Tree Farm Licence 25 1999 Annual Report TREE FARM LICENCE 25 Page 1 ANNUAL REPORT 1999 TREE FARM LICENCE 25 Page 2 ANNUAL REPORT 1999 Tree Farm Licence 25 Naka Tree Farm Licence (TFL 25) held by Western Forest Products Limited is comprised of five widely separated blocks on Vancouver Island, Queen Charlotte Islands, and the North, Mid, and Central Coast of British Columbia. The total area of TFL 25 is 480 820 hectares of which 151 086 are considered productive forest land. The Licence was granted to WFP predecessor, Alaska Pine and Cellulose Limited as Naka Tree Farm Licence 25 on May 21, 1958. The Licence area was significantly amended in 1998 by eliminating Block 4 and adding Block 6 (Formerly TFL 24). Since the awarding of the TFL 42 years ago, a total of 36 million cubic meters have been logged in TFL 25. More than 65% of the total TFL forest area still remains in an old growth condition. About 69 000 hectares are classed as mature operable and 46 000 hectares as immature for a total operable land base of 115 000 hectares (24% of total area). Each block of the TFL is now managed as a separate sustained unit. Forestry and milling activities supported by logging in TFL 25 sustain more than 750 direct jobs on Vancouver Island, Queen Charlotte Islands and coastal mainland of British Columbia. The Company also works with First Nation groups whose traditional territories lie within TFL 25 to create economic activities and build capacity for forest management. Forest planning policies, practices and activities in the TFL are prescribed in the Company’s Management Plans, Forest Development Plans and silviculture strategies. These are developed regionally and implemented locally by a team of dedicated professional foresters and other planning specialists and operations staff. WFP maintains a comprehensive system of public opportunities for reviewing all plans and reports annually on TFL activities through this Annual Report. The Company is proud of the level of forest management applied to TFL 25 that integrates the public interest in economic development and employment with good environmental stewardship. WFP supports local salmon enhancement projects in the Queen Charlotte Islands that are focused on 5 watersheds in the TFL. In conjunction with the Ministry of Forests, the Company maintains 3 popular camping sites plus a number of day picnic areas and trails for public use. WFP welcomes public comment on all our practices. Further information is available on the Company’s web site at www.westernforest.com TREE FARM LICENCE 25 Page 3 ANNUAL REPORT 1999 TABLE OF CONTENTS SECTION Page 1.0 Introduction 11 1.1 Statement of Stewardship 11 1.2 Operations Highlights 11 2.0 Management and Obligation Performance 18 2.1 Volume 18 2.2 Area 18 2.3 Contractor Compliance 18 2.4 Planning 18 2.5 Public Involvement 23 2.6 Inventories and Mapping 25 3.0 Management and Objectives Achievements 28 3.1 Management and Utilization of Timber Resources 28 3.2 Protection and Conservation Measures 33 3.3 Integration of Harvesting Activities 39 3.4 Forest Fire Management 40 3.5 Forest Health Management 40 3.6 Silviculture 41 3.7 Roads and Bridges 49 3.8 Employment and Economic Opportunities 51 3.9 Performance Monitoring 54 4.0 Timber Processing 55 5.0 Research 56 5.1 Silviculture and Stand Management 56 5.2 Genetics 56 5.3 Kermode Bears 56 6.0 Goals and Initiatives 58 7.0 Administration 59 8.0 Financial Statements 60 8.1 Forest Management Costs 60 8.2 Forest Management Reimbursements 61 TREE FARM LICENCE 25 Page 4 ANNUAL REPORT 1999 APPENDICES APPENDIX Page I Scaled Production 63 II Volume Charged to Allowable Cut 64 III Area Denuded 65 IV Current Cut Control Period Annual Allowable Cut 66 V Historical Cut Control Performance 67 VI Coastal Contractor Clause Performance Report 68 VII Phase and Full Contractors 69 VIII Contractors 70 IX Small Business Forest Enterprise Program Harvesting Report 72 X Project Summary 74 XI Not Satisfactorily Regenerated Balance Sheet 76 XII Historical Summary of Activities 77 XIII Tree Planting History 78 XIV – A Direct Employment Summary 79 XIV – B Direct Employment Summary – WFP 81 XIV – C First Nations Silviculture Contracts Employment Summary 82 XV Salmonid Enhancement Program Summary 83 XVI Log Flow and Wood Consumption 85 XVII Research Summary 86 XVIII Operating Statistics 87 XIX Summary of Obligations and Commitments 88 XX Seedling Production Report 90 XXI Seed Production Report 91 TREE FARM LICENCE 25 Page 5 ANNUAL REPORT 1999 SUMMARY OF ACTIVITIES AND ACCOMPLISHMENTS – 1999 Depletion Scaled Volume 360 731 m3 Volume Charged to Annual Allowable Cut 371 663 m3 Area Logged (Western Forest Products) 619.4 ha Area Logged (SBFEP) 87.1 ha Reforestation Silviculture Prescriptions 804.2 ha Site Preparation 14.8 ha Seedlings Planted 412 989 trees Seedlings Fertilized 207 110 trees Area Planted 461.8 ha Stocking Surveys 1 005.6 ha Free Growing Surveys 388.7 ha Stand Management Juvenile Spacing 234.3 ha Brushing and Weeding 143.7 ha Pruning 136.0 ha Broadcast Fertilization 2 641.3 ha Inventory Cutting Permit Cruising 1 045 plots Residue Assessment 238 plots Engineering Roads Built 39.6 km Roads Maintained 342.1 km Roads Deactivated 117.3 km Roadside Seeding 0.2 km Protection Accidental Fires 0 Contracting Contractor Obligation 137 512 m3 Contracted 179 911 m3 Compliance 130.8 % Minor Products Shake and Shingle 2 134.3 m3 Yew Bark 883.8 kg Honey 3 673.6 kg Salal 1 364 kg Roadside Salvage 95.1 m3 Salmon Enhancement Program Coho 68 208 fry Employment Direct Employment 85 285 person-days TREE FARM LICENCE 25 Page 6 ANNUAL REPORT 1999 PROJECT MAPS Block 1 TREE FARM LICENCE 25 Page 7 ANNUAL REPORT 1999 Block 2 TREE FARM LICENCE 25 Page 8 ANNUAL REPORT 1999 Block 3 TREE FARM LICENCE 25 Page 9 ANNUAL REPORT 1999 Block 5 TREE FARM LICENCE 25 Page 10 ANNUAL REPORT 1999 Block 6 Skidegate Queen Sandspit GRAHAM ISLAND Charlotte Alliford Bay el nn ha Copper e C Bay gat ide Sk Gray Deena k Cre e Bay Skidegate Blk. 1 Lake e ak L ito qu os Pa M l lant C Gil l Dawson reek at Arm Cove C ums Moresby hewa C In a let r m i c h a e l P a s s t Hibben le I n Island per Ku LOUISE ISLAND agoon Inle t Moresby L Lake MORESBY Inlet lll ewweel SSe Sewell wyn Inlet Sel In C le t Laskeek ec il Cove Bay N e fi w Paco oc Bay m b e In TALUNKWAN l e t Blk. 2 IS. D nlet ana I Barrier Bay nd nlet ou Logan I S su Ta Wilson Cres ent Inlet Bay T an TANU IS. u Pa s sag e Richar dson I nl et e ag D s s a a r P Pacific w n Klunkwoi s o in rd Bay ha ic R let S Atli In o Ocean un d Beljay Bay PLANTATIONS SITE PREP LYELL WEED SPECIES CONTROL IS. JUVENILE SPACING ISLAND PRUNING FERTILIZATION TREE FARM LICENCE 25 Page 11 ANNUAL REPORT 1999 1.0 INTRODUCTION 1.1 Statement of Sustainable Forest Management The three important elements of sustainable forest management – social benefits, environmental appropriateness, and economic viability – are critical to the successful management of TFL 25. Key components of Western Forest Product’s sustainable forest management program include: ¨ Promptly reforesting all areas after harvest with ecologically appropriate species to maintain and enhance forest growth. ¨ Planning for the long-term in an integrated manner to incorporate the full range of forest values including soil, water, fish and wildlife, archaeology, scenic resources, and biological diversity. ¨ Maintaining, enhancing, and protecting forest ecosystems while providing economic, environmental, social, and cultural benefits. ¨ Proposing and implementing allowable annual cuts that reflect forest ecosystem capacity and sustainability as well as social and economic considerations. ¨ Involving the public and stakeholders in meaningful consultation of all aspects of forest management. Western Forest Products is actively practicing sustainable forest management and will continue to do so. 1.2 Company Highlights Western Forest Products’ parent company Doman Industries Limited had a slight improvement in its financial situation in 1999. Year end results continued to be affected by depressed demand for hemlock lumber in Asian markets, low pulp prices and high stumpage and logging costs. Losses for the year were $55,913,000 compared to a $74,000,000 in 1998. Sales for the year were up almost $100 million to $873 million compared to $779 million in 1998. Lumber sales were approximately $500 million, pulp sales $262 million and log and sawmill revenues approximately $100 million. The outlook for 2000 was expected to be significantly better with improved pulp prices and demand by mid year. However, lumber prices and demand were not expected to be particularly robust. The Softwood Lumber Agreement with the United States continues to hamper the Company’s return to profitability by forcing the mills to operate at less than optimum level. The sawmill capacity for Doman Industries is 1.2 billion board feet but only 717 million board feet were produced in 1999, or 60% of capacity. Total timber harvest for the year continued in an undercut position. A total of 3.3 million m3 or 74% of available harvest volume was accomplished. TREE FARM LICENCE 25 Page 12 ANNUAL REPORT 1999 Stumpage payments were $84.7 million, an average of $25.28 per cubic metre. This is slightly lower than in 1998 but still a significant cost factor on an average sales value of slightly over $100 per cubic metre.