KPMG Forest Certification Services Inc. Telephone (604) 691-3000 Box 10426, 777 Dunsmuir Street Fax (604) 691-3031 Vancouver BC V7Y 1K3 www.kpmg.ca

April 15, 2019

Stakeholder Consultation

KPMG Forest Certification Services Inc. (KPMG FCSI) to conduct a Forest Stewardship Council® (FSC) Chain and Custody/Controlled Wood Re-certification Audit of Howe Sound Pulp & Paper Corp.

Purpose and scope of the audit

KPMG Forest Certification Services Inc. (KPMG FCSI) will be conducting a certification audit of Howe Sound Pulp & Paper Corporation (HSPP) against the requirements of the current Forest Stewardship Council® (FSC) chain of custody (CoC) and controlled wood (CW) standards. A stakeholder consultation process is planned for the spring of 2019, with the main assessment tentatively scheduled to occur May 27-31. The supply area for HSPP covers (see map in the company’s Due Diligence System Summary document), , and Oregon. The audit will be based on the current FSC Chain of Custody (FSC-STD-40-004 V3-0) and Controlled Wood (FSC-STD-40-005 V3-1) standards. This letter serves as an invitation to interested and affected stakeholders who wish to provide comments that are pertinent to HSPP’s FSC CoC/CW certification. The comments received will be considered by KPMG FCSI in reaching its conclusions regarding HSPP’s conformance with the applicable FSC CoC and CW standards.

About FSC and the CoC and CW standards The FSC is an international non-profit organization founded in 1993 to support environmentally appropriate, socially beneficial, and economically viable management of the world's forests. It supports the development of national and regional standards to be used to evaluate whether a forest is being well-managed. It is an association of members consisting of a diverse group of representatives from environmental and social organizations, forest and product industries, Indigenous People's organizations, community forestry groups and certification bodies from around the world. Membership is open to all who are involved in forestry or forest products and share its aims and objectives. April 15, 2019 Page 2

FSC, with its head office in the city of Bonn, Germany, is governed by an elected Board which consists of people from industry, environmental, social and labor groups, Indigenous People's representatives and others.

Your role We would appreciate your comments on issues that are pertinent to HSPP’s FSC CoC/CW certification. Such comments may include, but are not necessarily limited to, concerns or observations regarding the Company’s due diligence system (i.e., the system of measures and procedures developed by the organization to minimize the risk of sourcing material from unacceptable sources), one component of which is the company risk assessment (which FSC has decided may continue to be used until an approved national risk assessment for Canada is in place). Comments received will be considered by KPMG FCSI in assessing HSPP’s performance against the requirements of the applicable FSC CoC and CW standards. A summary of stakeholder comments will also be included in the HSPP FSC CoC/CW certification audit summary report. A questionnaire is provided with this letter for your comments on issues that are pertinent to HSPP’s FSC CoC/CW certification. However, additional materials and other methods of communication will also be accepted. Upon request, arrangements may also be made to allow stakeholders to meet with members of the audit team during the on-site portion of the audit.

Access to information FSC requires that stakeholders be provided access to certain information as part of the consultation process, including:  A description of the supply area and respective risk designation. This information is included in the HSPP Due Diligence System (DDS) Summary document.  A written summary of the HSPP DDS. A copy of this document is available on KPMG FCSI’s website at https://home.kpmg.com/ca/en/home/services/audit/sustainability-services/forest- management-consultations.html  Copies of the applicable FSC CoC and CW standards. These can be obtained from FSC International at https://ic.fsc.org/en/document-center/id/80 and https://ic.fsc.org/en/document- center/id/170.  A copy of the current HSPP company risk assessments, which are included in the DDS document.  The procedure for filing complaints. A copy of KPMG FCSI’s dispute resolution procedures are available on KPMG FCSI’s website.  Contact information of the person or position responsible for addressing complaints. This can be obtained by visiting the KPMG FCSI website noted above. April 15, 2019 Page 3

KPMG FCSI Contact information All comments and requests for additional information should be directed to Yurgen Menninga by fax at 604-691-3031, or email [email protected].

Our commitments 1 The source of specific comments received will remain confidential unless the commenting party specifically indicates to the contrary. 2 We will respond to all stakeholders who provide comments and provide information on how their comments were taken into account. 3 A summary of stakeholder comments and how they were considered by KPMG FCSI will be included in the HSPP FSC CoC/CW certification audit summary report.

Yours very truly,

Yurgen Menninga Manager 604-691-3368

April 15, 2019 Page 4

Stakeholder Questionnaire – 2019 Howe Sound Pulp & Paper FSC® Chain of Custody/Controlled Wood Certification Audit

To: Yurgen Menninga, KPMG FCSI Fax #: 604-691-3031 [email protected] From: Phone #: ______

Organization (if applicable):

KPMG Forest Certification Services Inc. (KPMG FCSI) will be conducting a re-certification audit of Howe Sound Pulp & Paper Corp. (HSPP), against the requirements of the current Forest Stewardship Council® (FSC) chain of custody (CoC) and controlled wood (CW) standards. A stakeholder consultation process is planned for the spring of 2019, with the main assessment tentatively scheduled to occur May 27-31. This questionnaire is intended to obtain information from interested and affected stakeholders regarding issues that are pertinent to HSPP’s FSC CoC/CW certification. Such comments may include, but are not necessarily limited to, concerns or observation’s regarding the Company’s due diligence system (i.e., the system of measures and procedures developed by the organization to minimize the risk of sourcing material from unacceptable sources), one component of which is the company risk assessment. Comments received will be considered by KPMG FCSI in assessing HSPP’s performance against the requirements of the applicable FSC CoC and CW standards. A summary of stakeholder comments will also be included in the HSPP FSC certification report, however, the identity of individuals/organizations providing comments will be kept confidential by KPMG FCSI unless the party providing comments specifically indicates in writing to the contrary.

NB: In order to be considered during the 2019 audit, comments must be received no later than May 29, 2019.

April 15, 2019 Page 5

1. Do you have any specific concerns regarding the HSPP due diligence system YES/NO/ (DDS), company risk assessment or other issues that are pertinent to the NA Company’s FSC CoC/CW certification?

Comments:

2. If you answered yes to question 1 above, have you communicated your YES/NO/ concerns to HSPP? NA

Comments: April 15, 2019 Page 6

3. If you answered yes to question 2 above, in your opinion, has HSPP made a YES/NO/ reasonable attempt to address your specific concerns? NA Comments:

4. Do you have any other concerns regarding HSPP’s FSC CoC/CW certification YES/NO/ that have not been addressed in the above questions? NA Comments: April 15, 2019 Page 7

5. Are there any specific issues or requirements of the FSC CoC or CW standard YES/NO/ (FSC-STD-40-004 V3-0 and FSC-STD-40-005 V3-1) that you believe merit NA special attention during the 2019 HSPP FSC CoC/CW audit?

Comments:

FSC® Controlled Wood Due Diligence System Summary

Version 1.1 – April 10 2019

Introduction

Howe Sound Pulp and Paper Corporation (HSPP) is a Kraft pulp producer with a mill located on Howe Sound at Port Mellon, British Columbia, Canada.

HSPP is seeking to become Forest Stewardship Council® (FSC) Chain of Custody (CoC) and Controlled Wood (CW) certified in accordance with FSC Standards. HSPP is implementing a ‘due diligence system’ (DDS) to minimize the risk of sourcing unacceptable materials. FSC defines unacceptable sources as fibre originating from: 1. Illegally harvested wood; 2. Wood harvested in violation of traditional and human rights; 3. Wood harvested in forests in which high conservation values (HCVs) are threatened by management activities; 4. Wood harvested in forests being converted to plantations or non-forest use; 5. Wood from forests in which genetically modified trees are planted.

HSPP has conducted a Controlled Wood Risk Assessment (CWRA) to assess the risk of sourcing materials unacceptable to FSC and the HSPP CWRA is publicly available. The DDS and CWRA apply to all logs, chips or other materials sourced by HSPP from British Columbia Canada and the USA States of Washington and Oregon with the exception of fibre sourced from organisations with an FSC CoC/CW certificate and materials sourced as FSC ‘reclaimed wood’ (e.g. reclamation of used boom sticks).

The following FSC Standards and the ‘applicable FSC risk assessments’ were used: • ‘Requirements for Sourcing FSC Controlled Wood’ FSC-STD-40-005 V3-1. (https://ic.fsc.org/en/document-center/id/170) (FSC CW Standard) • Canada National Risk Assessment Draft 2 (CAN-NRA-D2) (FSC-NRA-CAN V1-0 DRAFT) – October 15 2018. (https://ca.fsc.org/en-ca/standards/national-risk-assessment-01) • USA National Risk Assessment Draft 3 (USA-NRA-D3) (FSC-NRA-USA V1-0). (https://us.fsc.org/en-us/certification/controlled-wood/fsc-us-controlled-wood-national-risk- assessment-us-nra)

The FSC NRA process identifies specified risk for forest values of concern as well as low risk areas, however, the published assessments do not reflect the actual conservation values that are relevant to HSPP based on their actual supply. The HSPP CWRA is a publicly available document that reconciles the actual HSPP supply to the relevant NRA values. This is a ‘Company risk assessment’ according to the FSC Controlled Wood (CW) Standard. In the event that the HSPP Company risk assessment expires on June 30 2019 then the HSPP CWRA meets the requirements of the ‘Extended company risk assessment’ as per the FSC CW Standard.

The HSPPC Due Diligence System (DDS) is established, implemented and maintained by HSPP and applies to materials supplied without an FSC claim as ‘controlled material’ and products can be sold with a ‘FSC Controlled Wood’ claim and these terms are defined by the FSC CW Standard. The HSPP DDS includes measures and procedures (i.e. CWRA, internal audit and system controls) to minimize the risk of sourcing unacceptable fibre.

There are 5 FSC controlled wood categories of unacceptable sources: 1. Illegally harvested wood;

1 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

2. Wood harvested in violation of traditional and human rights; 3. Wood from forests in which high conservation values are threatened by management activities; 4. Wood from forests being converted to plantations or non-forest use; and 5. Wood from forests in which genetically modified trees are planted.

Description of the Supply Area

HSPP does not have its own wood supply and all fibre sourcing is achieved on the open market. Sourcing includes: • HSPP purchases fibre as sawmill by-product chips under contract arrangements. • HSPP also purchases logs and makes arrangements to have the logs chipped. • The CWRA and DDS apply to both the chip and log supply tracks. • 95% of supply comes from forests certified to a certification scheme including SFI, CSA and FSC forest certification schemes. • 95% of supply is sourced from publicly owned tenured forest lands primarily from the Coast of BC but also the Interior of BC, and from the states of Washington and Oregon. • The primary transportation system for logs and chips is by road and then transfer to marine barge to HSPP.

Map 1 shows the HSPP supply areas. Washington (low risk) and Oregon (low risk) States are also supply areas not shown on the map.

2 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

Map 1. HSPP BC supply areas and HSPP risk conclusions

Risk Conclusions The publicly available HSPP FSC Controlled Wood Risk Assessment provides the data and analysis supporting the risk conclusions presented here. Table 1 provides a summary of HSPP risk conclusions for all HSPP supply areas.

Table 1. HSPP supply area risk summary Supply Area CW Risk Category 1 Illegal 2 Human 3. High conservation values 4. Forest conversion 5. harvesting rights GMOs BC supply A. Sunshine Coast and LOW LOW Specified risk for some HCVs and CMs are LOW LOW Vancouver Island – High applied - See Map 1 and Table 2. volume supply B. Fraser Valley and Merritt – LOW LOW LOW for all other HCVs LOW LOW High volume supply C. North Coast Kitimat – Low LOW LOW Specified risk for some HCVs - See Map 1 LOW LOW volume supply and Table 2. HSPP LOW risk conclusion D. BC Low volume supply LOW LOW considering HSPP supply volumes LOW LOW E. BC Negligible volume supply LOW LOW LOW LOW USA supply D. Low volume supply LOW LOW HSPP LOW risk conclusion considering Counties with specified risk LOW Washington State HSPP supply volumes - See Table 2 and for conversion E. Negligible volume supply LOW LOW Maps 2 and 3. LOW Oregon State LOW for all other HCVs LOW risk in other Counties

3 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

HSPP has acknowledged all instances of ‘specified risk’ (i.e. defined by FSC as a risk of sourcing unacceptable materials from a defined geographic area) as recommended by the Canada draft National Risk Assessment and USA draft National Risk Assessment. The values of concern are primarily relative to FSC risk category 3 (high conservation values – HCV) as summarized in Table 2. Not acknowledged in Table 2 is the USA draft NRA conclusion of specified risk for risk category 4 (forest conversion) relative to specified USA Counties which occur in HSPP low and negligible volume supply areas of Washington and Oregon States.

Table 2. HSPP risk category 3 (HCV) specified risk summary

Supply Canada NRA D2 OR USA NRA D3 HSPP HSPP risk assessment conclusion Area HCV1 – SAR HCV2 – IFL specified risk Risk Result supply specified risk volume A. Sunshine Goshawk and IFL 169 in the BC mainland Specified risk High HSPP specified risk conclusion at HCV1 Coast and murrelet in the coastal forest at HCV1 and volume regarding 2 SAR (goshawk and murrelet) and Vancouver Central Pacific HCV 2 supply HCV2 (IFL 169). HSPP CM measures are Island coastal forest requiring CMs applied. Caribou habitat to mitigate The HCV1 value of caribou has been assessed overlap to BC at the HSPP supply level with a low risk mainland coastal conclusion. HSPP does not apply CMs. forest B. Fraser Salamander, IFL 131 overlaps the BC Specified risk HSPP specified risk conclusion at HCV1 for 3 Valley and shrew and frog in mainland coastal forest and the at HCV1 and SAR (salamander, shrew and frog). HSPP CM Merritt the Puget mountain leeward HCV 2 are applied. lowlands forest forest requiring CMs The HCV2 value of IFL 131 has been assessed ecoregion to mitigate considering the HSPP supply with a low risk. C. North Caribou in the BC IFLs 196, 206, 213, 223, 225, Specified risk Low HSPP low risk conclusion at HCV2 for 6 IFLs. Coast mainland coastal 238 in the BC mainland coastal at HCV1 and volume The HCV1 value of SAR caribou has been Kitimat forest ecoregion forest ecoregion HCV2 supply assessed at the HSPP supply level with a LOW requiring CMs risk conclusion. HSPP does not apply CMs. to mitigate While CMs are not applied additional activities including supply mapping, education and consultation are implemented. D. BC Low Caribou in the IFLs 131, 134, 169 in the BC Specified risk HSPP low risk conclusion at HCV 1 and HCV2. volume Fraser Plateau mainland coastal forest and at HCV1 and While CMs are not applied additional activities supply and Basin Cascade mountains leeward HCV2 including supply mapping, education and Complex forests and Fraser plateau and requiring CMs consultation are implemented. ecoregions basin complex ecoregions to mitigate D. Old growth NA Specified risk HSPP low risk conclusion at HCV 1. Washington forests are at HCV1 While CMs are not applied additional activities State low specified risks requiring CMs including supply mapping, education and volume to mitigate consultation are implemented. supply E. BC Goshawk and IFLs 201, 202 in the QCI Specified risk Neg- HSPP low risk conclusion at HCV2. Negligible murrelet in the ecoregion AND IFLs 223, 238, at HCV 1 and ligible While CMs are not applied additional activities volume Central Pacific 274 in the BC mainland coastal HCV2 volume including supply mapping, education and supply coastal forest forest ecoregion requiring CMs supply consultation are implemented. ecoregion to mitigate E. Oregon* HCV1 OG Forests NA Specified risk HSPP low risk conclusion at HCV1. State & Klamath- at HCV1 While CMs are not applied additional activities negligible Siskiyou critical requiring CMs including supply mapping, education and volume biodiversity area to mitigate consultation are implemented. supply * Oregon State supply is from one FSC CW-certified operation, therefore on a conservative basis the Oregon USA supply is deemed negligible risk.

4 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

Control Measures and Discussion

Table 3 identifies the draft NRA CMs and the CMs being implemented by HSPP at this time.

The basis of the HSPP CWRA and DDS is the HSPP supply assessment generating a 5-year rolling average annual supply by Timber Supply Area (TSA) in BC. While the 2017 assessment reflects USA supply to the State level, the 2018 HSPP supply assessment will consider supply to the County level. HSPP considers tracking supply to the TSA/County levels as appropriate since forest management planning and stakeholder consultations are commonly already organised at such scales. By using average annual supply data HSPP avoids annual supply variability while still acknowledging supply trends. HSPP is seeking to avoid the complication of supply jurisdictions annually popping in and out of the supply area where HSPP must stop and start conservation activities and potentially weaken relationships with forest managers and stakeholders through inconsistency.

The USA NRA process has been completed and instances of specified risk and the required control measures are known even if the NRA has not yet been approved by FSC International. However, the Canada NRA process is not completed and there is some uncertainty in the designation of specified risk values and associated mitigative control measures. As a result HSPP is implementing its FSC CWRA and DDS in two phases to allow HSPP to move forward building an effective FSC CoC and CW system in a climate of uncertainty. Once the Canada and USA NRAs have been approved by FSC International, as required by FSC Standards, HSPP must fully conform to such approved NRA results within six months.

The HSPP supply assessment identified the level of average annual sourcing by BC and USA jurisdiction. • Two high volume supply areas in BC represents approximately 81% of average annual HSPP supply. HSPP has accepted the instances of specified risk identified by the Canada draft NRA and any exceptions are noted. While HSPP has modified its recommended control measures at this time, HSPP anticipates full implementation of approved NRA mandatory control measures upon their finalization. • A number of BC and USA jurisdictions have been identified as low volume supply areas where each jurisdiction contributes 1-5% of annual HSPP fibre supply. At this time HSPP has reached a low risk conclusion for low volume supply areas. In the short term HSPP is applying actions such as education and consultation and is gathering information such as conducting detailed supply assessments. HSPP anticipates implementing the specified risk values and CMs as per the approved Canada and USA NRAs. • A number of BC and USA jurisdictions have been identified as negligible volume supply areas where each jurisdiction contributes <1% of average annual supply. HSPP has reached a low risk conclusion of sourcing unacceptable materials. Activities such as information gathering, education and consultation are proceeding. In the long term HSPP hopes to continue to exclude negligible volume supply areas from active FSC CW values management. It has been determined that the risk of sourcing from the jurisdiction is low and actually sourcing from an unacceptable source area within that negligible sourcing jurisdiction is even more unlikely.

HSPP does not manage forest land and HSPP currently does not interact at a significant level with forest managers or identify stakeholders for consultation. By implementing its DDS in a staged manner HSPP can concentrate on building its FSC CW system by implementing the CWRA and DDS first considering high volume supply areas.

5 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

Table 3 HSPP control measures summary HSPP Supply Risk NRA Proposed Mandatory CMs HSPP CM applied Area/TSAs HCV at risk A. Kingcome, Marbled Evidence demonstrates harvesting does not take place in critical A. 5 SAR in BC high volume jurisdictions Strathcona, N. Island, murrelet habitats for Specified Risk species identified. Pacific TSA overlap with Northern Objective: Prepare for full implementation of the relevant approved NRAs regarding Central Pacific coastal goshawk Experts confirm that the forests in the sourcing area have a forest 5 SAR in high volume supply jurisdictions. During phase 1 HSPP will identify and forest ecoregion management plan that details their contribution to the recovery map species at risk known occurrence and habitat relative to the HSPP wood supply (Vancouver Island) of the species at risk, consistent with the Federal Recovery and other conservation considerations (e.g. protected areas) to determine if the Strategy or approved Action Plan SAR is at risk due to HSPP fibre supplier’s forest management activities. Engage in B. Fraser and Merritt Oregon consultation activities, information gathering, conduct education and awareness TSAs and overlap with spotted frog activities and contact forest managers and experts. Puget Sound lowlands Coastal ecoregion Giant Activities that may be considered include: Salamander 1. Consultation activities Pacific • Summarize forest management legal requirements regarding these SAR species water shrew including federal, provincial and municipal governments. • From credible sources or experts summarize the conservation status relative to specific habitat values of concern regarding forest management considering private and public land ownership. • Information gathering and/or information exchange with forest managers at the planning and practices levels regarding conservation and values at risk. • Information gathering and exchange with stakeholders as per Annex B. • Contact industry, Provincial, Federal or other groups with similar conservation goals and assess the information available from established and credible sources. 2. Education and awareness activities • Make conservation information available to Forest Managers and stakeholders. • Make information on conservation status and planning and practices available. • Make information from experts available. 3. Use of experts • Identify experts as per FSC CW Standard Annex C. • Contact experts and communicate the HSPP CWRA. 4. The HSPP DDS Summary includes a summary of HSPP process and progress to the identification of experts confirming that forest management plans as required by CM.. Managers of private forests, interested and affected stakeholders, Managers of private land also participate in CMs 1-4 above. Indigenous Peoples, Species at Risk experts*, provincial 5. The HSPP DDS Summary includes a summary of HSPP process and progress and/federal representatives and Certificate Holders involved in regarding a regional meeting as required by the CM. the sourcing area participate in a regional meeting that result in agreed-upon actions related to regionally appropriate best practices. The agreed-upon actions related to regionally appropriate best practices are being implemented in the area.

6 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

HSPP Supply Risk NRA Proposed Mandatory CMs HSPP CM applied Area/TSAs HCV at risk IFL 169 Forest operations do not occur within IFLs. OR B. IFL 169 in BC high volume Kingcome TSA

Forest operations do not reduce IFLs below 50,000 ha, AND all Objective: Prepare for full implementation of the relevant approved NRAs regarding meet cumulative impact parameters as detailed in the CAN-NRA- one IFL in a high volume supply jurisdiction (i.e. Kingcome TSA). During phase 1 D2. HSPP will identify and map the IFL relative to the HSPP wood supply and other conservation considerations (e.g. protected areas) to determine if the IFL is at risk Evidence demonstrates that a minimum of 80% of the IFL is not due to HSPP fibre supplier’s forest management activities. Engage in consultation threatened by forest management operations in the long-term. activities, information gathering, conduct education and awareness activities and AND The cumulative impacts of forest harvesting will not reduce contact forest managers and experts. the IFL to below 50,000 ha. Activities that may be considered include: 1. Consultation activities • Information gathering and/or information exchange with forest managers at the planning and practices levels regarding conservation and IFL values at risk. • Information gathering and exchange with stakeholders as per FSC CW Standard at Annex B. • Contact industry, Provincial, Federal or other groups with similar conservation goals and assess the information available from established and credible sources. • Detailed GIS-based assessment of the IFL to confirm the boundaries and assess the landform to ensure the definitions of an IFL are met. 2. Education and awareness activities • Make conservation information available to Forest Managers and stakeholders. • Make information on conservation status and planning and practices available. C. Kalum TSA in the BC IFLs 196, As per IFL above During phase 1 Control Measures do not apply to LOW supply risk sources. mainland coastal forest 206, 213, 223, 225 and 238

D. Soo TSA and Williams 131, 134 Lake TSAs in the BC and 169 mainland coastal forest and Cascade Mountains leeward forests and Fraser Plateau and Basin complex

E. Kispiox TSA in the BC 223, 238, mainland coastal forest 274

7 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

HSPP Supply Risk NRA Proposed Mandatory CMs HSPP CM applied Area/TSAs HCV at risk E. Queen Charlotte TSA 201, 202 in the Queen Charlotte

E. Arrowsmith TSA in Marbled the Central Pacific murrelet coastal forest Ecoregion Northern (VI) goshawk D. Williams Lake TSAs in Caribou Evidence demonstrates that harvesting does not take place in During phase 1 Control Measures do not apply to LOW supply risk sources. In phase the Fraser Plateau and critical habitats 2 HSPP anticipates fully implementing finalized NRA results. Basin complex ecoregions D Washington State Old growth The Organization avoids sourcing from sites where the HCV that is During phase 1 Control Measures do not apply to LOW supply risk sources. E. Oregon State forests associated with the specified risk area occurs. OR E. Oregon State Klamath- Siskiyou A representative of the Organization attends FSC US-coordinated critical Controlled Wood Regional Meetings when they occur. AND For biodiversity each area of specified risk from which the Organization sources area materials, the Organization implements one or more of the actions identified during the collaborative dialogue at the Controlled Wood Regional Meeting, as detailed in the Controlled Wood Regional Meeting Report D Washington State Category 4 The Organization avoids sourcing from sites where natural or E. Oregon State forest semi-natural forest is being converted to non-forest or conversion plantations. OR

A representative of the Organization attends FSC US-coordinated Controlled Wood Regional Meetings when they occur. AND Actions identified must help to achieve a specified outcome.

8 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

Stakeholder Consultation

The HSPP stakeholder consultation was conducted in accordance with the FSC CW Standard at Annex B. Stakeholders were provided with the HSPP CWRA and DDS Summary both version 1.0 – January 7 2019. These documents both provided maps, tables with data and additional evidence and discussion describing the HSPP supply area.

A summary of the stakeholder groups invited to participate, and the results of the stakeholder consultation is provided as Appendix A to this DDS Summary. Highlights of the stakeholder consultation include: • 10 potential categories of stakeholders were identified from the FSC CW Standard: o Stakeholders were identified in 8 (80%) categories. o HSPP received responses from stakeholders in 5 (50%) categories. • A total of 487 stakeholders were on the HSPP stakeholder consultation list: o 412 (85%) were from Canada. o 75 (15%) were from the USA. o There was only a 2% rejection rate due to incorrect mailing address. • Responses were received from 29 parties which is a 6% return rate with 25 respondents completing a questionnaire. o 12 respondents provided comments (including questionnaire and email respondents), however, HSPP received permission to publish comments from only 4 respondents.

HSPP solicited for responses using a questionnaire and received 25 returned questionnaires and 4 additional comments from parties by email. Only response comments where the respondents consented to publication are included in this consultation summary. 1 a) Do you have any concerns with the HSPP approach of acknowledging all instances of specified risk from published draft risk assessments? o 100% of 25 questionnaire respondents had no concerns. o Comment: “The CWRA and Due Diligence process proposed by HSPP is appropriate and thorough.” 1 b) Do you have any concerns with the HSPP approach of using the draft national risk assessments to identify forest values with a low risk of sourcing by HSPP? o 100% of 25 questionnaire respondents had no concerns. o Comment: “ …low volume” supply areas are in Oregon and Washington, which have very limited HCV forests available on for private land, (due to past practices and/or regulations) and on Federal land the limitations on harvesting activities due to the National Forest Management Act (NFMA), National Environmental Policy Act (NEPA), the Endangered Species Act (ESA), the public scoping, public noticing of forest management plans and projects, AND the ability to litigate decisions makes activities on Public lands, particularly with regard to HCV forests, well considered and mitigated for.” 2 a) Do you have any concerns with the HSPP assessment approach considering ecoregions, BC Timber Supply Areas, or best management practices? o 96% of 25 questionnaire respondents had no concerns. o Comment: “No significant concerns with approach. However, two TSA’s mainly accessed by [the respondent] were not included (as far as I could tell). Cascadia TSA in the Kitimat low volume supply area and the Pacific TSA which supplies HSPP with fibre from numerous supply blocks along the coast in high and low volume supply areas.”

9 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

o Comment: “The HSPP approach appears to be a productive means of engaging in a process that already includes a great deal of input from resource professionals. The engagement of HSPP in that process will only strengthen the outcomes of those forest management projects.” 2 b) Do you have any concerns with the HSPP assessment approach considering actual supply and findings of high volume, low volume and negligible supply volume areas and that HSPP will consider negligible volume jurisdictions as low risk regardless of NRA specified risk and control measure findings? o 100% of 25 questionnaire respondents had no concerns. o Comment: “There are no Mountain Caribou populations or habitat concerns within the Nass, Kalum or Kispiox TSA’s.” o Comment: “At least for the USA the forest permitting process for private and public timber land is rigorous enough to prevent any significant adverse risks to the HCV forests with unspecified risk.” 2 c) Do you have any concerns with HSPP’s two-phase approach to implementing control measures? o 100% of 24 questionnaire respondents had no concerns. o Comment: “This seems like a reasonable approach, particularly since the CWRA scopes the potential risks in a thorough way.” 3. Is there any other aspect of the HSPP Controlled Wood Risk Assessment or Due Diligence system or HSPP FSC-certified or controlled material supply that is a concern? o 100% of 24 questionnaire respondents had no concerns. o Comment: “100% of [the respondent] volume is from Sustainable Forestry Initiative (SFI) certified operations. Primary license holders can provide documentation to confirm logs are from a certified operation. FSC and SFI have their challenges cooperating but the bottom line is the schemes protect for very similar values and the SFI certification should not be discounted.” 4. Was this questionnaire helpful as a tool for you or your organization to provide feedback? o 92% of 25 questionnaire respondents agreed that the questionnaire was helpful to provide feedback to HSPP. o Comment: “The FSC CW process is quite complicated and will be difficult for the average company that is not exposed to it or participating in it to understand.”

The stakeholder consultation was held for 6 weeks from February 7 2019 to March 20 2019. The FSC CW Standard requires HSPP to respond to all stakeholder participants and inform them of how their comments were considered. HSPP completed this procedure, including those respondents who did not give permission for their comments to be included in this report, and follow-up action plans have been prepared. HSPP has completed a stakeholder consultation report with all the backup data and information supporting this summary and the detailed report, including all comments received, is made available as evidence to the certification body.

Considering the stakeholder responses and comments HSPP concludes significant support for its CW system: • HSPP received clear and significant support for its FSC Controlled Wood Risk Assessment and Due Diligence Summary and HSPP’s CW system. • No concerns with the HSPP approach of acknowledging all NRA instances of 'specified risk'. HSPP has considered all instances of specified risk as determined by Canada and USA Draft NRAs.

10 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

• No concerns with HSPP approach to identify NRA low risk across all risk categories (i.e. with the exception of instances of specified risk). HSPP has adequately identified all instances of low risk. • HSPP CWRA has adequately considered ecoregions, TSAs and best management practices in its CWRA and DDS. Respondents support the HSPP CWRA. • HSPP's approach to implementing control measures in two phases was supported by all respondents. Stakeholders support HSPP control measures. • Respondents supported the use of the questionnaire as an effective tool for providing stakeholder comments.

HSPP has addressed all the stakeholder comments or issues and informed the stakeholders of how their comments were considered. The HSPP DDS Summary includes more information regarding the stakeholder consultation process and the results of the February 2019 stakeholder consultation completed by HSPP.

The stakeholder consultation has given HSPP a strong mandate to implement the CWRA and due diligence system across the HSPP supply area in order to avoid sourcing unacceptable fibre. The implementation of the HSPP CW system begins on April 10 2019. The HSPP CW system is ready to begin sourcing controlled material for sale as pulp with an FSC CW claim, once system certification has been achieved.

Experts

Once the Canada and USA National Risk Assessments are approved and fully in effect, HSPP will have to engage experts in accordance with the FSC CW Standard at Annex C. The FSC CW Standard requires HSPP to have an expert justify the adequacy of some control measures and some control measure actions require the participation of experts. The HSPP control measures described in Table 3 requires HSPP to begin the work of finding and engaging with experts.

HSPP Contact Information

The person representing HSPP for the handling of complaints is:

HSPP FSC Consultation Leader c/o ISO Metrix Inc. 610 -610 Granville Street Vancouver, BC, Canada, V6C 3J3 1-250-207-1977 [email protected]

Complaints Process Upon receiving concerns expressed by a stakeholder or complaints regarding the CWRA and results, DDS or FSC CW CoC system HSPP will:

1. Acknowledging receipt of complaints.

11 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

2. Informing stakeholders of the complaint procedure and providing an initial response to complainants within two (2) weeks. 3. Forwarding complaints related to risk designations in the relevant FSC risk assessment to the responsible body. (NOTE: When a complaint is forwarded to a responsible body steps 4-11 do not apply. 4. Conducting a preliminary assessment to determine whether evidence provided in a complaint is or is not substantial, by assessing the evidence provided against the risk of using material from unacceptable sources. 5. Dialogue with complainants that aims to solve complaints assessed as substantial before further actions are taken. 6. Forwarding substantial complaints to the certification body and relevant FSC National Office for the supply area within two (2) weeks of receipt of the complaint. Information on the steps to be taken by the organization in order to resolve the complaint, as well as how a precautionary approach will be used, shall be included with the complaint. 7. Employing a precautionary approach towards the continued sourcing of the relevant material while a complaint is pending. 8. Implementing a process (e.g. field verification and/or desk verification) to verify a complaint assessed as substantial by the organization, within two (2) months of its receipt. 9. Determining the corrective action to be taken by suppliers and the means to enforce its implementation by a supplier if a complaint has been assessed and verified as substantial. If a corrective action cannot be determined and/or enforced, the relevant material and/or suppliers shall be excluded by the organization. 10. Verifying whether corrective action has been taken by suppliers and whether it is effective. 11. Excluding the relevant material and suppliers from the organization’s supply chain if no corrective action is taken. 12. Informing the complainant, the certification body, and the relevant FSC National Office of the results of the complaint and any actions taken towards its resolution, and for maintaining copies of relevant correspondence. 13. Recording and filing all complaints received and actions taken.

12 HSPP FSC Controlled Wood Due Diligence Summary – Version 1.1 April 10 2019

Appendix A. HSPP Stakeholder consultation and results

1. NRA Instances of 'specified Stakeholder response 2. HSPP Control Measures risk' 4. Consultation Category Country 3. General Stake- Comp- Respon- Process 1(a) 1(b) 2(a) 2(b) 2(c) holders leted dents Feedback

Com- Com- Com- Com- Com- Com- Com- # # % # % YesNo ments YesNo ments Yes No ments Yes No ments Yes No ments YesNo ments YesNo ments A. Forest owners - Local, Regional, Canada 20 20 100 2 10 2 2 1 1 1 2 2 1 1 2 Provincial Land managers - Government USA 4 4 100 0 3.1 (a) Forest owners and managers 3.5 National and Prov forest agency Total 24 24 100 2 8 2 2 1 1 1 2 2 1 1 2 B. Forest owners - Local, Regional Canada 76 76 100 16 21 16 16 16 1 16 1 16 16 1 14 2 3 Provincial land managers - Industry 3.1 (a) Forest owners and managers USA 11 9 82 1 11 1 1 1 1 1 1 (b) forest contractors (c) representatives of forest Total 87 85 98 17 20 17 17 17 1 17 1 16 17 1 15 2 3 industries Canada 5 4 80 1 25 1 1 1 1 1 1 1 1 1 C. FSC Certificate holders USA 0 0 3.1 (d) FSC certificate holders Total 5 4 80 1 25 1 1 1 1 1 1 1 1 1 D. ENGOs & NGOs Canada 13 11 85 0 0 3.2 (a) Social NGOs with USA 9 9 100 0 0 environmental interests 3.3 (a) ENGOs Total 22 20 91 0 0 Canada 1 1 100 0 0 E. Other NGOs USA 0 0 3.2 (a) NGOs Total 1 1 100 0 0 F. Forest workers Canada 1 1 100 0 0 3.1 (c) Forest workers USA 1 0 0 representatives 3.2 (b) Forest workers Total 1 1 100 0 0

G. Unions Canada 7 7 100 0 0 3.2 (c) Local, national, international USA 1 1 100 0 0 trade/labour unions Total 8 8 100 0 0

H. Local communities Canada 80 80 100 0 0 3.2 (d) Local communities USA 0 0 3.3 (b) Local communities Total 80 80 100 0 0 Canada 194 190 98 2 1 1 I. Indigenous Peoples USA 7 6 86 0 0 Total 201 196 98 2 1 1 Canada 3 3 100 0 0 J. Recreation USA 0 0 3.2 (f) Recreation Total 3 3 100 0 0 K. FSC Accredited Certification Canada 3 3 100 0 0 Bodies 3.4 FSC-accredited certification USA 0 0 bodies Total 3 3 100 0 0 L. Research Institutions and Canada 0 0 universities USA 0 0 3.7 Research Institutions and universities Total 0 0 M. FSC Family Canada 9 9 100 1 11 1 3.8 FSC regional offices, network partners, registered standard USA 42 42 100 6 14 5 5 5 5 5 5 5 develop groups & NRA Work Groups Total 51 51 100 7 25 5 5 5 5 5 5 1 5

N. Experts Canada 0 0 3.6 Experts with expertise in USA 0 0 controlled wood categories Total 0 0 Canada 412 405 98 22 5 0 19 1 0 19 0 1 18 3 0 19 1 0 19 0 0 18 4 17 2 3 All Stakeholder Categories USA 75 71 95 7 10 0 6 0 0 6 0 0 6 0 0 6 0 0 5 0 0 6 0 6 0 0 Total 487 476 98 29 6 0 25 1 0 25 0 1 24 3 0 25 1 0 24 0 0 24 4 23 2 3 13 HSPP FSC Controlled Wood Due Diligence Summary Appendix A – Version 1.1 April 10 2019

FSC® Controlled Wood Risk Assessment

Version 1.1 – April 10 2019

A. Introduction

Howe Sound Pulp and Paper Corporation (HSPP) is a Kraft pulp producer with a mill located on Howe Sound at Port Mellon, British Columbia, Canada.

This Controlled Wood Risk Assessment (CWRA): • The CWRA describes the risks of sourcing materials unacceptable to the Forest Stewardship Council® (FSC) and this CWRA has been prepared in accordance with the requirements of the FSC Controlled Wood (CW) Standard: ‘Requirements for Sourcing FSC Controlled Wood’ FSC- STD-40-005 V3-1 (https://ic.fsc.org/en/document-center/id/170). • This CWRA is a ‘company risk assessment’ conducted in accordance with the FSC CW Standard at indicator 3.3 and Annex A. While the Standard uses the term ‘company risk assessment’ to describe this assessment, HSPP chooses to use the more descriptive identifier: ‘controlled wood risk assessment’ (CWRA) to ensure the reader understands the assessment is the HSPP assessment of specified risk regarding HSPP sourcing and FSC CW. (Note: Since all Company Risk Assessments expire on June 30 2019, should the Canada and USA National Risk Assessments not be approved, on July 1 2019 this CWRA meets the requirements of the Extended Company Risk Assessment in accordance with the FSC CW Standard at indicator 3.3 and Annex A). • The FSC CW Standard at indicator 3.1 gives an organisation the option of applying an FSC risk assessment under development. HSPP’s FSC auditors confirmed the use of the Canada National Risk Assessment Draft 2 to identify low risk and specified risk as meeting both the requirements of a Company Risk Assessment and Extended Company Risk Assessment. This CWRA addresses risk related to sourcing unacceptable materials for five controlled wood categories by considering the Canada and USA Draft National Risk Assessment methodology and results: o Canada National Risk Assessment Draft 2 (CAN-NRA-D2) (FSC-NRA-CAN V1-0 DRAFT) – October 15 2018 (https://ca.fsc.org/en-ca/standards/national-risk-assessment-01) o USA National Risk Assessment Draft 3 (USA-NRA-D3) (FSC-NRA-USA V1-0) (https://us.fsc.org/en-us/certification/controlled-wood/fsc-us-controlled-wood- national-risk-assessment-us-nra) o The Canada and USA Draft NRAs identify geographic areas where FSC has identified the risk of sourcing unacceptable materials as ‘low’. HSPP has chosen to adopt those results in the HSPP CWRA. o The Canada and USA Draft NRAs identify geographic areas where FSC has identified ‘specified risks’ associated with one or more risk categories and the draft NRAs have identified ‘control measures’ to mitigate or manage the identified risks. This CWRA has acknowledged every instance of specified risk and the control measures relevant to HSPP sourcing areas as presented in the draft USA and Canada NRAs. However, since the NRAs are not approved HSPP has then departed from the NRA recommended control measures and such decisions are made transparently in this paper. • The Canada and USA Draft NRAs do not, of course, consider the actual HSPP supply area or specific applicability of the identified risks to the actual HSPP supply. This CWRA is about documenting the results of the Canada and USA Draft NRAs and applying the results to the actual HSPP supply area and supply volumes.

1 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 This CWRA is not: • The CWRA excludes all HSPP sourcing of fibre with an FSC Chain of Custody (CoC) or FSC CW claim from sources with an FSC CoC/CW certificate, certified to FSC Chain of Custody (CoC) Standard: ‘Chain of Custody Certification’ FSC-STD-40-004 V3-0 (https://ic.fsc.org/en/document- center/id/80). • This CWRA excludes all HSPP supply sourced under ‘Sourcing Reclaimed Material For Use In FSC Product Groups or FSC Certified Projects’ FSC-STD-40-007 V2-0 (https://ic.fsc.org/en/document- center/id/83).

The CWRA assesses HSPP supply to confirm that the geographic areas from which HSPP receives fibre does not include fibre sourced from 5 CW risk categories. 1. Illegally harvested wood; 2. Wood harvested in violation of traditional and human rights; 3. Wood harvested in forests in which high conservation values (HCVs) are threatened by management activities; 4. Wood harvested in forests being converted to plantations or non-forest use; 5. Wood from forests in which genetically modified trees are planted.

Once certified as meeting FSC CoC and CW requirements, HSPP will have the ability to source controlled materials from its supply area and sell the resulting pulp products with an FSC Controlled Wood claim. HSPP does not have its own wood supply and all fibre sourcing is achieved on the open market. Sourcing includes: • HSPP purchases fibre as sawmill by-product chips under contract arrangements. • HSPP also purchases logs and makes arrangements to have the logs chipped. All fibre arrives at the Port Mellon mill site as chips. • 95% of supply comes from forests certified to a certification scheme including SFI, CSA and FSC forest certification schemes. • 95% of supply is sourced from publicly owned tenured forest lands primarily from the Coast of BC but also the Interior of BC and Washington and Oregon States. • Transportation systems for logs and chips is by road to the ocean and transferred to barge and transported by water to HSPP.

HSPP has assessed its wood supply and has determined the overlaps between HSPP supply areas and those geographic areas identified by FSC with a ‘specified risk’ where forest management potentially threatens particular FSC values. The CWRA also considers the HSPP wood supply at the supply chain level to ensure that the fibre transportation systems do not introduce risks of HSPP mixing in unacceptable materials. Regarding the supply area boundaries there are practical outside limits to the HSPP supply area that are dependent on transportation mode and routes and ultimately relating to log value versus transportation costs. ‘High volume’ supply areas are identified, and instances of specified risk are acknowledged. Where risks are identified they are mitigated or managed through ‘control measures’ (CM). ‘Low volume’ and ‘negligible volume’ supply areas are identified and HSPP has acknowledged occurrences of specified risk.

1. NRA and HSPP risk assessment results The CAN-NRA-D2 and USA-NRA-D3 are the bases for this CWRA. Table 1 presents the HSPP risk conclusions considering all HSPP supply areas. Table 2 summarizes specified risk values by HSPP supply

2 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 area. Map 1 shows the HSPP risk conclusions of low and specified risk associated with BC supply. Maps 2-4 shows HSPP conclusions of low and specified risk associated with the USA supply.

Table 1. HSPP risk conclusion summary

Supply Area CW risk category – HSPP risk conclusion 1 Illegal 2 Human 3. High conservation values 4. Forest conversion 5. harvesting rights GMOs BC supply A. Sunshine Coast and LOW LOW Specified risk for some HCVs and LOW LOW Vancouver Island CMs are applied - See Map 1 and High volume supply Table 2. B. Fraser Valley and Merritt LOW LOW LOW LOW High volume supply LOW for all other HCVs C. North Coast Kitimat LOW LOW Specified risk for some HCVs - See LOW LOW Low volume supply Map 1 and Table 2. D. BC LOW LOW LOW LOW Low volume supply HSPP LOW risk conclusion E. BC LOW LOW considering HSPP supply volumes. LOW LOW Negligible volume supply USA supply D. Washington State LOW LOW HSPP LOW risk conclusion HSPP LOW risk LOW Low volume supply considering HSPP supply volumes - conclusion considering E. Oregon State LOW LOW See Table 2 and Maps 2 and 3. HSPP supply volumes - LOW Negligible volume supply LOW for all other HCVs See map 4.

2. Canada NRA Draft 2 The Canada National Risk Assessment – Draft 2 – October 15 2018 (CAN-NRA-D2) is the basis for this CWRA. All instances of specified risk are acknowledged. Where applicable, any departures from the CAN-NRA-D2 specified risk are noted. HSPP anticipates changes to the identification of specified risks as the Canada NRA final report is approved.

The Preamble of the CAN-NRA-D2 acknowledges the certification challenges facing HSPP as a pulp mill without a dedicated wood supply. “Complexity in Supply Chains One of the challenges when designing Control Measures to mitigate the identified risks was taking into account the complexity in supply chains. In some cases, a FSC Certificate Holder may source non-certified material through an indirect chain of suppliers (i.e. not directly from the forest). This is common for pulp mills that source non-FSC chips and residue from various other mills. In several cases, the range in supply areas can encompass several hundred thousand hectares, as well as dozens of suppliers, forests and communities. The NRA Working Group recognized that it may be difficult for Certificate Holders using the Controlled Wood system to confirm, beyond the first point of purchase, that sub-suppliers meet the requirements of Control Measures at the forest-level. Best efforts were made to take this complexity into account, while still ensuring that the Control Measures adequately mitigate the identified risk.”

3 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 Table 2. HSPP risk category 3 (HCV) specified risk summary

Supply Canada NRA D2 OR USA NRA D3 HSPP HSPP risk assessment conclusion Area % HCV1 – SAR HCV2 – IFL specified risk Risk Result supply specified risk volume HSPP High volume supply A. Sunshine Coast 56% Goshawk and IFL 169 in the BC mainland Specified risk at HCV1 High HSPP specified risk conclusion at HCV1 regarding 2 SAR (goshawk and Vancouver murrelet in the coastal forest ecoregion and HCV 2 requiring volume and murrelet) and HCV2 (IFL 169). HSPP CM measures are Island Central Pacific coastal CMs to mitigate supply applied. forest ecoregion The HCV1 value of caribou has been assessed at the HSPP supply Caribou habitat level with a low risk conclusion. HSPP does not apply CMs. overlap to BC mainland coastal forest ecoregion B. Fraser Valley 25% Salamander, shrew IFL 131 overlaps the BC mainland Specified risk at HCV1 HSPP specified risk conclusion at HCV1 for 3 SAR (salamander, and Merritt and frog in the Puget coastal forest and the Cascades and HCV 2requiring shrew and frog). HSPP CM are applied. lowlands forest mountain leeward forest CMs to mitigate The HCV2 value of IFL 131 has been assessed considering the ecoregion ecoregions HSPP supply with a low risk conclusion. HSPP Low volume supply C. North Coast 4% Caribou in the BC IFLs 196, 206, 213, 223, 225, 238 Specified risk at HCV1 Low HSPP low risk conclusion at HCV2 for 6 IFLs. Kitimat mainland coastal in the BC mainland coastal forest and HCV2 requiring volume The HCV1 SAR value of caribou has been assessed at the HSPP forest ecoregion ecoregion CMs to mitigate supply supply level with a low risk conclusion. HSPP doesn’t apply CMs. The HCV2 value of IFL 131 has been assessed considering the HSPP supply with a low risk conclusion. While CMs are not applied additional activities including supply mapping, education and consultation are implemented. D. BC Low volume 5% Caribou in the Fraser IFLs 131, 134, 169 in the BC Specified risk at HCV1 HSPP low risk conclusion at HCV 1 and HCV2. supply Plateau and Basin mainland coastal forest and and HCV2 requiring While CMs are not applied additional activities including supply Complex ecoregions Cascade mountains leeward CMs to mitigate mapping, education and consultation are implemented. forests and Fraser plateau and basin complex ecoregions D. Washington 2% HCV1 Old growth NA Specified risk at HCV1 HSPP low risk conclusion at HCV 1 and HCV2. State low volume forests are specified requiring CMs to While CMs are not applied additional activities including supply supply risks mitigate mapping, education and consultation are implemented. Negligible volume supply E. BC Negligible 3% Goshawk and IFLs 201, 202 in the QCI Specified risk at HCV Negligible HSPP low risk conclusion at HCV2. volume supply murrelet in the ecoregion AND IFLs 223, 238, 274 1 and HCV2 requiring volume While CMs are not applied additional activities including supply Central Pacific coastal in the BC mainland coastal forest CMs to mitigate supply mapping, education and consultation are implemented. forest ecoregion ecoregion E. Oregon State 5%* HCV1 OG Forests & NA Specified risk at HCV1 HSPP low risk conclusion at HCV1. negligible volume Klamath-Siskiyou requiring CMs to While CMs are not applied additional activities including supply supply critical biodiversity mitigate mapping, education and consultation are implemented. area *All Oregon State supply is from one FSC CoC/CW-certified operation, therefore on a conservative basis the Oregon USA supply is deemed negligible risk. 4 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019

Map 1. BC supply areas and HSPP specified risk conclusions

5 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 The FSC Canada NRA Draft 2 acknowledges the particular complexity facing pulp mills like HSPP to become FSC CW certified. HSPP is implementing the Standard including applicable instances of specified risk and the required control measures in two phases and this allows HSPP to manage the complexity of implementing an FSC-conformant controlled wood system. The first phase takes uncertainty regarding finalized NRA values and controls into account. By the end of the second phase HSPP anticipates acting on all specified risk and implementing control measures from the approved Canada NRA. HSPP is also applying a wood supply volume category of ‘negligible supply’ to its FSC CW system in order to manage the complexity and challenges associated with working with forest managers and engaging with stakeholders at the outer margins of the HSPP supply area and far from the HSPP mill physically and where HSPP has limited ability to influence forest management or engage with stakeholders

3. USA NRA Draft 3 The USA National Risk Assessment – Draft 3 – July 2018 (FSC-NRA-USA V1-0) (USA-NRA-D3) is the basis for this CWRA of USA supply. In this CWRA HSPP acknowledges any departures from the results of the USA-NRA-D3. The USA NRA process has completed, and we are anticipating the approval of the NRA results in 2019. Specified risk and CMs are not anticipated to change during the time frames of the HSPP FSC CW certification effort.

The HSPP supply assessment has identified HSPP fibre sourced from Washington (WA) State (i.e. 2% supply) and Oregon (OR) State (i.e. 5%). The assessment of the 2013-2017 HSPP wood supply considered the USA supply only to the State level. HSPP has procedures to assess supply to the County jurisdictional level in the USA which will improve the next iteration of the supply assessment. It is worthwhile noting that the HSPP supply assessment indicates that all Oregon supply enters the HSPP supply chain under an FSC CW certificate. For this reason Oregon is considered a negligible volume supply area. Washington State is a low volume supplier to HSPP.

Maps 2-4. USA-NRA-D3 specified risk occurrences

Map 4*. Counties with specified Map 2*. Klamath Siskiyou Critical Map 3* Old growth specified risk areas risk for conversion Biodiversity Area *Maps 2-4 are cut from maps supplied by the USA-NRA-D3

The USA-NRA-D3 has identified specified risk associated with supply from Washington and Oregon States including: • FSC CW risk category 3 and HCV 1 Klamath Siskiyou Critical Biodiversity Area (see map 2) occurring partially in Oregon State (all Oregon supply comes from an FSC-certified forest).

6 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 • FSC CW risk category 3 and HCV 1 Old-growth specified risk areas as mapped (see map 3) and occurring in Washington State (low volume supply area) and Oregon State (negligible volume supply area). • FSC CW risk category 4 forest conversion in specified counties (see map 4) of Washington State (low volume supply area) and Oregon State (negligible volume supply area).

4. Two phase DDS implementation HSPP is implementing the DDS in two phases: Phase 1 is anticipated as effective until approximately June 2019: • HSPP anticipates the NRA approval by FSC International in June 2019 and HSPP hopes to achieve FSC CoC and CW certification prior to the approval of the USA and Canada NRAs. • The USA NRA D3 represents the final version going to FSC International for approval. • However, the Canada NRA D2 used in this assessment was an interim draft and has apparently been superseded by a more recent draft to be considered by FSC International for approval but this final draft has not been released to the public. • Phase 1 of the HSPP CWRA implementation covers the time from now to when the Canada and USA NRAs are both completed and up to the time of the Canada and USA NRA approvals by FSC International.

Phase 2 is anticipated as effective from approximately June 2019 (or when the Canada/USA NRAs are approved) for six months: • The FSC CW Standard at indicator 3.2 requires a certificate holder to amend the DDS within 6 months of the approval of the Canada/USA NRAs.

During phase 1 HSPP has applied thresholds to carve up the HSPP supply areas into logical groupings and better manage the risk that supply might include unacceptable sources: • Supply areas A and B in BC represent 81% of supply which HSPP considers ‘high volume supply’ areas. • In phase 1 regarding supply areas A and B HSPP has concluded specified risk for all the HCVs also identified as specified risk by the CAN-NRA-D2 with exceptions noted in this paper. The NRA- recommended CMs are acknowledged in this CWRA and the NRA-recommended CMs have been modified by HSPP to stage their implementation and allow HSPP to build its CW program. • The remaining HSPP supply areas, including two USA States supplying fibre to HSPP, are considered ‘low volume’ supply or ‘negligible volume’ supply. HSPP has acknowledged the NRA results including specified risk and recommended CMs. HSPP has concluded low risk due to the low supply from jurisdictions. HSPP is undertaking activities such as consultation.

HSPP is hoping to achieve FSC CoC/CW certification during phase 1 of the HSPP program implementation and by approximately May or June 2019. Once the Canada and USA NRAs are approved, then the following six months allowed by the FSC Standard to adapt to the newly approved NRAs becomes phase 2 where HSPP is working to meet the full requirements of the Standard.

By the end of phase 2, HSPP anticipates high and low volume supply areas to be fully conformant to the approved Canada and USA NRAs, as required by the Standard. HSPP has concluded low risk of sourcing unacceptable materials regarding HSPP negligible supply areas despite the NRA instances of specified risk and control measures identified. This HSPP position is in effect in phases 1 and 2, and into the

7 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 future HSPP anticipates continuing to identify negligible supply volume as low risk to sourcing unacceptable materials.

By addressing the specified risk issues associated with only the highest volume of the HSPP supply in phase 1, HSPP gains experience with implementing CMs including stakeholder consultation and working with forest managers on control measures.

5. Stakeholder consultation In February and March 2019 HSPP conducted a stakeholder consultation which concluded: • No concerns with the HSPP approach of acknowledging all NRA instances of 'specified risk'. HSPP has considered all instances of specified risk as determined by Canada and USA Draft NRAs. • No concerns with HSPP approach to identify NRA low risk across all risk categories (i.e. with the exception of instances of specified risk). HSPP has adequately identified all instances of low risk. • HSPP CWRA has adequately considered ecoregions, TSAs and best management practices in its CWRA and DDS. Respondents support the HSPP CWRA. • HSPP's approach to implementing control measures in two phases was supported by all respondents. Stakeholders support HSPP control measures. • Respondents supported the use of the questionnaire as an effective tool for providing stakeholder comments.

HSPP has addressed all the stakeholder comments or issues and informed the stakeholders of how their comments were considered. The HSPP DDS Summary includes more information regarding the stakeholder consultation process and the results of the February 2019 stakeholder consultation completed by HSPP.

The stakeholder consultation gave HSPP a strong mandate to implement the CWRA and due diligence system across the HSPP supply area in order to avoid sourcing unacceptable fibre.

8 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 B. HSPP Supply Assessment

HSPP assessed the 2013 to 2017 HSPP annual wood supply to generate a 5-year average supply as the basis for defining the HSPP wood supply area. The intersection of the HSPP wood supply and draft specified risk forest values identified by the Canada and USA NRAs is the subject of this CWRA. The HSPP BC wood supply areas are shown on Maps 1 and 5 and wood supply information is provided in Tables 1, 2 and 3. Future iterations of this CWRA will include maps of the USA supply area. The USA supply data is also included in the information tables.

1. Supply assessment methodology HSPP assessed its supply from 2013 to 2017 to the Timber Supply Area (TSA) level in BC and to the State level considering USA supply. HSPP has procedures to conduct annual supply assessments and maintain a 5-year rolling average describing the entire HSPP wood supply. By using a 5-year average HSPP normalizes the annual supply by averaging out annual variability yet maintaining an approach that reflects sourcing trends. This approach is particularly logical since supply shifts trend slowly over years and supply from particular sources vary in the time frame of years not months. The results of the assessment are included in Table 2 where annual average supply percentages are cited.

In the future the USA supply will be further broken down to the County level, a logical level to identify origin and the County is a logical forest management unit for planning in the USA. HSPP considers the wood supply assessment to be propriety information relating to its competitiveness and HSPP considers this as a confidential document made available to the certification body in a certification audit but not available to stakeholders.

The Canada and USA NRAs present two different kinds of identification of specified risk. Some specified risk forest values are a feature with a hard area boundary. For example, IFL 169 is shown on Map 1 and is acknowledged by HSPP as a BC category 3 and HCV2 specified risk relative to supply area A. HSPP considers the potential impacts and conservation considerations relative to the IFL boundary but further features inside the boundary are not relevant. Alternatively some features have additional considerations inside of the hard area boundaries. Some specified risk species have particular habitat requirements that are the focus of conservation concerns and the habitat occurs in a definable area with hard boundaries. For example, the HCV1 specified risk marbled murrelet requires trees with old growth characteristics for nesting and this habitat has specified risk to conservation in the Central Pacific coastal forest ecoregion (i.e. Vancouver Island).

HSPP mapped the HSPP supply in an Esri ArcGIS with Provincial and other data sets to show values at risk identified by USA and Canada NRA processes. Map 5 shows the BC TSAs and ecoregions in addition to the supply area boundaries. Table 3 summarizes this data along with the HSPP specified risk and the HSPP risk conclusion. • Regarding the low and negligible supply volume areas NRAs have identified instances of specified risk forest values which are potentially unacceptable fibre sourcing areas: o In phase 1 HSPP is not concluding specified risk and HSPP has concluded a low risk for sourcing unacceptable materials. In phase 1 regarding instances of NRA specified risk values, HSPP is identifying the low and negligible risk supply with a low risk conclusion and no control measures are implemented. o The issues identified by the NRAs as specified risk but not further considered by HSPP as specified risk during phase 1 of this project are shown in grey italic font in Table 3.

9 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 • In phase 2 HSPP anticipates acknowledging all instances of specified risk as per approved NRAs regarding low volume supply areas. • In phase 2 and beyond HSPP anticipates continuing with a low risk conclusion regarding negligible volume supply areas despite the occurrence of specified risk occurrence in an approved NRA.

HSPP also added GIS layers including: • Protected areas (National parks, Provincial parks, Ecological reserves and Conservancies - not shown in maps in this presentation). HSPP obtained data from the BC Conservation Data Centre (https://www2.gov.bc.ca/gov/content/environment/plants-animals-ecosystems/conservation- data-centre) mapping species at risk range (hard boundary) in the case of caribou and ‘known occurrence’ in the case of all other species. Regarding SAR where particular habitat represents the specified risk then the ecoregion is the hard boundary to the range of the species. • Intact forest landscape data was obtained from the Intact Forest Landscapes website (www.intactforests.org/data.ifl.html)

Regarding values at risk such as IFLs or SAR, the HSPP assessment generated area data from the GIS showing overlaps including the HSPP supply area, ecoregion and TSA for each value at risk. In a similar manner as the Canada NRA process, HSPP further assessed individual values such as IFLs and species at risk to determine if the value was material to the HSPP supply.

In conducting the BC supply-level assessment HSPP has worked to maintain similar patterns of analyses as applied by the Canada NRA working group. Page 76/153 of FSC-NRA-CAN V2-0 DRAFT states that HCV 2 was analyzed first at an ecoregional-level and then at a more detailed level considering individual IFLs. In a similar manner HSPP has considered supply first at the ecoregional level and indeed HSPP has eliminated ecoregions as low risk. The Canada NRA specifically uses thresholds in assessing risk and HSPP has followed this same methodology.

The TSA-level in BC and County-level in the USA are the organisational units that are the basis of a logical and practical supply assessment and a logical land area to apply CMs. In BC harvesting is planned at the TSA-level with timber supply assessments and timber supply allocations to companies under tenure arrangements and plans that include consideration of SAR are important TSA-level planning functions. Forest managers are organised at the TSA-level in higher level plans and this is the same unit of land requiring forest manager stakeholder, community and First Nations consultations mandated by BC regulations. HSPP anticipates building the strongest relationships and applying the most rigorous control measures in TSAs with high volume HSPP supply. The 2013-2017 HSPP supply assessment was conducted to the TSA level in BC. In Washington and Oregon states the next iteration of the HSPP supply assessment will be conducted to the County level where currently the assessment is completed only to the State level.

The HSPP HCV2 assessment considered BC IFLs: • 58 IFLs in BC were considered. • 38 IFLs in BC were identified as specified risk by CAN-NRA-D2. • 12 IFLs materially overlapped with the HSPP supply area. At this time IFL 169 occurs in high volume supply areas A and B and CMs are applied.

10 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 Table 3. HSPP supply risk conclusions by supply area, TSA and ecoregion

Supply HSPP Specified risk HSPP risk conclusion Area TSA/County Ecoregions HCV1 HCV2 A. Sunshine Kingcome Central Pacific coastal forests Goshawk, IFL 169 High volume supply area. Specified risk for 5 Coast and Strathcona Puget lowlands forest murrelet, Pacific species at risk and 1 IFL and CMs apply for Vancouver Sunshine Coast BC mainland coastal forests shrew mitigation. Island Part of Pacific TSA LOW risk for all other HCVs and CW risk B. Fraser Fraser Puget lowlands forest Pacific giant categories Valley and Merritt BC mainland coastal forests salamander Merritt Cascade mountains leeward Oregon spotted forests frog dry forests C. North Kalum BC mainland coastal forests 196, 206, Low volume supply area. LOW risk for all HCVs Coast Parts of Pacific 213, 223, and CW risk categories Kitimat & Cascadia TSAs 225, 238 Additional activities including supply area mapping, education and consultation for 6 IFLs that are expected to become specified risk in phase 2. D. BC Low Williams Lk BC mainland coastal forests Caribou 131, 134, Low volume supply area. LOW risk for all volume Soo Cascade mountain leeward 169 HCVs and CW risk categories supply forests Fraser plateau and basin Additional activities including supply area complex mapping, education and consultation for one Okanagan dry forests SAR species and 6 IFLs that are expected to become specified risk in phase 2. D. To be Willamette valley forests Old growth Low volume supply area. LOW risk for all Washington determined at Blue mountains forests forests HCVs and CW risk categories State low next annual BC mainland coastal forests volume fibre supply Cascade mtn leeward forests Additional activities including supply area supply review Central pacific coastal forests mapping, education and consultation for 1 Central and S cascades forest HCV1 (old growth forests) as well as Counties Eastern cascades forests with forest conversion risk (risk category 4) N. central rockies forests Okanagan dry forests Puget lowlands forests E. BC Arrowsmith, Central pacific coastal forests 201, 202, Negligible volume supply area. LOW risk for Negligible Okanagan, Okanagan dry forests 223, 238, all HCVs and CW risk categories volume QCI Queen Charlotte Islands 274 supply Kispiox BC mainland coastal forests Additional activities including supply area Nass mapping, education and consultation for 3 IFLs. 100 Mile E. Oregon To be Willamette valley forests Old growth Negligible volume supply area. LOW risk for State determined at Blue mountains forests forests all HCVs and CW risk categories negligible next annual Central pacific coastal forests Klamath- volume fibre supply Central and S cascades forest Siskiyou critical Additional activities including supply area supply review Eastern cascades forests biodiversity mapping, education and consultation for 2 Great basin montane forests area HCV1 as well as Counties with forest conversion Klamath siskiyou forests risk (risk category 4) N. California coastal forests

11 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 Map 5. HSPP supply areas, TSAs and ecoregions

HSPP is using best management practices in this CWRA including consideration of ‘Interim Guidance for the Delineation Intact Forest Landscapes – May 25 2017’. The FSC guidance states that forest managers consider IFLs on a supply unit basis and managers must maintain a 50,000 ha core area according to the guidance. Only 20% of the IFL outside of protected areas can be impacted by new harvesting.

HSPP is applying the FSC guidance to the TSA as a management unit in order to identify IFLs in TSAs with low risk or specified risk of sourcing unacceptable fibre. This analysis considers the amount of IFL in a TSA and/or ecoregion and if the IFL overlap to the TSA does not meet the 50,000 ha threshold and/or harvest cannot exceed 20% of the IFL within the jurisdiction, HSPP concludes low risk. The HSPP results might differ from the FSC Canada NRA D2 results considered only at the ecoregional level.

IFL 131 occurs in both the BC Mainland Coastal Forest (54% of the IFL occurs in the BC Mainland Coastal Forest ecoregion considered by CAN-NRA-D2 as specified risk) and the Cascade Mountains Leeward Forests (46% of the IFL in this ecoregion and it is considered as specified risk) and relative to HSPP supply IFL 131 spans the Fraser TSA (high risk supply area B – 35%), the Soo TSA (low volume supply area D – 27%) and the Lillooet TSA which has no HSPP sourcing (38% of IFL 131 occurs in the Lillooet TSA). The Stein Valley Provincial Park overlaps the IFL providing >100,000 ha of protected area overlapping the IFL and this overlap occurs in the Lillooet TSA. There is not 50,000 ha of IFL in the Fraser TSA (HSPP Supply

12 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 Area B) and clarification is required with regard to how HSPP should consider IFL 131 crossing two IFLs and 3 TSA s. HSPP has concluded LOW risk at the individual IFL review level and HSPP will resolve its approach to this IFL during phase 1.

HSPP does not provide the full IFL analysis to the public however HSPP is willing to share the results with interested stakeholders during consultations.

2. 2017 HSPP average supply assessment results HSPP used 2013-2017 fibre supply data to identify the BC TSAs and USA States where HSPP sources fibre. HSPP has a procedure to update the annual volume supply assessment and HSPP anticipates significant improvements to the supply assessment over time.

HSPP has identified five groupings supply areas as depicted on Map 5 (i.e. showing only BC supply areas): • BC high volume supply areas A (Vancouver Island and Sunshine Coast) and B (Fraser Valley and Merritt) and the TSAs sourced represents 81% of the average HSPP supply. HSPP has the greatest level of influence over forest managers in these supply areas. • Low volume supply areas are defined as jurisdictions with 1-5% of annual average HSPP supply: o BC Area C on the BC North Coast is the Kalum TSA, and also includes small bits of the Pacific and Cascadia TSAs. o BC Area D are 3 additional low volume TSAs in BC including the Williams Lake, Soo and Kamloops TSAs. o The USA State of Washington is a low volume supply area for HSPP. o In phase 1, while HSPP phases in the full CW program, the low volume supply areas have been assessed by HSPP with a low risk conclusion for sourcing unacceptable fibre. o In phase 2 HSPP anticipates bringing forward the low volume BC supply areas C and D and Washington State fully into the CWRA and DDS with CMs to address specified risk, however, this will be done with experience built on a smaller set of specified risk values during phase 1. • Regarding negligible volume supply HSPP has identified 6 BC TSA jurisdictions considering specified risk including Arrowsmith, Okanagan, QCI, Kispiox, Nass and 100 Mile Timber Supply Areas. o In phase 1 of the CWRA and DDS implementation HSPP has identified negligible volume supply areas as low risk of sourcing unacceptable materials. o In phase 2 and after the NRAs are fully integrated into the FSC CW standard, HSPP hopes to continue with the approach of assessing negligible supply areas as low risk of sourcing unacceptable materials. Stakeholders have endorsed this approach.

The 2017 assessment had several weaknesses with implications to the quality of the assessment: • The assessment did not differentiate sourcing of logs or residual chips and such data can be collected by HSPP to improve future assessments. • The residual chip sourcing allocation to a TSA reflects the location of the sawmill in a TSA as opposed to reflecting the outside boundaries of the sawmill supply. HSPP fibre sourcing staff reviewed the HSPP fibre sourcing results and commented that they do not anticipate significant changes to the assessment since distance and means of transportation have been considered. The next iteration of supply volume assessment is anticipated to reflect by-product chip supplier sourcing to a more accurate level.

13 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 • The current assessment included all sourcing even purchases of FSC-certified, FSC Controlled Wood and FSC reclaimed wood and future assessments may show only the sourcing of uncontrolled materials. Note that Oregon State has been downgraded from a ‘low volume’ to a ‘negligible volume’ supply area. At this time HSPP sources from only one Oregon company who is FSC CoC/CW certified and including Oregon as a negligible volume jurisdiction is a conservative approach.

3. HSPP supply and ecoregions The HSPP 2017 supply analysis showed the following ecoregions overlapping with the HSPP supply areas as shown on Map 2: High, low and negligible volume supply in BC • BC mainland coastal forests – More than half of this ecoregion is considered, much of it is high volume supply. • Central Pacific coastal forests – Most of the ecoregion is included in either low volume or high volume HSPP supply areas. • Cascades mountains leeward forests – Almost all of this ecoregion is included in either negligible volume or high volume HSPP supply areas. • Queen Charlotte Islands – The entire ecoregion is included in the HSPP negligible volume supply area. • Okanagan dry forests – Almost all of this ecoregion is included in the either low volume or high volume HSPP supply areas.

Ecoregions with no or negligible HSPP supply in BC • North central rockies forests. • Central BC mountain forests. • Northern transitional alpine forests. • Pacific coastal mountain icefields and tundra.

At this time there is no indication of supply from the Central BC Mountain forest ecoregion, however, there may be supply originating from the North central Rockies forests and Northern transitional alpine forest ecoregions. In accordance with the HSPP approach as long as sourcing is less than 1% of annual mill supply, these ecoregions are excluded from the HSPP FSC CW system.

Washington State and Oregon States have ecoregions as detailed in Table 3. Future HSPP CWRAs may take ecoregion into account in a more active manner regarding USA States and supply.

4. HSPP supply and BC TSAs The HSPP BC supply area assessment eliminated ecoregions from the HSPP supply area and this also resulted in the exclusion of some BC TSAs. Map 5 shows the BC HSPP supply areas and TSA boundaries. For example with the exclusion of the North central rockies forests ecoregion, TSAs are also eliminated including the Arrow, Cranbrook, Invermere, Revelstoke, Golden and Robson Valley TSAs. While it is possible that future HSPP supply assessments might find additional TSAs to have some level of HSPP sourcing, such new source TSAs are expected to have negligible volume sourcing resulting in a low risk conclusion for sourcing unacceptable fibre.

Also applicable to this assessment is the consideration of fibre transportation method and location of the source. Very little HSPP supply comes to the pulp mill directly by road from local sources. Almost all

14 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 supply is transported by road to the ocean and barged to Port Mellon on the Pacific Ocean. HSPP has a means test considering distance and means of transport that is applied to consider supply origin. Supply amounts follow transportation corridors including: • Vancouver Island forest roads and highways to ocean log dumps • BC Mainland Coast forest roads and highways to ocean log dumps • Interior highway transportation corridors to the Coast and ocean log dumps including Hwy 1 through the Fraser Valley and Hwy 16 to Kitimat.

Areas at the margins of the HSPP supply area and at the margins of TSA/ecoregion boundaries are subject to some exclusions of supply including: • The exclusion of the North central rockies forest ecoregion excludes the eastern portions of the Okanagan TSA, the Kamloops TSA and Williams Lake TSAs. As stated, future HSPP supply assessments might identify some supply from the eastern ends of these TSAs and the North central rockies forest ecoregion, however, supply is anticipated to be negligible volume. • TSAs are anticipated to toggle between no sourcing and negligible sourcing from one assessment to the next. HSPP has procedures to bring new TSAs into the HSPP supply area or remove TSAs from consideration.

5. High volume supply areas In phase 1 HSPP is acknowledging all instances of specified risk associated with high volume supply areas including: • Fraser TSA: o HCV1: Coastal Giant Salamander, Pacific water shrew, Oregon spotted frog o IFL 131 supply review assessed low risk in phase 1 as discussed in a section above. • Kingcome TSA: o HCV1: Marbled murellet and Northern goshawk o HCV1: Caribou supply review assessed low risk o HCV2: IFL 169

Control measures include consultation, information gathering, education/awareness and experts. The control measures are oriented towards meeting the mandatory control measures of FSC Canada NRA D2.

The HSPP assessment considered individual instances of HCV1 and HCV2 specified risk occurrence identified by the CAN-NRA-D2 to determine if the HCV occurrence was relevant. Best Management Practices (BMPs) have been considered.

HCV1 caribou occurs in the HSPP supply area and HSPP examined in detail the overlap between mapped caribou range and the HSPP high risk supply area A. Regarding an overlap of caribou range with the HSPP high volume supply area A, HSPP used the GIS database and other resources to characterize the area. As seen in figure 1, imagery shows a mountainous area without discernable access and with little or no merchantable timber available for harvesting. HSPP research indicates that this area may be in a zone planned for ecosystem restoration and there are no plans for harvesting at this time. Finally the size of the area is negligible within the Kingcome TSA or supply area A. According to the HSPP assessment the caribou occurrence in the BC Mainland coastal forest ecoregion is not material in magnitude and there the caribou value is not under logging threat.

15 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 Figure 1. HCV1 Caribou specified risk site specific assessment

Figure 1 shows the caribou habitat overlap with HSPP supply area A and this is our ‘study area’ or ‘subject area’. Specifically the area in red is indicated as caribou habitat by the BC Conservation Data Centre and this area in red is also in the HSPP high volume supply area A. The blue area to the north and east is the caribou habitat area outside of the HSPP supply area and this is no longer the BC Mainland Forest ecoregion (identified as specified risk for caribou by CAN-NRA-D2) but is the Cascades Mountain leeward forest ecoregion (identified as low risk by CAN-NRA-D2). The subject area is at the margins of the caribou zone mapped by the CDC however, this study does not make any comments regarding the relative value of the subject area as caribou habitat … simply because it is inside the mapped boundary this initial analysis does not consider the value of the subject area to caribou. The green area is the Upper Klinaklini River Conservancy. The photo shows a previously harvested area to the north-west of the subject area. However, timber values in the subject area are low and the difficult terrain represents a significant barrier to further development. In conclusion, this detailed assessment of the small overlap area between high volume supply area A and mapped caribou habitat indicates a negligible risk of HSPP sourcing fibre from caribou habitat at this location. This assessment concludes low risk for caribou relative to supply area A.

The HSPP approach to the inclusion of NRA instances of specified risk and the application of control measures that are modified from the Draft NRAs is as follows: • HSPP has acknowledged all instances of specified risk identified by the Canada-NRA-D2. One IFL has been assessed as low risk.

16 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 • The Canada NRA remains a draft document awaiting approval. In phase 1 HSPP has modified the mandatory control measures of the draft NRAs. • HSPP is not a forest manager and is using phase 1 to make connections to forest managers and learn about the species at risk and IFLs and their management as well as to make connections with stakeholders and experts. • By concentrating on high volume jurisdictions to implement the HSPP CW system, HSPP is building capacity to take on additional instances of specified risk and implement control measures.

6. HSPP and low volume (1-5%) supply Low volume jurisdictions contribute 1-5% of the annual supply of fibre to the HSPP pulp mill. In phase 1 HSPP is acknowledging all instances of specified risk associated with low volume supply areas including: • The Kalum TSA currently supplies 4% of annual volume supply to the HSPP mill and is supply area C. o There are potential overlaps with 6 IFLs. o The potential overlap with a boreal caribou area to the Kalum TSA has been assessed as not material to the HSPP supply. • The Williams Lake TSA supplies 3% of annual supply, the Soo TSA 1.3% and the Kamloops TSA 2.1%. o There is potential overlap with a boreal caribou area to the Williams Lake TSA. • There is overlap with 3 IFLs and the Soo TSA: o IFL 131 also overlaps high volume supply area B and has been assessed as low risk in phase 1. o IFL 169 also overlaps with high volume supply area A and HSPP is moving forward with control measures relative to the area A supply. o HSPP has not implementing control measures regarding low volume jurisdictions in phase 1 regarding IFLs 131, 134 and 169 and an overlap with the Soo TSA. Additional activities include supply area mapping, education and consultation. • The Sunshine Coast TSA supplies only 3% of annual supply but this TSA is contiguous with Supply Area A and logically fits into the high-volume supply category particularly considering that this is home territory for the HSPP pulp mill. • Also considered to be a low volume supply jurisdiction is Washington State. The USA-NRA-D3 acknowledges old growth forests as a category 3 specified risk as well as category 4 forest conversion concerns applied to some Washington State Counties.

Regarding this first iteration of the HSPP CWRA the low volume supply jurisdictions are low risk at a supply level: • The NRA processes in Canada and the USA have not been completed and there is continued uncertainty regarding specified risk and control measures. • HSPP has no formal business relationships with forest managers or stakeholders. It is in the interest of all parties to allow HSPP to start consultations regarding control measures relative to high volume source areas. • USA supply in particular is more challenging for HSPP to assess due to a lack of familiarity with American stakeholders and risk considerations to the BC-based HSPP.

Regarding an overlap of caribou range with the HSPP low volume supply area C, HSPP conducted a site- specific assessment of this supply area. HSPP found that most of the caribou overlap with the Kalum

17 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 TSA and HSPP supply was actually the Kitlope Heritage Conservancy Provincial Park. Although there is an area of caribou habitat available for harvest it is less than several hundred hectares in size. One cutblock harvested in 1979 occurs in this area. HSPP considers there to be no material risk that harvesting will impact this caribou zone. The aerial photos involved in the analysis is not provided in this paper but is available upon request.

During phase 1 HSPP has acknowledged the boreal caribou habitat overlap to the Williams Lake TSA and HSPP is not applying control measures to low volume jurisdictions. The caribou habitat overlap occurs at the limits of the HSPP supply area and HSPP is undertaking additional activities to prepare for phase 2 and full implementation of the Canada NRA. Supply area mapping will be of particular interest to HSPP to determine if caribou is at risk relative to the HSPP supply area.

During phase 1 HSPP has acknowledged the Washington State instances of specified risk and HSPP is not applying the Draft NRA control measures recommended by the USA NRA Draft 3. Additional activities including contacting the FSC US-coordinated Controlled Wood Regional Meetings and to contact forest managers and undertake supply area mapping, education and consultation.

In phase 2 HSPP will be implementing the full NRA results including acknowledging all instances of specified risk and applying mandatory control measures.

7. HSPP and negligible (<1%) supply Negligible volume supply jurisdictions are those supplying less than 1% of the annual HSPP fibre supply. In phase 1 HSPP is acknowledging all instances of specified risk associated with negligible supply volume area E: • In the Kispiox TSA IFLs 223, 238 and 274 potentially overlap with the HSPP supply area E. • In the Queen Charlotte TSA IFLs 201 and 202 potentially overlap with the HSPP supply area E. • In the Arrowsmith TSA there are two species at risk, the marbled murrelet and the Northern goshawk. • The state of Oregon has several HCVs identified by the USA-NRA-D3 with specified risk including controlled wood category 3 HCVs old growth forests and the Klamath-Siskiyou critical biodiversity area and controlled wood category 4 are select Counties with forest conversion risk. • While the HSPP CWRA acknowledges the BC values at risk including two species at risk and 5 IFLs as specified risk, no control measures are being implemented during phase 1. Additional activities include supply area mapping, education and consultation. • While HSPP is acknowledging the Oregon instances of specified risk (two HCVs and forest conversion) no control measures are being implemented in phase 1. Additional activities include contacting the FSC USA Controlled Wood Regional Meeting and engage in supply area mapping, education and consultation.

Maps 1 and 5 show HSPP supply area E and these are the negligible volume supply areas. At this time HSPP has set an arbitrary threshold of 1% of annual HSPP supply applied at the TSA-level to define ‘negligible volume’ supply areas. The following are the considerations: • The FSC CW standard defines ‘low risk’ as “negligible” risk of sourcing unacceptable materials and HSPP notes that the standard does not state NO risk. • The application of thresholds is common in conservation biology. The FSC Canada working group applied thresholds regularly to determine the forest values that are identified with specified risk of being sourced as unacceptable materials. HSPP is taking the exact same

18 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019 approach as the FSC Canada working group and HSPP is applying defensible thresholds to its supply area. • As of the 2017 HSPP fibre sourcing assessment there were six BC TSAs with supply less than 1% each: Kispiox 0.1%, Okanagan 0.5%, QCI 0.8%, Arrowsmith 0.6%, Nass 0.1% and 100 Mile 0.1%. The maps showing the supply areas demonstrate these areas to be logical end zones of highway transportation corridors to the Coast. Not only is HSPP sourcing from these TSA at a negligible volume level, the probability of sourcing specified risk HCVs has a further diminishing probability since specified risks affect only a small portion of the TSAs. • The negligible supply areas have HCV1 and HCV2 identified by Draft NRAs with CMs indicated. HSPP is declaring negligible supply jurisdictions as low risk. • Marginal supply areas are anticipated to vary from no supply to negligible supply from one assessment period to another. Since HSPP does not action negligible supply with control measures this category of supply serves as a buffer to stop supply areas popping in and out of the system over successive years. • HSPP has more influence over forest managers and harvesting planning and practices in high volume supply areas and little or no influence at negligible supply areas. HSPP considers that forest managers may be difficult to engage considering that the HSPP supply is negligible in their supply area. • HSPP has not built relationships with communities, stakeholders, aboriginal groups and the public. It will be a challenge for HSPP to start the process of building relationships relative to even a smaller number of HCVs associated with the high volume supply areas and it is not practical to consider that HSPP can implement meaningful programs involving areas with negligible supply.

The HSPP supply assessment identified Oregon State as supply of 5% of HSPP annual average fibre usage. However, all the Oregon supply is purchased from a supplier with a current FSC CoC/CW certificate. At this time Oregon State is considered as a negligible supply area and this is a conservative approach.

HSPP has procedures to annually test supply and identify negligible risk ecoregions and TSAs. With the next HSPP supply assessment HSPP anticipates a greater number of negligible risk areas will be identified.

19 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019

C. Control Measures Mitigate Specified Supply Risk to Low Risk

Table 4. Control measures summary

HSPP Supply Risk NRA Proposed Mandatory CMs HSPP Actions Area/TSAs HCV at risk HSPP CM applied Other actions A. Kingcome, Strathcona, Marbled Evidence demonstrates harvesting does not take A. 5 SAR in BC high volume jurisdictions 6. Explore partnering with N. Island, Pacific TSA murrelet place in critical habitats for Specified Risk species organisations to facilitate overlap with Central Northern identified. Objective: Prepare for full implementation of the consultation, education and Pacific coastal forest goshawk relevant approved NRAs regarding 5 SAR in high volume awareness, experts in order to ecoregion (Vancouver Experts confirm that the forests in the sourcing area supply jurisdictions. During phase 1 HSPP will identify streamline and focus HSPP effort Island) have a forest management plan that details their and map species at risk known occurrence and habitat and mitigate costs of applying the Oregon contribution to the recovery of the species at risk, relative to the HSPP wood supply and other conservation CM. B. Fraser and Merritt spotted frog consistent with the Federal Recovery Strategy or considerations (e.g. protected areas) to determine if the TSAs and overlap with Coastal approved Action Plan SAR is at risk due to HSPP fibre supplier’s forest Puget Sound lowlands Giant management activities. Engage in consultation activities, ecoregion Salamander information gathering, conduct education and awareness Pacific activities and contact forest managers and experts. water shrew Activities that may be considered include: 1. Consultation activities • Summarize forest management legal requirements regarding these SAR species including federal, provincial and municipal governments. • From credible sources or experts summarize the conservation status relative to specific habitat values of concern regarding forest management considering private and public land ownership. • Information gathering and/or information exchange with forest managers at the planning and practices levels regarding conservation and values at risk. • Information gathering and exchange with stakeholders as per FSC CW Standard at Annex B. • Contact industry, Provincial, Federal or other groups with similar conservation goals and assess the information available from established and credible sources.

2. Education and awareness activities

20 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019

HSPP Supply Risk NRA Proposed Mandatory CMs HSPP Actions Area/TSAs HCV at risk HSPP CM applied Other actions • Make conservation information available to Forest Managers and stakeholders. • Make information on conservation status and planning and practices available. • Make information from experts available.

3. Use of experts • Identify experts as per FSC CW Standard Annex C. • Contact experts and communicate the HSPP CWRA.

4. The HSPP DDS Summary includes a summary of HSPP process and progress to the identification of experts confirming that forest management plans as required by the CM.. Managers of private forests, interested and affected Managers of private land also participate in CMs 1-4 7. Explore partnering with private stakeholders, Indigenous Peoples, Species at Risk above. forest land organisations with an experts*, provincial and/federal representatives and 5. The HSPP DDS Summary includes a summary of HSPP interest in implementing the CM. Certificate Holders involved in the sourcing area process and progress regarding a regional meeting as participate in a regional meeting that result in required by the CM. agreed-upon actions related to regionally appropriate best practices. The agreed-upon actions related to regionally appropriate best practices are being implemented in the sourcing area. IFL 169 Forest operations do not occur within IFLs. OR B. IFL 169 in BC high volume Kingcome TSA 3. Explore partnering with organisations to facilitate Forest operations do not reduce IFLs below 50,000 Objective: Prepare for full implementation of the consultation, education and ha, AND all meet cumulative impact parameters as relevant approved NRAs regarding one IFL in a high awareness in order to streamline detailed in the CAN-NRA-D2. volume supply jurisdiction (i.e. Kingcome TSA). During and focus HSPP effort and phase 1 HSPP will identify and map the IFL relative to the mitigate costs of applying the Evidence demonstrates that a minimum of 80% of HSPP wood supply and other conservation considerations CM. the IFL is not threatened by forest management (e.g. protected areas) to determine if the IFL is at risk due operations in the long-term. AND The cumulative to HSPP fibre supplier’s forest management activities. impacts of forest harvesting will not reduce the IFL Engage in consultation activities, information gathering, to below 50,000 ha. conduct education and awareness activities and contact forest managers and experts.

Activities that may be considered include: 1. Consultation activities

21 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019

HSPP Supply Risk NRA Proposed Mandatory CMs HSPP Actions Area/TSAs HCV at risk HSPP CM applied Other actions • Information gathering and/or information exchange with forest managers at the planning and practices levels regarding conservation and IFL values at risk. • Information gathering and exchange with stakeholders as per FSC CW Standard at Annex B. • Contact industry, Provincial, Federal or other groups with similar conservation goals and assess the information available from established and credible sources. • Detailed GIS-based assessment of the IFL to confirm the boundaries and assess the landform to ensure the definitions of an IFL are met.

2. Education and awareness activities • Make conservation information available to Forest Managers and stakeholders. • Make information on conservation status and planning and practices available. C. Kalum TSA in the BC IFLs 196, As per IFL above Control Measures do not apply to LOW supply risk 1. Additional activities including mainland coastal forest 206, 213, sources supply area mapping, education 223, 225 and consultation. and 238 2. Explore partnering with other organisations to streamline and D. Soo TSA and Williams 131, 134 focus HSPP conservation efforts. Lake TSAs in the BC and 169 mainland coastal forest and Cascade Mountains leeward forests and Fraser Plateau and Basin complex ecoregions

E. Kispiox TSA in the BC 223, 238, mainland coastal forest 274

E. Queen Charlotte TSA in 201, 202 the Queen Charlotte ecoregion

22 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019

HSPP Supply Risk NRA Proposed Mandatory CMs HSPP Actions Area/TSAs HCV at risk HSPP CM applied Other actions E. Arrowsmith TSA in the Marbled Central Pacific coastal murrelet forest Ecoregion (VI) Northern goshawk D. Williams Lake TSAs in Caribou Evidence demonstrates that harvesting does not Control Measures do not apply to LOW supply risk 1. Additional activities including the Fraser Plateau and take place in critical habitats sources supply area mapping, education Basin complex ecoregions and consultation. 2. Explore partnering with other organisations to streamline and focus HSPP conservation efforts. D Washington State Old growth The Organization avoids sourcing from sites where Control Measures do not apply to LOW supply risk 1. Contact FSC US-coordinated E. Oregon State forests the HCV that is associated with the specified risk sources Controlled Wood Regional E. Oregon State Klamath- area occurs. OR Meetings and notify organisation Siskiyou of HSPP assessment findings. critical A representative of the Organization attends FSC US- 2. Additional activities including biodiversity coordinated Controlled Wood Regional Meetings supply area mapping, education area when they occur. AND For each area of specified risk and consultation. from which the Organization sources materials, the Organization implements one or more of the actions identified during the collaborative dialogue at the Controlled Wood Regional Meeting, as detailed in the Controlled Wood Regional Meeting Report D Washington State Category 4 The Organization avoids sourcing from sites where 1. Contact FSC US-coordinated E. Oregon State forest natural or semi-natural forest is being converted to Controlled Wood Regional conversion non-forest or plantations. OR Meetings and notify organisation of HSPP assessment findings. A representative of the Organization attends FSC US- Request the 4.1 Exception. coordinated Controlled Wood Regional Meetings 2. Additional activities including when they occur. AND Actions identified must help supply area mapping, education to achieve an outcome specified in the Standard. and consultation

23 HSPP FSC Controlled Wood Risk Assessment – Version 1.1 April 10 2019