Skookumchuck pulp mill for chipping or grinding. The mills are where wood is scaled and ownership transfers. These four sites receive and scale almost all of the wood from the certified forest. A small amount of wood is sold to other non-Canfor purchasers in round log form. Most of this wood is also delivered first to the Canfor mills for scaling, but occasionally loads of logs are delivered direct to those purchasers and are scaled at their designated scale sites. Scope Definition of CoC Certificate: Does the FME further process material before transfer at forest gate? (If yes then processing must be evaluated to full CoC checklist for CoC standard FSC-STD-40-004 v2.) Note: This does not apply to on-site production of chips/biomass from wood harvested from the evaluated forest area.

Yes No

Comments: Chips are produced on site, but for the purposes of this indicator, there is no “further processing”. Is the FME a large scale operation (>10,000 hectares) or a Group Certificate? (If yes then CoC procedures for all relevant CoC criteria shall be documented.)

Yes No

Comments: Canfor is a large operation. It is not a group certificate. Does non-FSC certified material enter the scope of this certificate prior to the forest gate, resulting in a risk of contamination with wood from the evaluated forest area (e.g. FME owns/manages both FSC certified and non-FSC certified FMUs)?

Yes No

FM-06 19 April 2012 of 45

Comments: No non-certified wood enters the scope of the certificate prior to the forest gates. Canfor does have non-FSC certified forests but these all have different timber marks and cutting permit numbers, which identify them as non-certified at the mill. The wood is not mixed prior to the forest gate. The provincial regulations and Canfor’s internal tracking systems ensure that this non-certified wood does not enter the scope of this certificate. There are also other licensees on Canfor’s operating areas (i.e. NRFLs held by First Nations). This wood is also certified, and carries separate timber marks which again can be clearly identified as coming from the certified forest. There is no risk of contamination. Wood from the non-certified forests arrives at the same forest gates but has different timber marks. Does FME outsource handling or processing of FSC certified material to subcontractors (i.e. milling or concentration yards) prior to transfer of ownership at the forest gate? (If yes a finding is required for criterion CoC 7 below.)

Yes No

Comments: All log handling and log transport operations are conducted by contractors and sub-contractors associated with Canfor. No logs are milled prior to transfer of ownership. In the case of some chips, on-site chippers are subcontracted to chip material prior to delivery to the pulp mill. These subcontractors are included under the scope of the Canfor’s FM/COC certificate as per SmartWood document CoC-12 (August 8, 2013). This practice of on-site chipping was discontinued. Does FME purchase certified wood from other FSC certificate holders and plan to sell that material as FSC certified? (If yes then a separate CoC certificate is required that includes a full evaluation of the operation against FSC-STD-40-004 v2.)

Yes No

Comments: Canfor does not purchase and sell non-certified wood under the scope of this FM/COC certificate. This is addressed in CoC certificates associated with the mills. Does FME use FSC and/or Rainforest Alliance trademarks for promotion or product labeling? (If FME does not or has no plans to use FSC/RA trademarks delete trademark criteria checklist below.)

Yes No

Comments: Canfor does not presently use FSC or Rainforest trademarks for promotion of product labeling of the logs and chips covered by this FM/CoC certificate. In the past, the FSC logo had been used by Tembec with approval on specific products from their mills under the CoC certificates. However, products are no longer being stamped with the FSC logo. Annual Sales Information Total Sales/ Turnover $141,834,267 CDN$

Volume of certified product sold as FSC certified (i.e. FSC claim on sales documentation) (previous calendar year)

1, 002,000 m3

Value of certified product sold as FSC certified (i.e. FSC claim on sales documentation) (previous calendar year)

$557,308 US$

Chain-of-Custody Criteria [FM-35 SmartWood Chain-of-Custody Standard for Forest Management Enterprises (FMEs)] 1. Quality Management

COC 1.1: FME shall define the personnel/position(s) responsible for implementing the CoC control system. Yes No

FM-06 19 April 2012 of 45

Findings: Canfor’s FSC Chain of Custody Documented Control System (Dated August 8, 2013) identifies the positions responsible for the CoC aspect of the FM certification in section 2.1. Canfor’s Sawmill FSC Multi-site CoC Coordinator is accountable for all FSC certified sites in the Kootenay region. At the site level, the CoC Site Coordinator is responsible. COC 1.2: All relevant staff shall demonstrate awareness of the FME’s procedures and competence in implementing the FME’s CoC control system. Yes No

Findings: Canfor staff are familiar with the requirements for the FM chain of custody. These are relatively simple because procedures follow BC timber marking and log transport requirements. Procedures are thoroughly described in the DCS (dated August 8, 2013). Training requirements are also included in the DCS, section 2.4. CoC 1.3: FME procedures/work instructions shall provide effective control of FSC certified forest products from standing timber until ownership is transferred at the forest gate. Note: For large scale operations (>10,000ha) and Group Managers, CoC procedures covering all relevant CoC criteria shall be documented. Including: a) Procedures for physical segregation and identification of FSC certified from non-FSC certified material. (If applicable) b) Procedures to ensure that non-FSC certified material is not represented as FSC certified on sales and shipping documentation. (If applicable) c) Procedures to include FME FSC certificate registration code and FSC claim (FSC Pure) on all sales and shipping documentation for sales of FSC certified products. d) Recordkeeping procedures to ensure that all applicable records related to the production and sales of FSC certified products (e.g. harvest summaries, sales summaries, invoices, bills of lading) are maintained for a minimum of 5 years. e) Procedures to ensure compliance with all applicable FSC/Rainforest Alliance/SmartWood trademark use requirements.

Yes No

Findings: Canfor provided a documented control system (DCS, dated March 5, 2010) that describes the chain-of-custody procedures for the flow of wood from the forest to the forest gate (sawmills and pulp mill) in detail. These procedures are consistent with the CoC procedures in place at the mill sites. The DCS describes how wood logged in the Canfor certified forests is tracked from logging phase, through log transport to the log scale location. Procedures at each step are described. Regarding the requirements above: FSC FM certified and Controlled material come from separate forest units. They are not mixed prior to the forest gate. Mixing load sources does not occur. Each source is separately identified and tracked in Canfor’s Logs Production Module database and is identifiable through stamp-hammer marks and/or spray-painted timber marks.

N/A: Ownership does not change until the wood product is scaled at the forest gate. Every load is individually tracked through a well documented, monitored and audited system which contain information about the forest, the cutblock of origin (including approval date and number) and a geographical reference for the cut block. A Load Description Slip (LDS) accompanies each log of logs or chips until they are delivered to a scale at one of the sites where ownership transfers.

FM-06 19 April 2012 of 45

Since the Load Description Slips are official documents (non-FSC certified organization), these documents do not include the FSC claim and the certification code. However, the LDS include information about the forest, the cutblock of origin (including approval date and number) as a means to identify the FSC-certified FMU. In addition, all wood coming from Canfor’s operating areas within the certified forest is FSC Pure, so there can be no confusion regarding the FSC claim of the wood. Record keeping procedures are established. These are thoroughly described in the DCS (dated August 8, 2013) in Sections 2.6, 2.7 and 3.2.1b. Canfor does not apply on-product labels to the products (logs and chips) covered by this FM/CoC certificate. Procedures for the promotional use of the FSC and RA trademarks are described in the corporate office FSC trademarks use documented control system (dated August 8, 2013) and referenced in the CoC DCS.

2. Certified Material Handling and Segregation

COC 2.1: FME shall have a CoC control system in place to prevent the mixing of non-FSC certified materials with FSC certified forest products from the evaluated forest area, including: a) Physical segregation and identification of FSC certified from non-FSC certified material. b) A system to ensure that non-FSC certified material is not represented as FSC certified on sales and shipping

documentation. Note: If no outside wood is handled by FME within scope of certificate, mark as N/A.

Yes No N/A

Findings: FSC and non-FSC material are not physically segregated. However, their identity is tracked in Canfor’s Logs Production Module database and is identifiable through stamp-hammer marks and/or spray-painted timber marks and therefore mixing load sources does not occur.

CoC 2.2: FME shall identify the sales system(s) or “Forest Gate”, for each FSC certified product covered by the Chain of Custody system: i.e. standing stock; sale from log yard in the forest; sale at the buyer’s gate; sale from a log concentration yard, etc.

Yes No

Findings: The ’Forest Gate’ for FSC certified logs and chips is the scales at Canfor’s three sawmill sites and the pulp mill chipper site. Occasionally, log scale occurs at other wood purchaser sites. These mills and sites are not within the forest and are not included in the scope of this FM/COC certificate. CoC 2.3: FME shall have a system that ensures that FME products are reliably identified as FSC certified (e.g. through documentation or marking system) at the forest gate.

Yes No

Findings: The timber marks and Load Description Slips that accompany each load of wood from the forest to the forest gate identify the forest of origin. All material coming from Canfor’s certified forest is FSC Pure. CoC 2.4: FME shall ensure that certified material is not mixed with non-FSC certified material at any stage, up to and including the sale of the material. Note: If no outside wood is handled by FME within scope of certificate, mark as N/A.

Yes No N/A

FM-06 19 April 2012 of 45

Findings: FSC and non-FSC material are not physically segregated. However, their identity is tracked in Canfor’s Logs Production Module database and is identifiable through stamp-hammer marks and/or spray-painted timber marks and therefore mixing load sources does not occur.

3. Certified Sales and Recordkeeping

COC 3.1: For material sold with FSC claim the FME shall include the following information on sales and shipping documentation: a) FME FSC certificate registration code, and b) FSC certified claim: FSC Pure

Yes No

Findings: Since the Load Description Slips are official documents (non-FSC certified organization), these documents do not include the FSC claim and Canfor’s certification code. However, the LDS include information about the forest, the cutblock of origin (including approval date and number) as a means to identify the FSC-certified forest. In addition, all wood coming from Canfor’s certified forest is FSC Pure, so there can be no confusion regarding the FSC claim of the wood. CoC 3.2: FME shall maintain certification production and sales related documents (e.g. harvest summaries, invoices, bills of lading) for a minimum of 5 years. Documents shall be kept in a central location and/or are easily available for inspection during audits.

Yes No

Findings: The production from Canfor’s certified forest area is tracked. This is required for payment of stumpage to the provincial government. The volume of wood sold to each non-Canfor purchaser is also tracked. Procedures for record keeping are described in the DCS (dated August 8, 2013) in Section 2.5, which also states that records will be kept for 5 years. All Tembec documents have been retained by Tembec, so Canfor only has CoC records starting at the time of their acquisition. However, Tembec continues to retain all CoC documents. CoC 3.3: FME shall compile an annual report on FSC certified sales for SmartWood containing monthly sales in terms of volume of each FSC certified product sold to each customer.

Yes No

Findings: Canfor can provide reports of production and the destinations of the production upon request. This is described in Section 2.5 of the DCS. 4. Outsourcing

CoC 4.1: FME control system shall ensure that CoC procedures are followed at subcontracted facilities for outsourcing and FME shall collect signed outsourcing agreements covering all applicable FSC outsourcing requirements per FSC--40-004 v-2.0 FSC Standard for Chain of Custody November 2007. Note 1: If FME outsources processing or handling of FSC certified material the outsourcing report appendix is required. Note 2: Check N/A If FME does not outsource processing or handling of FSC material.

Yes No N/A

Findings: There is no outsourcing.

FM-06 19 April 2012 of 45

5. FSC/Rainforest Alliance Trademark (TMK) Use Criteria Standard Requirement: The following section summarizes the FME’s compliance with FSC and Rainforest Alliance trademark requirements. Trademarks include the Forest Stewardship Council and Rainforest Alliance/SmartWood names, acronyms (FSC), logos, labels, and seals. This checklist is directly based on the FSC labeling standard (FSC-STD-40-201 FSC on-product labeling requirements (version 2.0) and FSC-TMK-50-201 V1-0 FSC Requirements for the Promotional Use of the FSC Trademarks by FSC Certificate Holders. References to the specific FSC document and requirement numbers are included in parenthesis at the end of each requirement. (Rainforest Alliance Certified Seal = RAC seal). General COC 5.1: FME shall have procedures in place that ensure all on-product and off product FSC/Rainforest Alliance trademark use follows the applicable policies.

Yes No

Findings: Canfor’s FSC Chain of Custody - FSC Trademarks use documented control system (Version 1.0; March 29, 2012) defines who is responsible for using FSC trademarks, and clearly outlines the requirements for on-product labeling and promotional use of FSC and RA trademarks. The audit team verified that Canfor is not labeling any of their products from their mills, nor are they using the promotional label or RAC seal. There have been only two uses of the FSC/Rainforest Alliance/SmartWood logos during the life of the certificate. Previous audit teams verified that Tembec obtained permission for use of the FSC logo on the two signs in TFL 14. COC 5.2: FME shall have procedures in place and demonstrate submission of all FSC/Rainforest Alliance/SmartWood claims to SmartWood for review and approval prior to use, including:

a) On-product use of the FSC label/RAC seal; b) Promotional (off-product) claims that include the FSC trademarks (“Forest Stewardship Council”, “FSC”,

checkmark tree logo) and/or the Rainforest Alliance/SmartWood trademarks (names and seal)(50-201,2.3).

Yes No

Findings: Canfor’s FSC Chain of Custody - FSC Trademarks use documented control system (Version 1.0; March 29, 2012) clearly outlines the requirements for on-product labeling and promotional use of FSC and RA trademarks as well as the requirement for all trademark use to be submitted and approved by Rainforest Alliance. The audit team verified that Canfor is not labeling any of their products from their mills, nor are they using the promotional label or RAC seal. There have been only two uses of the FSC/Rainforest Alliance/SmartWood logos during the life of the certificate. Previous audit teams verified that Tembec obtained permission for use of the FSC logo on the two signs in TFL 14. COC 5.3: FME shall have procedures in place and demonstrates that all trademark review and approval correspondence with SmartWood is kept on file for a minimum of 5 years (40-201, 1.10; 50-201, 2.4): Yes No

Findings: Canfor’s FSC Chain of Custody - FSC Trademarks use documented control system (Version 1.0; March 29, 2012) requires in Section IV that all trademark review and approval correspondence is kept on file for five years.

FM-06 19 April 2012 of 45

Off-product / Promotional

Check if section not applicable (FME does not, and does not plan to use the FSC trademarks off-product or in promotional pieces) Note: promotional use items include advertisements, brochures, web pages, catalogues, press releases, tradeshow booths, stationary templates, corporate promotional items (e.g., t-shirts, cups, hats, gifts). When applicable to the FME’s promotional/off-product use of the trademarks, the criteria below shall be met: Yes No Findings: The audit team verified that Canfor has not, and does not plan to, use the labels for promotional purposes. COC 5.4: If the FSC trademarks are used for promotion of FMUs, FME shall limit promotion to FMUs covered by the scope of the certificate.

COC 5.5: In cases that the Rainforest Alliance trademarks are used (50-201, 13.1, 13.2): a) The FSC trademarks shall not be at a disadvantage (e.g., smaller size); b) The FSC checkmark tree logo shall be included when the RAC seal is in place. COC 5.6: In cases that the FSC trademarks are used with the trademarks (logos, names, and identifying marks) of other forestry verification schemes (SFI, PEFC, etc.), SmartWood approval shall be in place (50-201, 3.0). COC 5.7: Use of the FSC trademarks in promotion of the FME’s FSC certification shall not imply certain aspects are included which are outside the scope of the certificate (50-201, 1.6). COC 5.8: Use of the FSC trademarks on stationery templates (including letterhead, business cards, envelopes, invoices, paper pads) shall be approved by SmartWood to ensure correct usage (50-201, 12.0). COC 5.9: In cases that the FSC trademarks are used as part of a product name, domain name, and/or FME name, SmartWood approval shall be in place (50-201, 9.0, 10.0). On-product

Check if section not applicable (FME does not, and does not plan to apply FSC labels on product) COC 5.10: FME shall have a secure system in place for labeling products that ensures the following (40-201, 1.2): a) Only those products originating from forests covered by the scope of a valid FSC certificate are FSC-labeled; b) Only those products that meet the eligibility requirements per CoC standard requirements for FSC-labeling are FSC-

labeled; c) Only the FSC Pure label is used.

Yes No

Findings: The audit team verified that Canfor has not, and does not plan to, use the labels for on-product purposes. When applicable to the FME’s on-product labeling, the criteria below shall be met: Yes No Findings: COC 5.11: FME shall not use the FSC labels together with the logos or names of other forestry verification schemes (40-201, 1.11, 1.13).

COC 5.12: FME shall not use the FSC labels together with claims referring to the sustainability of the forest from which the wood is sourced (40-201, 1.11, 1.13). COC 5.13: The FSC label shall be applied to products in such a way that it is clearly visible (40-201, 1.14).

FM-06 19 April 2012 of 45

APPENDIX VI: Rainforest Alliance Database Update Form

Instructions: For each FSC certificate, Rainforest Alliance is required to upload important summary information about each certificate to the FSC database (FSC-Info). During each annual audit RA auditors should work with the certificate holder to verify that the information posted on FSC-Info is up to date as follows: 1. Print out current Fact Sheet prior to audit from FSC-Info website or direct link to fact sheets (http://www.fsc-info.org) 2. Review information with the FME to verify all fields are accurate. 3. If changes are required (corrections, additions or deletions), note only the changes to the database information in the section below. 4. The changes identified to this form will be used by the RA office to update the FSC database. Is the FSC database accurate and up-to-date? YES NO

(if yes, leave section below blank) Client Information (contact info for FSC website listings) Organization name Canadian Forest Products Ltd. Primary Contact Chris Stagg, RPF Title Chief Forester Primary Address 5162 Northwood Pulp Mill Road Telephone 250-962-3414 Address Prince George, BC V2L 4W2 Fax 250-962-3473 Email [email protected] Webpage www.canfor.com Forests Change to Group Certificate

Yes No Change in # of parcels in group

total members

Total certified area Hectares (or) Acres

Species (note if item to be added or deleted) Scientific name Common name Add/Delete Products

FM-06 19 April 2012 of 45

FSC Product categories added to the FM/CoC scope (FSC-STD-40-004a) Level 1 Level 2 Species

Canadian Forest Products Ltd.

Documents

Transcript of Canadian Forest Products Ltd.