4.4.1 Plan Assessment Areas of Concern Harvest Silviculture Access... 12

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2 TABLE OF CONTENTS 1 Executive Summary... iii 2 Table of Recommendations Introduction Audit Process Management Unit Description Current Issues Summary of Consultation and Input to Audit Audit Findings Commitment Public Consultation and Aboriginal Involvement Forest Management Planning Plan Assessment and Implementation Plan Assessment Areas of Concern Harvest Silviculture Access System Support Monitoring Compliance Year 10 Annual Report Achievement of Management Objectives and Sustainability Achievement of Management Objectives Forest Sustainability Contractual Obligations Conclusions and Licence Extension Recommendation Appendix 1 Recommendations Appendix 2 Management Objectives Tables Appendix 3 Compliance with Contractual Obligations Appendix 4 Audit Process Appendix 5 List of Acronyms Appendix 6 Audit Team Members and Qualifications KBM Forestry Consultants Inc. i

3 LIST OF TABLES Table 1. Recommendations and Best Practice... 1 Table 2. Silvicultural Success vs. Regeneration Success Table 3. Summary of the Status of the FMP Objectives Table 4. Compliance with Contractual Obligations Table 5. IFA Procedures Selected by the Audit Team Table 6. Audit Sampling Intensity LIST OF FIGURES Figure 1. Location of the Nagagami Forest... 3 Figure 2. Proportion of Provincial Forest Types on the Nagagami Forest... 4 Figure 3. Volumes (m3) reported for the Forest during the audit term... 9 KBM Forestry Consultants Inc. ii

4 1 EXECUTIVE SUMMARY All Crown forests in Ontario are required to be audited at least every five years. The requirement for independent audits arises from MNR's Class Environmental Assessment Approval for Forest Management on Crown Lands in Ontario (2003). Regulation 160/04 of the Crown Forest Sustainability Act (S.O. 1994, c. 25) (CFSA) sets out the specific requirements for conducting the audits. This report documents the results of the Independent Forest Audit (IFA) of the Nagagami Forest (the Forest) conducted by KBM Forestry Consultants Inc. (KBM) covering the five-year period April 1, 2007 to March 31, Two forest management plans are included in the scope of this audit. Specifically, implementation of the last three years of the FMP, and planning and approval of the FMP as well as its implementation for the first two year period of its term. During the audit term the Forest was managed under a Sustainable Forest Licence held by Nagagami Forest Management Ltd. (NFM), a cooperative of wood commitment holders on the Forest. Day to day administration is conducted by Jackfish River Management Ltd. (JRM), under contract to NFM. The principal auditees were NFM and the Ontario Ministry of Natural Resources (MNR) Wawa District Office. The audit team identified one best practice for the analysis of renewal outcomes on the Forest and made seven recommendations. Two recommendations each were directed at NFM and MNR Wawa District, two were directed at both NFM and MNR, and one was directed at Corporate MNR. Recommendations arise from the audit team s observations of material non-conformances and identification of situations in which there is a significant lack of effectiveness in forest management activities. All audit recommendations must be addressed in an action plan and the status of the action items must be reported within two years of approval of the audit action plan. A summary of the recommendations is provided here. Wawa District MNR must continue efforts to work with area First Nations to update values maps and background information reports. A written decision regarding a proposed new road was made by the Regional Director under the issue resolution process; however, it lacked an analysis of alternatives and a clear rationale for the choice of the preferred route; documentation that is normally provided in an FMP. This may be the result of a lack of sufficient guidance in the Forest Management Planning Manual when utilizing the issue resolution process for making such decisions. A recommendation was made to Corporate MNR to review this possibility. Improvement is required in on-the-ground practices to ensure that a sufficient amount of large, live wildlife trees remain following aerial herbicide spraying. Regeneration data suggests that the presence of balsam fir is increasing on the Forest. Harvesting practices and less reliance on mechanical site preparation may be contributing to such an increase. This is a concern from a forest health perspective given the susceptibility of balsam fir to spruce budworm attack and a recommendation was made to study and report on this potential problem. A supporting recommendation was made for NFM to investigate the costs and benefits of increasing the use of mechanical site preparation and prescribed burning. During the latter part of the audit term conifer was being topped in excess of what is permitted under the Scaling Manual and the FMP. As a result, there is an inventory of merchantable conifer fibre contained in slash piles. NFM plans to utilize the material in a cogeneration plant currently under construction; however, MNR had not approved the larger topping standard. A recommendation that MNR and NFM reach an agreement on addressing the unutilized merchantable conifer was made. A related recommendation dealt with the fact that the unutilized merchantable conifer fibre had not been reported as an Operational Issue by NFM during compliance reporting. The audit team found that forest sustainability is being achieved. While harvest levels are depressed due to challenging market conditions, this does not appear to be a significant threat to sustainability at this time. During the previous audit term the Nagagami Forest had one of the highest harvest area utilization KBM Forestry Consultants Inc. iii

5 levels in the Province and the current under-harvest does not constitute a trend. Modelling was verified by the audit team and the long term management direction is sustainable. Overall, management objectives are being met, although social objectives associated with full harvest of the available harvest area are not currently being met. The silviculture program is keeping up with harvest levels and the forest managers have detailed on-the-ground knowledge of the Forest and its management. The audit team s concern over a possible increase in the balsam fir component on the Forest due to operational practises is based on observation; firm data needs to be collected to know conclusively if there is real cause for concern. Slash has been an ongoing challenge; however, Haavaldsrud Timber Co. has risen to the challenge with construction of the Becker cogeneration plant, which should lead to significant improvement in the use of slash and unmarketable fibre. Regeneration success rates are very high, although silvicultural success rates are approximately 60%, the latter being a function of how silviculture success is defined in the Forest Management Planning Manual. The regeneration that is developing will most certainly lead to a viable forest. Access, harvest and silviculture operations are generally well executed and the environment is being protected during plan implementation. Management of the unit was generally in compliance with the legislation, regulations and policies in effect during the audit term. NFM was in compliance with most of the conditions of the SFL. There were two exceptions, the most significant being arrears of approximately $3 million for outstanding Crown dues (stumpage), Forestry Futures Trust contributions and Forest Renewal Trust Account contributions; all due to extremely challenging market conditions. NFM and MNR have signed and are implementing a repayment agreement. The field evidence collected by the audit team indicates that silvicultural liabilities are not a concern. Forest sector markets are forecasted to improve and the Terrace Bay pulp mill has resumed operations. These trends suggest that the repayment plan should be viable. The second exception is associated with conifer utilization. NFM implemented a topping standard for conifer that was not approved by MNR. This has led to an issue of merchantable conifer fibre being left at roadside that must be addressed. This and the associated compliance reporting issue identified during the audit are not considered a threat to forest sustainability. As a result of the outcome of the audit, the audit team recommends the Minister extend the term of Sustainable Forest Licence for a further five years. Rod Seabrook EP(EMSLA) Lead auditor on behalf of the audit team KBM Forestry Consultants Inc. iv

6 2 TABLE OF RECOMMENDATIONS Table 1. Recommendations and Best Practice Recommendation on Licence Extension The audit team concludes that management of the Nagagami Forest was generally in compliance with the legislation, regulations and policies that were in effect during the term covered by the audit, and the Forest was managed in compliance with the terms and conditions of the Sustainable Forest Licence held by Nagagami Forest Management Ltd. Forest sustainability is being achieved, as assessed through the Independent Forest Audit Process and Protocol. The audit team recommends the Minister extend the term of Sustainable Forest Licence for a further five years. Best Practice: the analysis of forest renewal outcomes conducted by JRM in conjunction with MNR is a best practice. Recommendations Directed to SFL Holder/MNR District Recommendation 1: MNR engage Ginoogaming, Constance Lake and Pic Mobert First Nations to conduct values mapping and prepare Aboriginal background information reports and contact Hornepayne Aboriginal Community to update their values maps and background information report. Recommendation 3: NFM ensure that, where possible, a component of large live conifer trees are left in harvest blocks where herbicide treatment is likely. Recommendation 4: NFM, with the technical assistance of MNR, conduct a study on the effect of stand and site conditions, harvest method and treatment type on the content of balsam fir in the future forest condition, and that the NFM report on its findings in the Annual Report following completion of the study. Recommendation 5: MNR Wawa District and NFM come to an agreement on the conifer utilization associated with topping in excess of 10 cm diameter that will, as a minimum, specify precisely: what merchantable material that has been left unutilized without authorization will be recovered for use and the Crown charges that will apply on this material, and what merchantable material that has been left unutilized without authorization is beyond recovery for economic or other reasons, and the Crown charges that will apply on this material. Recommendation 6: NFM investigate the costs and benefits of increased productivity and reduced balsam fir composition through the use of mechanical site preparation and prescribed burns by establishing and monitoring trials within the next two years. Recommendation 7: NFM and MNR Wawa District review compliance reporting practices and ensure that there is a clear understanding and consistent application of the concept of Operational Issues associated with compliance inspection reporting requirements. Recommendations Directed to Corporate or Regional MNR Recommendation 2: Corporate MNR review Part A, Section of the FMPM and ensure that its wording is clear that decisions made as a result of the issue resolution process must also meet the requirements of the forest management planning process. KBM Forestry Consultants Inc. 1

7 3 INTRODUCTION 3.1 Audit Process Independent Forest Audits (IFAs) are a requirement of the Crown Forest Sustainability Act (S.O. 1994, c. 25) (CFSA). Every forest management unit in Ontario must be audited by an independent audit team at least once every five years. KBM Forestry Consultants conducted an independent forest audit on the Nagagami Forest for the fiveyear period April 1, 2007 to March 31, The audit assessed implementation of the Forest Management Plan (FMP) for the period April 1, 2007 to March 31, 2011 as well as the planning and approval of the FMP and the first year of its implementation (i.e. April 1, 2011 to March 31, 2012). The on-site portion of the audit occurred from September 17-21, 2012 inclusive, with document examination and interviews taking place prior to, during, and subsequent to this period. During the audit term the Forest was managed by Nagagami Forest Management Ltd. (NFM) under SFL No Both NFM and the Ontario Ministry of Natural Resources (MNR) Wawa District were the principal auditees. IFAs are governed by eight guiding principles as described in the Independent Forest Audit Process and Protocol (IFAPP). Recommendations arise from audit team observations of material non-conformances and identification of situations in which there is a significant lack of effectiveness in forest management activities. All recommendations made in this report are correspondingly described in full in Appendix 1 and summarized above in Section 2. Reviews of the achievement of objectives and contractual obligations are summarized in Appendices 2 and 3, respectively. More detailed information on the audit process, including the sampling intensity, is provided in Appendix 4. A list of acronyms is presented in Appendix 5. Audit team members and their qualifications are presented in Appendix Management Unit Description The following description of the Forest is based primarily on material included in the FMP for the Nagagami Forest. The current administrative boundaries of the Nagagami Forest were established in 1991, following the reorganization of the MNR District and Regional administrative boundaries. The entire Nagagami Forest area now falls within the MNR Wawa District, Northeast Region. The town of Hornepayne is located within the Forest on Secondary Highway 631 which provides access through the central portion of the Forest from Highway 11 to the north to Highway 17 to the south (see Figure 1). Major centres to the east and west are Sault Ste. Marie and Thunder Bay, respectively. KBM Forestry Consultants Inc. 2

8 Figure 1. Location of the Nagagami Forest In April 2004, the Nagagami Forest S.F.L. was transferred to NFM from Abitibi-Consolidated Company of Canada. NFM was previously a co-operative of several shareholders but due to mill shutdowns and bankruptcies it has been reduced to a single shareholder: Olav Haavaldsrud Timber Company. Jackfish River Management Ltd. (JRM) is the management contractor who acts on behalf of NFM regarding the administration of the Nagagami Forest, including forest management planning and operations. Road building and logging operations are undertaken by logging operators such as Olav Haavaldsrud Timber Co. Ltd., Kenogami Lake Lumber Ltd., Columbia Forest Products Levesque Division, and Kabi Lake Forest Products Ltd. The Nagagami Forest has a total forested area of 448,389 hectares. This area includes water, nonforested land and productive forest land. The majority of the area (99%) is Crown Land subject to forest management planning and forest management operations. Most of the Forest is located within the Arctic watershed, with waters flowing north to Hudson Bay. The watersheds generally flow in a northeast direction following the topography of the underlying bedrock. Soils in the Nagagami Forest are the result of glacial and postglacial events. The clay soils of the claybelt to the north have been derived from sediments deposited by post-glacial Lakes Barlow and Ojibway. Peat and organic soils, overlying the marine sands and clays, resulted from the deposition of vegetative matter in association with poorly drained land. The forest represents a total of seven forest units by provincial forest types: Lowland Conifer (MCL), Upland Conifer (MCU), Poplar (POP), Mixedwood (MIX), Jack Pine (PJK), White Birch (BWT), and White and Red Pine (PRW). MCL forest type covers the largest forest area, followed by MCU and POP forest types. PRW forest represents only 19 hectares, less than 1% of the productive forest (see Figure 2). KBM Forestry Consultants Inc. 3

9 Figure 2. Proportion of Provincial Forest Types on the Nagagami Forest 3.3 Current Issues The IFAPP requires a review of High Priority Aspects (HPAs) of the auditees systems or activities. These are areas of potential focus during the audit related to key issues or management challenges arising during the audit term. Five HPAs were included in the Audit Plan, as follows: 1. The 2007 IFA found that MNR Wawa District had completed a minimal number of compliance inspections during two years of the audit term. The audit team viewed the shortfall as a lack of commitment by MNR. The audit team examined whether improvement has been made in this regard. 2. Issue resolution was utilized during approval of the Mosambik Road. The District Manager had accepted the proposal of the planning team; however, the decision was appealed to the Regional Director who, in turn, supported an alternative proposal. The audit team examined conformity to the process and the effectiveness of the outcome. In addition, the audit team reviewed the status of actions to address recommendations associated with access from the previous IFA. 3. The previous IFA identified the overall need for improved forest inventory maintenance. Issues were found with free to grow assessments and barren and scattered and depleted stands amounted to approximately 20% of the production forest landbase. Recommendations were made in both the 2002 and 2007 IFAs. The audit team examined progress in this area. 4. The SFL holder currently owes almost $3 million in Crown dues, Forest Renewal Trust charges and Forestry Futures Trust charges. The audit team examined the reasons for the shortfalls and plans and actions to address them. 5. Poor markets for conifer and hardwood pulpwood have created challenges for the forest manager. The audit team examined harvest allocation strategies, utilization practices and potential implications for silviculture. 3.4 Summary of Consultation and Input to Audit KBM used several different strategies for encouraging input to the audit process. Letters, including a one-page survey, were mailed to numerous stakeholders advising of the audit. The survey was also KBM Forestry Consultants Inc. 4

10 available to the general public on the KBM website ( A summary of the methods and input is provided in Appendix 4. 4 AUDIT FINDINGS 4.1 Commitment Forestry services for NFM are provided by JRM. Posters were visible throughout the JRM s office outlining the company s commitment to sustainable forest management and environmental protection, and the commitments are recognized by JRM s employees. Staff is provided copies of the company s stated commitment to sustainability upon the beginning of their employment. These statements are also included with all of the contracts JRM has with harvesting and silviculture contractors. Statements are reviewed with contractors prior to starting work each year or at the beginning of the Annual Work Schedule (AWS). All staff members interviewed appeared knowledgeable about the applicable legislation and policies, with one exception. Company Forest Operations Information Program (FOIP) inspectors did not report Operational Issues associated with topping of conifer in excess of permissible limits (see Recommendations 5 and 7). 4.2 Public Consultation and Aboriginal Involvement The establishment of the Nagagami Forest LCC was consistent with the requirements of the 2009 FMPM. The membership of the current LCC represents a range of interests in the Forest including the timber industry, trappers, remote tourism operators, bear baiters, anglers/hunters, the general public, and cottage owners. A list of current LCC members, a recommendation from the previous IFA, proved to be useful in contacting members. The purpose of the LCC is incorporated into the LCC Terms of Reference. All LCC members were invited to participate in the Nagagami Forest IFA through mail-out, , and follow-up phone calls. Out of 12 active members four responded - 33% of the current membership - and represented a range of interests on the forest. Comments pertaining to the LCC were generally quite supportive of the Committee. While members clearly have opposing interests with regard to the Forest, it does not take away from the fact that the LCC is functioning effectively. Many are long-standing members and have actively participated in the development of several Forest Management Plans. This experience is valuable to the Nagagami Forest LCC. However, recruiting new membership has been cited as a potential issue. The community of Hornepayne is isolated from surrounding towns and has a relatively small population from which to draw new members. As a potential solution to this issue, the idea of a regional LCC was discussed with those who responded. Some were supportive of the idea and felt that a regional LCC would help with recruitment and limiting conflict of interest within the Committee, while others were not supportive. MNR Wawa District may wish to discuss the merits of a regional LCC with the LCC. Access restrictions and remote tourism continue to be a significant source of discussion on the Forest, as observed in a review of the minutes and interviews. Many are awaiting the outcome of the Crown Land Use Atlas Harmonization (CLUAH) project 1 to see if these concerns have been addressed. The technical nature of forest management was described as a barrier to meaningful participation on the LCC; however, training opportunities do exist for members. MNR should continue with these efforts and encourage members to participate. There were nine resource-based tourism operators in the Nagagami Forest. JRM provided copies of 1 The MNR Wawa District, with participation and input from the public and a broad range of stakeholders, is reviewing existing land use direction for unregulated provincial Crown lands and waters. Their objective is to ensure the balance of social, economic, and ecological sustainability, and to reduce access conflicts in other district planning processes. KBM Forestry Consultants Inc. 5

11 letters sent to tourism operators regarding the Resource Stewardship Agreement (RSA) process. Discussions on RSAs began but were never concluded. Tourism operators did not proceed with negotiations because they felt that their interests were protected with the existing prescriptions and a separate process was not required. There are five Aboriginal Communities adjacent to the Nagagami Forest management unit: Hornepayne Aboriginal Community, Constance Lake First Nation, Ojibways of the Pic River First Nation, Ginoogaming First Nation and Pic Mobert First Nation. The audit team held in-person discussions with representatives of all the Aboriginal communities with the exception of Pic Mobert First Nation, which declined the invitation to participate. Interviewees reported that they had an amicable working relationship with MNR representatives. Three of the First Nations felt that MNR could make greater efforts at consultation. They acknowledged, however, that internal capacity issues impeded their ability to respond to MNR correspondence, to assist with community consultations and to generally participate in the FMP process. Four of the First Nations did not have values maps or Aboriginal Background Information Reports completed and expressed interest in completing these documents. Although Hornepayne Aboriginal Community had completed values maps and a Background Information Report, the information was dated. The interviewee expressed an interest in updating the documents. See Appendix 1 for more information. Recommendation 1: MNR engage Ginoogaming, Constance Lake and Pic Mobert First Nations to conduct values mapping and prepare Aboriginal background information reports and contact Hornepayne Aboriginal Community to update their values maps and background information report. A common response from all Aboriginal communities interviewed was that although MNR may be meeting all the required regulations, the regulations themselves are inadequate, treating Aboriginal communities like a stakeholder and not acknowledging that the forests were part of their homeland. Condition 34 reports for the audit period were provided and detailed a number of activities undertaken by MNR intended to provide Aboriginal communities with greater opportunities to participate in the benefits provided through forest management planning. Despite these efforts Aboriginal communities felt that they were not provided adequate opportunities to benefit or opportunities to negotiate their involvement. These differing perceptions of the efforts and actual benefits to Aboriginal communities from forest management planning are concerning. It is suggested that MNR engage in discussion with Aboriginal communities on how they wish to participate in the benefits provided through forest management planning. As per the FMPM requirements, MNR sent letters to the Aboriginal communities six months prior to the commencement of the formal public consultation process, inviting them to participate in the preparation of the FMP and to develop a specialized consultation approach. None of the communities chose this option; however, most have completed or are developing consultation protocols for their community. MNR should engage with the communities in dialogue to determine how the community consultation protocols can be accommodated using a specialized consultation approach. There were no Aboriginal community representatives on the planning team or the LCC. Issue resolution is a process available to parties in the event of unresolved issues during preparation of an FMP. One issue, the Mosambik primary road, went to issue resolution using the process prescribed in Part A, Section of the FMPM. The issue remained unresolved at Step 7 in the process and the District Manager (DM) provided a written decision in accordance with the requirements of the FMPM. The audit team found the DM s decision to be sound and his rationale to be clear. The concerned party remained unsatisfied and requested a review of the DM s decision by the Regional Director (RD), as permitted by the FMPM. This process continued unresolved to Step 11, at which time the RD provided her written decision with reasons. The audit team found the RD s statement of decision to be lacking in two ways. Firstly, there was no documentation of the analysis that led to the selection of the preferred alternative (as required by the FMPM). Secondly, the RD failed to provide a clear rationale for her decision. See Appendix 1 for more information. KBM Forestry Consultants Inc. 6

12 Recommendation 2: Corporate MNR review Part A, Section of the FMPM and ensure that its wording is clear that decisions made as a result of the issue resolution process must also meet the requirements of the forest management planning process. 4.3 Forest Management Planning Forest Management Plan Modelling for the FMP was reviewed and found to be complete and accurate. Modelling assumptions were reasonable and based on current information. The planning team completed all FMPM requirements for the modelling checkpoints for the plan. Values maps (excluding Aboriginal values maps see Recommendation 1) were updated by MNR during planning. Survey flights for moose aquatic feeding areas (MAFAs) and stick nests took place in 2008 and 2009, resulting in 175 updates (additions and deletions) to the data base. Accuracy of the updates was confirmed during the audit through a check of several entries. Fisheries data is from surveys conducted in the 1970s and 1980s with updating occurring on an ad hoc basis. Unknown fisheries receive cold water timing restrictions. Values receiving protection through an Area of Concern (AOC) prescription include MAFAs, stick nests (e.g. eagle, osprey, heron), tourism lodges, fisheries, and areas of high cultural heritage potential. Appropriate AOC prescriptions were prepared and mapped for the range of values requiring protection. Prescriptions followed guide requirements and no exceptions were developed. The FMP identified seven species at risk, none of which are categorized as endangered but three of which are categorized as threatened (forest dwelling woodland caribou, whip-poor-will, and peregrine falcon). Whip-poor-will and peregrine falcon have not been documented on the Forest but the Forest is within the range for these species. Surveys indicate a resident population of seven to nine caribou, two of which are fitted with tracking collars. Approximately half of the Forest area is identified as caribou range (continuous or discontinuous). The planning team, working with planning teams from adjoining forests, developed a Dynamic Caribou Habitat Schedule designed to provide for a long term continuous supply of habitat suitable for woodland caribou. The planned harvest meets FMPM requirements and logically followed the management strategy. The FMP planned harvest was 96% of the available harvest volume, with an explanation provided for the difference. A clear explanation of how volumes were estimated was provided, as was an explanation of how SFL Appendix E wood supply commitments would be met. No wood supply shortages emerged during the audit, which is not surprising in light of the mill closures that have occurred in recent years. The Nagagami Forest has several large tourism lakes and a number of remote tourism operators, which makes roads an issue on the Forest. There is every indication that information for roads planning was adequate, that access planning was consistent with the management strategy and that the roads network is developing logically. The supplementary documentation for road alternatives and environmental analysis is brief but meets FMPM requirements. Public comments were received and resulted in one road (the Mosambik Road) being elevated to Step 11 in the dispute resolution process, as discussed in Section 4.2. Amendments There were a total of ten amendments to the FMP, all of which were characterized as administrative, and covered such things as harvest carryover from the previous FMP, line of site cutting, and application of an AOC to a recreational camp. The audit team determined that the categorization of the amendments was reasonable and that the required processes were followed. The FMP Amendment #13 was examined in detail. This is the amendment modifying the hardwood utilization standards and allowing non-veneer aspen to be left standing, on the ground or at roadside. It is a controversial one because of the potential effect on forest renewal and the amount of unsightly waste left in the public eye. The audit team found Amendment #13 to be appropriate. Specifically, the amendment was made in accordance with MNR-Northeast Region guidelines; unutilized poplar was not found by the audit team to be an impediment to forest renewal in the field, and a change in utilization KBM Forestry Consultants Inc. 7

13 standards was found to be necessary, the latter being brought on by the closure of oriented strand board (OSB) mills in Wawa, Hearst and Longlac. Amendments are categorized, among other things, according to the degree of public and aboriginal consultation required in the circumstances. The District chose to categorize Amendment #13 as administrative, with which the LCC agreed. This was one of the reasons Amendment #13 was chosen for a closer look but, in the end, the audit team does not challenge the DM s decision. 4.4 Plan Assessment and Implementation Plan Assessment The conditions observed by the audit team in the field were consistent with descriptions of current forest conditions in the plan. Operations were also found to be consistent with the strategies outlined in the plan Areas of Concern A sample of AOCs was examined during the audit. AOC widths were verified by overlaying depletion imagery on the approved planning maps and ground conditions were verified during the field audit. Other than one MAFA AOC (Block 773), which the audit team found had a portion that was slightly narrower than prescribed, there was no evidence of trespass into the AOCs. The Forest Management Guide for Conserving Biodiversity at the Stand and Site Scales (Stand and Site Guide) now permits harvesting within portions of MAFAs and the small incursion did not appear to compromise the value Harvest The audit team viewed completed harvest operations from the air and on the ground. No active operations were visited as these are occurring outside of the audit period. The audit team observed a high standard of adherence to FMP harvest allocations and to AOC prescriptions. GPS technology and the dedication of company staff and contractors appear to have almost eliminated the problem of trespass reported in the last IFA. This constitutes a significant improvement in performance. No site damage was observed either on the ground or from the air. This, too, is a commendable achievement of which the company can be justifiably proud. Slash disposal is a challenge not unique to the Nagagami Forest. Slash management was an issue on the last IFA and the problem has been exacerbated by shrinking markets for non-veneer grade aspen and conifer pulpwood. The audit team observed roadsides lined with poplar tree-length and softwood slash during its field trips. The problem has been made worse by the skidding to roadside of full-tree poplar from which only the veneer logs are removed. This is being done, apparently, to facilitate its later utilization in the Becker Cogeneration Limited plant, now under construction alongside the Haavaldsrud sawmill in Hornepayne. The precise amount of unmarketable hardwood and softwood slash at roadside that will be utilized remains to be determined. The company anticipates that it will all be used; however, plant size and delivery cost are limiting factors, as is the age and condition of roadside slash. Creating a viable market is undoubtedly the most effective way of dealing with waste, no matter what the type. Haavaldsrud Timber Co. deserves commendation for its part in the cogeneration plant venture, which will do much to improve utilization of unmarketable products and reduce roadside slash on the Nagagami Forest. Should there be a significant amount of unmanaged waste left behind, despite operation of the cogeneration plant, then MNR and NFM would need to take action. Cutovers were examined in the field for residual tree retention and compliance with requirements. While adequate numbers of trees were retained following harvest they were mostly hardwood trees that were will be killed by any follow-up aerial herbicide spraying. The Stand and Site Guide, and previously the Forest Management Guide for Natural Disturbance Pattern Emulation, require leaving a specified average number of large live wildlife trees per hectare to provide a compliment of live trees that will decline over an extended period of time, thus increasing their value to wildlife. See Appendix 1 for more information. KBM Forestry Consultants Inc. 8

14 Recommendation 3: NFM ensure, where possible, a component of large live conifer trees are left in harvest blocks where herbicide treatment is likely. The extent of advanced growth balsam fir that survives the harvest was of concern to the audit team. Most harvesting on the Forest is done full-tree using feller-bunchers and grapple skidders. Typically, an un-trampled corridor is left between skid trails with a high survival rate among advanced growth. This was observed both on lowland sites where CLAAG methods are desirable and on upland sites with high balsam fir content where they are not. The audit team s concern is that this practice will result in a higher than desirable proportion of balsam fir in the future forest condition and, in turn, greater vulnerability to future spruce budworm attacks. Stands with a minor balsam content confined to a suppressed position in the understory suddenly have their balsam fir thrust into a dominant position and full sunlight. The effect is greatest where older mixedwood stands are cut and the concern is greatest where white spruce is planted. The winter shear blading that was inspected was highly effective in reducing balsam fir but relatively little mechanical site preparation is done on the Nagagami Forest. Most sites are direct-planted with no site preparation at all. The audit team expressed concern that the proportion of balsam fir on the Forest may be increasing. NFM disputes this view and cites the destruction of balsam fir resulting from machine traffic during harvesting as evidence that it is being controlled. At this point, there is no conclusive proof one way or the other that there is a significant issue with balsam fir, only a concern on the part of the audit team that such a problem may be developing. The audit team believes that it is prudent to examine this question further. See Appendix 1 for more information. Recommendation 4: NFM, with the technical assistance of MNR, conduct a study on the effect of stand and site conditions, harvest method and treatment type on the content of balsam fir in the future forest condition, and that the NFM report on its findings in the Annual Report following completion of the study. The proposed study could be as simple as analyzing the change in species composition from the pre-cut to the post-ftg condition by forest unit, harvest method and treatment type. What would be learned could be used in the next FMP Silvicultural Ground Rules (SGRs) as a part of normal adaptive management. Markets and utilization are the key problems on the Nagagami Forest. Today, only a market for softwood sawlogs and poplar veneer remains. Figure 3. Volumes (m3) reported for the Forest during the audit term KBM Forestry Consultants Inc. 9

15 The utilization issue has been brought on by the closure of OSB mills accepting poplar in Wawa and Longlac, and by the closure of pulp mills accepting spruce and balsam fir in Terrace Bay, Marathon and Sault Ste. Marie. Nagagami Forest Management has lost two of its four original shareholders through these closures. Columbia Forest Products continues to receive wood from the Forest but is no longer a shareholder. Despite this and despite the other challenges facing softwood lumber producers, Haavaldsrud Timber has been able to remain open. In recent years, the only demand for Nagagami Forest wood has been for softwood sawlogs from Haavaldsrud and poplar veneer logs from Columbia Forest Products in Hearst. With the loss of its other markets, the company is no longer able to balance the demand for just two products with the supply from what amounts to a highly mixed forest. With a utilization standard that was impossible to meet and a commitment to supply its two remaining mills at the same time, the company amended its FMP and wrote its 2011 FMP using modified poplar utilization standards, in keeping with MNR-NE Region guidelines. In the field, the audit team found the company to be operating in accordance with these modified standards and it did not find the low level of poplar utilization to present a sustainability issue. The harvest left a large amount of unsightly, unused wood behind, much of it at roadside, but it did not appear to the audit team to impinge on forest renewal generally. Poplar stands with the requisite <30% residual crown canopy were found to be regenerating satisfactorily when left to regenerate naturally, and to contain adequate numbers of planted trees when treated to regenerate artificially. In the end, the low level of poplar utilization was not considered an issue by the audit team. A significant amount of merchantable conifer was observed in slash piles, which was not addressed in the FMP or through FMP Amendment #13. In late 2009, NFM approached MNR Wawa District for permission to amend the FMP to modify conifer utilization standards, citing the lack of markets for conifer pulpwood and chips. The request was to allow an increase in the minimum top diameter size from a 10 cm top to 14 cm. MNR did not reply in writing but indicated at a meeting with the JRM vice-president soon after that it would not support such a request. Despite the lack of an approval to do so, Haavaldsrud Timber s harvesting operations began topping conifer at roadside to a target 14 cm top, the rationale being that operations would have otherwise closed and that the unutilized merchantable material would be picked up for biomass, where possible, when the cogeneration plant became operational. The Becker Cogeneration Plant is under construction and is expected to start up by October, This is a commendable initiative that, along with the re-start of the Terrace Bay mill by AV Terrace Bay Inc, should go a long way toward solving the softwood utilization issue on the Nagagami Forest. In the meantime, action needs to be taken to resolve the conifer utilization issue and recover the unutilized fibre that has been left at roadside without proper approval to do so. See Appendix 1 for more information. Recommendation 5: MNR Wawa District and NFM come to an agreement on the conifer utilization associated with topping in excess of 10 cm diameter that will, as a minimum, specify precisely: o what merchantable material that has been left unutilized without authorization will be recovered for use and the Crown charges that will apply on this material, and o what merchantable material that has been left unutilized without authorization is beyond recovery for economic or other reasons, and the Crown charges that will apply on this material Silviculture Regeneration treatments are linked to harvest activity. Since 2008, markets collapsed and local markets for pulpwood disappeared. Harvest levels declined dramatically and were shifted to concentrate on upland pine, spruce and mixedwood stands where sawlog, hardwood veneer and hardwood biomass products could be harvested in stands that were close to the one remaining sawmill in Hornepayne (Haavaldsrud Timber). Slightly less than half of the area harvested was planted (4,957 ha or 44% of the actual harvest area). Fifty five percent (5,778 ha) of the area harvested was tended to encourage spruce, pine and fir regeneration and the remainder was regenerated naturally, leading most often to poplar and KBM Forestry Consultants Inc. 10

16 birch dominated stands. Lowland conifer stands also regenerate naturally to mixtures of spruce, larch and cedar. Field observations found that species were assigned to match the site conditions and were often planted in mixtures that matched the initial stand conditions. The planting program was well planned and implemented. Seedlings were healthy and vigorous and all regenerated stands were well stocked with trees. The company is managing its slash for biomass and residual piles are to be burned and then planted. The ratio of planned renewal treatments to actual harvest levels was assessed from the Annual Report data. The ratio of natural regeneration areas to harvest areas is 48%. The relative amount of area actually planted (44%) is higher than planned (31% of harvested area) because of the concentration of harvests on upland sites with suitable saw timber. In 2009 the harvest areas declined due to a temporary sawmill closure. The planting of areas harvested two years previous to 2009 amounted to 1,000 hectares, some of which was part of a Forestry Futures Trust stimulus program. An increase in the relative amount of planting should coincide with an increase in the relative amount of site preparation and tending. There is twice as much area direct planted without site preparation than was planned. The relative amount of harvest area planted (44%) matches the provincial average (44% of area harvested) but the site preparation planned (20%) and actual (21%) is less than half of the provincial ten-year average (40%) on a harvest area ratio basis. The area tended relative to harvested areas fluctuated over the five-year period and is similar to the provincial average (47% of area harvested). The company consolidates tending contracts into some peak years to generate economies of scale. The ratio of tended area to harvest area matches planned levels across the five-year term. Some areas planted in this term will be treated in the next term. Site preparation is significantly lower than the provincial average. Site preparation helps reduce balsam fir, control unwanted vegetation and warm the soil, allowing seedlings to better establish themselves. The Company plans to catch up on site preparation and uses winter blading as the preferred method. This technique improves planter access but does not warm the soil. Studies in British Columbia have shown that site preparation can increase growth rates and reduce rotation length by 10%. Studies in eastern Canada, however, found that the increased growth rates did not justify the cost of site preparation. MNR currently relies on natural fire pattern emulation at the landscape and stand scales as a course filter biodiversity conservation strategy. This strategy is a cornerstone of Provincial policy. Site preparation (fire or mechanical) helps emulate natural disturbance events like fire and wind throw at the microsite scale. In general, the reforestation program is well-run and will grow productive and healthy forests. The fine textured soils that dominate the Forest are quite productive and there was little evidence of compaction and rutting. These soil conditions favour mixedwood forests and balsam fir is abundant in the understory. Harvesting methods designed to protect advanced growth on some sites and protection of residual stems and patches required under the stand and site guides all contribute to enhancing residual structure and persistence of balsam fir. These practices combined with horse logging up to the 1970s, fire suppression and under-harvesting may create unnaturally high levels of balsam fir that are susceptible to periodic budworm outbreaks. Previous audits (2002 and 2007) identified that the increase in balsam fir is a forest health concern. The 2007 IFA suggested that mechanical site preparation and prescribed burning be considered as options to address these forest health concerns. MNR has recently modified its prescribed burn policies, which should make this treatment more cost effective using a risk assessment and management approach. See Appendix 1 for more information. Recommendation 6: NFM investigate the costs and benefits of increased productivity and reduced balsam fir composition through the use of mechanical site preparation and prescribed burns by establishing and monitoring trials within the next two years. It is not entirely clear to the audit team if an increase in site preparation on harvested areas alone will have a significant enough impact on reducing fir and mixedwoods in ways to address this potential forest KBM Forestry Consultants Inc. 11

17 health risk and to meet the Landscape Guides. Furthermore, the evidence from silviculture effectiveness monitoring is not sufficiently conclusive to determine the magnitude of the problem at this stage of review. These concerns are best addressed through the adaptive management process in the current forest management planning framework. Some questions worth exploring during the next planning and analyses phase are: How serious is the current forest development path in compromising forest health and landscape guide targets? If the trends are deemed serious, undesirable and unalterable using conventional forest harvest and renewal practices, would MNR consider changing the Stand and Site Guide to reduce residual patch retention and hence balsam fir representation? Would MNR also consider expanded prescribed burns into un-harvested areas to address these potential forest health risks? Access During the field portion of the audit, the audit team inspected road construction and maintenance, including water crossing installations and removals. Only one completely new road the Mosambik Road was planned in the FMP. It ended up going through the issue resolution process as described in the FMPM (see Section 4.2). In contrast to findings in the previous IFA, road maintenance was observed to be satisfactory with no significant drainage issues noted. Much work, including replacement of old culverts, had been accomplished under the Road Maintenance funding agreement and the work corresponded to invoice details for the sample viewed. Water crossing work was typically completed to a high standard, with one exception (WC 66 - perched) viewed in the field. Culverts were of proper size and placement, in good condition, properly installed, with stable banks and well armoured with rip-rap. Removals showed proper water diversion, stable banks and no evidence of soil movement into the water. 4.5 System Support Jackfish River Management operates from an office located in Hornepayne, which is centrally located in the Nagagami Forest. While the staff is small in number, several have decades of experience on the Forest and know it intimately. This was evident in the detailed silviculture prescriptions that were prepared based on on-the-ground reconnaissance. There are two registered professional foresters on staff. The company has an in-house geographic information system used for planning, data management and map production. Records were found to be well maintained. MNR Wawa District operates from a main office in Wawa and a satellite office in Manitouwadge, both an approximately two hour drive from Hornepayne. This distance poses some challenges for MNR staff to make regular visits to the Forest. District staff is well trained and qualified to undertake its responsibilities. Infrastructure support and resources were provided to fulfill MNR s role in forest management. The Forest Information Management (FIM) portal, an online data exchange system, helps to ensure document control. The audit team made use of the portal during the site selection and document review portions of the audit to access documents and the Geographic Information System data shared by MNR and the SFL holder. 4.6 Monitoring Compliance FOIP inspections conducted by MNR were below the MNR compliance plan level in the first three years of the audit term but above it in the final two years. The plan called for MNR to inspect 10% of company start-ups. MNR underperformed in the number of inspections in the previous audit period as well. MNR could consider contracting out its compliance inspection program where it knows that it cannot meet its inspection obligations. KBM Forestry Consultants Inc. 12

18 The company prepared and implemented a forest compliance plan meeting MNR requirements; however, some compliance inspection reports did not identify Operational Issues associated with conifer utilization. This issue is related to the utilization issue discussed in Section 4.3 and is dealt with in Recommendation Year 10 Annual Report The Year 10 Annual Report was prepared according to requirements, addressed the required topics and provided a reasonable synopsis and analysis of activities. The audit team found the observations and conclusions in the Year 10 Annual Report were generally consistent with those of the audit team. Due to market conditions and mill closures, actual harvest area across nearly all forest units was substantially below planned (53%) during the plan term. Utilization of available harvest volumes was also well below planned (42%), although jack pine harvest volume was 86% of planned. Volume trends over the previous three terms spanning 1997 to 2011 demonstrated a steady decline in spruce/pine/fir utilization and a recent steep decline in poplar utilization. Utilization of birch and incidental species such as cedar and larch remained consistently low. Planned versus actual tree planting levels have varied between terms but were close to planned in the term when prorated against harvest levels. Mechanical site preparation has consistently fallen short of planned. This is related to the practice of using careful logging methods and direct planting on the Forest. Chemical site preparation spiked in the term but has returned to modest levels. Aerial chemical tending levels have varied and are directly tied to the results of vegetation competition estimates conducted by JRM and to the refinement of herbicide prescriptions. A total of 19,436 hectares of FTG surveys were completed by the Company. The audit sample found the data to be consistent with field observations, an improvement from the last IFA. FTG data help to update the inventory and assess silvicultural program effectiveness. Table AR-13 in the Year 10 AR describes silviculture effectiveness and regeneration effectiveness. Although regeneration success is 98%, silviculture success is 54%. Silviculture success is achieved when a silviculture ground rule produces the expected forest unit. Table 2. Silvicultural Success vs. Regeneration Success Area (ha) Regenerated to: Projected Other Area Not Harvest Forest Unit Forest Successfully Silvicultural Regeneration Forest Unit Unit Regenerated Success (%) Success (%) Bw LC MW MW2 1, PJ PJ PO PO3 4,198 2, SB1 1,190 1, SB , SF , SP1 1, KBM Forestry Consultants Inc. 13

19 Area (ha) Regenerated to: Projected Other Area Not Harvest Forest Unit Forest Successfully Silvicultural Regeneration Forest Unit Unit Regenerated Success (%) Success (%) BOG Total 13,404 11, There are many problems with this type of analysis. The forest estate model recognizes that forests succeed along multiple pathways. The SGRs recognize a range of outcomes as being acceptable but can only list one forest unit when in fact several could be suitable. Forests that classify the forest into relative few and more complex forest units will more likely achieve higher silviculture success rates than forests that have more numerous and narrowly defined forest units. These higher scores may look good but mask trends and reduce the opportunities for institutional learning. Low success rates send a negative message to the public, suggesting that the reforestation program is not up to par, when in fact it could reflect artifacts of models and classifications schemes of a virtual world of forest estate modeling that is more precise and predictable than the real world. This is a significant issue in Ontario, where relatively low value and yields do not generate incomes or rationale for intensive forestry on the majority of sites. This reliance on extensive forestry produces more variable outcomes compared to plantation forestry found in temperate and tropical countries, yet might be a perfectly rational strategy. The audit team has raised this issue in previous audits and MNR is reviewing their forest renewal monitoring and reporting procedures. In recognition of the above problems, JRM did some additional analyses and developed a transition matrix tracking the forest units that were harvested to the forest units declared during the free to grow survey. The report author then described in detail the variances that have occurred. Some of these variances are artifacts of inventory and mapping practices but other variances suggest a need to update the SGRs or forest estate modeling assumptions. The additional analysis undertaken by JRM represents a best practice (Appendix 1). See Appendix 1 for more information. Best Practice: the analysis of forest renewal outcomes conducted by JRM in conjunction with MNR. The analysis shows that many mixedwood forest units are regenerating as spruce-fir forest due to protection of understory and tending practices. Many lowland spruce stands (SB3) are regenerating to lowland conifer (LC1) due to increases in larch. Larch representation is increasing across Ontario as this species is recovering from larch saw fly, an invasive species outbreak in 1920 that is now under control as predator populations adapted or have been introduced. 2 These trends are important to consider in future plans and may suggest a need to refine forest renewal strategies but should not necessarily be described as a silviculture failure or lack of success. The audit team has questioned the utility of the concept of silviculture success in previous IFAs and suggests MNR consider in future revisions of the FMPM the use of transitional analysis, such as the one completed for the Nagagami Forest, as a more meaningful approach to assessing silvicultural outcomes. The 80% target for clearcuts below 260 ha in size was not met in the term. The actual result was approximately 59%, the most significant shortfall being in the ha size class. However, overall movement toward desired distribution by size class was met. The AR author acknowledged the difficulty in achieving the targets given considerations such as forest and site conditions and species markets. Disturbance targets established in the FMP are tempered by limits set by MNR (i.e. what is socially acceptable) and fire suppression policies. They do not fully reflect the distribution of disturbance sizes that what would occur in a natural, fire-driven ecosystem (i.e. even more area in large disturbances). Having less area contained in small disturbances is consistent with a natural disturbance pattern. 2 accessed Nov 2012 KBM Forestry Consultants Inc. 14

20 Modeling assumptions from the FMP were reviewed by the AR author; however, there was no impact on the assumptions for the FMP as the long term management direction had already been set for that plan. The author identified shortfalls in harvest area and post-renewal succession as being the two areas where assumptions were not met, and suggested that the model could be run in the future using the lower utilization levels. Changes in the wildlife habitat matrices in the FMP confound the interpretation of trends in the information and make comparison to previous terms unreliable. Achievement of the FMP objectives was evaluated. Forest diversity objectives were met. Nontimber objectives were met, while timber objectives were not. Forest cover objectives were met, as were silviculture objectives. Based on the collective assessment of achievement of the management objectives and implementation of the FMP the Year 10 AR concluded that forest sustainability was being achieved. 4.7 Achievement of Management Objectives and Sustainability Achievement of Management Objectives The audit team s assessment of achievement of the FMP management objectives is summarized in Table 2, Appendix 2. Targets for most objectives were met, the most significant shortfall being the underutilization of the available harvest area. The current plan has only been implemented for one year, so it is too early to determine whether its objectives are on track to being met. The intent is to report on progress towards meeting these management objectives in the Year 7 and Year 10 ARs Forest Sustainability The audit team found that forest sustainability is being achieved. While harvest levels are depressed due to challenging market conditions, this doesn t appear to be a significant threat to sustainability at this time. During the previous audit term the Nagagami Forest had one of the highest harvest area utilization levels in the Province and the current under-harvest does not constitute a trend. Modelling was verified by the audit team and the long term management direction is sustainable. Overall, management objectives are being met, although social objectives associated with full harvest of the available harvest area are not currently being met. The silviculture program is keeping up with harvest levels and the forest managers have detailed on-the-ground knowledge of the Forest and its management. The audit team s concern over a possible increase in the balsam fir component on the Forest due to operational practises is based on observation. Firm data needs to be collected to know conclusively if there is real cause for concern (see Recommendation 4). Slash has been an ongoing challenge; however, Haavaldsrud Timber Co. has risen to the challenge with construction of the Becker cogeneration plant, which should lead to significant improvement in the use of slash and unmarketable fibre. Regeneration success rates are very high, although silvicultural success rates are approximately 60%, the latter being a function of how silviculture success is defined in the FMPM. The regeneration that is developing will most certainly lead to a viable forest. Access, harvest and silviculture operations are generally well executed and the environment is being protected during plan implementation. 4.8 Contractual Obligations NFM was in compliance with most of the conditions of the SFL (see Appendix 3), with two exceptions. Arrears of approximately $3 million have been accumulated for outstanding Crown dues (stumpage), Forestry Futures Trust contributions and Forest Renewal Trust Account contributions. Many firms were allowed by MNR to defer Crown dues during the Great Recession that began in 2008 and has not yet ended for the forest sector in Ontario. Some of these firms have since declared bankruptcy. In addition to the loss of Crown dues, the bankruptcies also raise issues about silvicultural or forest renewal liabilities. MNR has completed a study on the issue of silvicultural liabilities that is not yet available to the public. NFM and MNR have signed and are implementing a repayment agreement. The field evidence collected by the audit team indicates that silvicultural liabilities are not a concern. The forest sector markets are KBM Forestry Consultants Inc. 15

21 forecast to improve next year and the Terrace Bay pulp mill has resumed operations. These trends suggest that the repayment plan should be viable. An issue directly related to the utilization of conifer tops, discussed in Section 4.3, is the compliance reporting that was done for it. The audit team observed large conifer tops on a number of harvest blocks that were not properly reported in FOIP. Given that the FMP did not allow topping of conifer at greater than 10 cm, NFM inspectors should have reported an Operational Issue on each block in which conifer tops containing merchantable wood were being produced. According to FOIP, an Operational Issue makes or has the potential to make a forest operation non-compliant with the regulatory framework. The onus is on the licence holder s inspector to report Operational Issues, allowing MNR inspectors to verify such reports so that follow-up actions can occur. See Appendix 1 for more information. Recommendation 7: NFM and MNR Wawa District review compliance reporting practices and ensure that there is a clear understanding and consistent application of the concept of Operational Issues associated with compliance inspection reporting requirements. Most of the 30 recommendations contained in 2007 IFA report were fully addressed and the actions were effective in addressing the identified issues. Recommendation 1 (MNR compliance monitoring) was partially addressed in that MNR s compliance inspection targets were met in only two of five years. Recommendation 17 (developing a common compliance understanding) was also partially met in that some planned meetings and joint inspections were not conducted. Recommendation 23 (traditional means of access) was partially addressed. MNR re-stated its position on roads and cited the process in the FMPM and the fact that the FMPM is available to the public. Recommendation 30 (licence extension) was in process at the time of audit. 4.9 Conclusions and Licence Extension Recommendation The audit team found that NFM was committed to a high standard of management on the Forest during the review period and that it met its obligations under the licence in large measure. Notably, the Company prepared a good forest management plan and operated in general accordance with it. In addition, the Company achieved a very low incidence of site damage during harvest and a very high rate of regeneration success after renewal. All of the AOCs that were inspected received the protection due to them and none of the water crossings that were inspected showed environmental damage. Attention is required by NFM to address concerns with balsam fir regeneration, maintenance of a component of large, live trees in cut blocks, merchantable wood contained in conifer tops and accurate reporting of Operational Issues in FOIP. The audit team concludes that management of the Nagagami Forest was generally in compliance with the legislation, regulations and policies that were in effect during the term covered by the audit, and the Forest was managed in general compliance with the terms and conditions of the Sustainable Forest Licence held by Nagagami Forest Management Ltd. Forest sustainability is being achieved, as assessed through the Independent Forest Audit Process and Protocol. The audit team recommends the Minister extend the term of Sustainable Forest Licence for a further five years. KBM Forestry Consultants Inc. 16

22 APPENDIX 1 RECOMMENDATIONS Independent Forest Audit Record of Finding Recommendation 1 Principle 2: Public Consultation and Aboriginal Involvement Criteria 2.5 Aboriginal Involvement in Forest Management Planning Procedure 2.5.1: Aboriginal community consultation and involvement Background Information and Summary of Evidence: Supplementary Document G Aboriginal Background Information Report includes background information reports for: Hornepayne Aboriginal Community. Supplementary Document G Aboriginal Background Information Report discusses the creation of value maps for: Hornepayne Aboriginal Community The audit team was provided with a copy of a report created in 1996 called A Constance Lake Hornepayne First Nation Values Mapping Project, a draft Native Background Information Report from September 1999 for Constance Lake and a draft report on the protection of identified Native Values for Hornepayne from April A Preliminary report on the Protection of Identified Aboriginal Values was prepared in November Ginoogaming, Constance Lake & Pic Mobert all requested that values mapping be conducted. Their feeling is that their values are not being protected. Hornepayne Aboriginal Community would like to update their values maps. Their feeling is that not all values have been identified and therefore not all have been protected. Discussion: The current background information reports may be outdated and the communities expressed interest in values updating. Conclusion: MNR should act on the interest expressed by the three Aboriginal communities to update values information and the background information reports. Recommendation 1: MNR engage Ginoogaming, Constance Lake and Pic Mobert First Nations to conduct values mapping and prepare Aboriginal background information reports and contact Hornepayne Aboriginal Community to update their values maps and background information report. KBM Forestry Consultants Inc. 17

23 Independent Forest Audit Record of Finding Recommendation 2 Principle 2: Public Consultation and Aboriginal Involvement Criteria 2.3: Issue Resolution Procedure 2.3.1: Examine and assess the approach used to resolve issues identified by the public. Background Information and Summary of Evidence: One issue, the Mosambik primary road, went to issue resolution using the process described in Part A, Section of the FMPM. The issue remained unresolved at Step 7 in the process and the District Manager (DM) provided a written decision in accordance with the requirements of the Manual. In making his decision, the DM selected from among the three alternative road corridors that had been proposed through the forest management planning process and provided the rationale for his decision. The audit team found the DM s decision to be sound and his rationale to be clear. The concerned party (a remote tourism operator) remained unsatisfied and requested a review of the DM s decision by the Regional Director in accordance with Part A, Section of the FMPM. This process continued unresolved to Step 11, at which time the Regional Director provided her written decision with reasons. Discussion: In making her decision, the Regional Director selected a previously identified alternative without first subjecting it to the forest management planning process. For primary roads, the FMPM requires an identified corridor, an identification of AOCs, an environmental analysis, a rationale for the choice of the preferred option, a use management strategy for the road, public consultation and documentation of the process. The regional office was unable to provide a documentation of the process that led to the Regional Director s decision. In her letter of decision, the only condition placed by the Regional Director on her choice of the fourth alternative was its feasibility. The district manager was asked only to confirm whether the portion of this road option on private land could be converted to a Crown road. Conclusion: The audit team found that the Regional Director failed to provide a clear rationale for her decision. The reasons provided in the written decision stated only that her decision was based on additional information that was not available to the district manager at the time of his decision-making process. Recommendation 2: Corporate MNR review Part A, Section of the FMPM and ensure that its wording is clear that decisions made as a result of the issue resolution process must also meet the requirements of the forest management planning process. KBM Forestry Consultants Inc. 18

24 Principle 4: Plan Implementation Criteria 4.3: Harvest Independent Forest Audit Record of Finding Recommendation 3 Procedure Review and assess in the field the implementation of approved harvest operations. Include the following: residual stand structure required of the FMP, including individual residual tree retention and downed woody material. Background Information and Summary of Evidence: The Natural Disturbance Pattern Emulation Guide and more recently the Stand and Site Guide require the leaving of large live wildlife trees following harvest. Field observations during the audit noted that most residual stems left following harvest within harvest blocks were hardwood, principally poplar. Many of these blocks both sampled and viewed between sample sites had been aerial sprayed with herbicide, thus killing the live residual trees. Most of these blocks had been harvested principally for their softwood content and therefore there would have been opportunities to leave a mix of both hardwood and conifer stems. Discussion: The potential useful life of large live hardwood trees left following harvest is greatly shortened when follow-up herbicide treatments occur within the first few years following harvest. Since conifer trees are unaffected by the herbicide spray when applied at the correct time they should help to meet the intent of the guides that there be a component of large live trees left following harvest. Conclusion: Leaving a component of large, live conifer trees, in particular white spruce where it is found, would assist in meeting the intent of the guides of having a compliment of live trees that will decline over an extended period of time, thus increasing their value to wildlife. Recommendation 3: NFM ensure that, where possible, a component of large live conifer trees are left in harvest blocks where herbicide treatment is likely. KBM Forestry Consultants Inc. 19

25 Principle 4: Plan Implementation Criteria 4.3: Harvest Independent Forest Audit Record of Finding Recommendation 4 Procedure Review and assess in the field the implementation of approved harvest operations Background Information and Summary of Evidence: The extent of balsam fir advanced growth that survives the Nagagami harvest was of concern to the audit team, at least on certain sites. Typically an untrampled corridor is left between skid trails, with a high survival rate among advanced growth. This was observed both on lowland sites where CLAAG methods are desirable and on upland sites with high balsam content where they are not. Discussion: A mixedwood stand harvested by feller-bunchers and hot-planted without site preparation. A follow-up aerial herbicide application will reduce the hardwood competition but not the balsam fir. Essentially, the concern is that this practice will result in a higher proportion of balsam fir in the future forest condition and a greater vulnerability to future spruce budworm attacks. Stands with a minor balsam content confined to a suppressed position in the understory suddenly have their balsam thrust into a dominant position and full sunlight. The effect is greatest where older mixedwoods are cut and the concern is greatest where white spruce is planted. KBM Forestry Consultants Inc. 20

26 The winter shear blading that was inspected proved highly effective in reducing balsam fir but relatively little mechanical site preparation is done on the Nagagami. Most sites are direct-planted with a hand scalp and no other site preparation at all. Conclusion: Knowledge of the factors influencing balsam fir as a component of the regenerating forest will be useful in planning management strategies to reduce the impact of spruce budworm infestations. Recommendation 4: NFM, with the technical assistance of MNR, conduct a study on the effect of stand and site conditions, harvest method and treatment type on the content of balsam fir in the future forest condition, and the NFM report on its findings in the Annual Report following completion of the study. KBM Forestry Consultants Inc. 21

27 Principle 4: Plan Implementation Criteria 4.3: Harvest Independent Forest Audit Record of Finding Recommendation 5 Procedure: Assess whether wood utilization followed the Scaling Manual Background Information and Summary of Evidence: Utilization issues were observed repeatedly in the field during the audit. Harvest operations were leaving merchantable conifer with a diameter of cm for which there was no market or poor markets, without the approval of MNR. Low levels of poplar utilization were also observed in the field but this was not an issue for the audit team. NFM amended its FMP and wrote its FMP using modified poplar utilization standards, in keeping with MNR-NE guidelines. The audit team found the company to be operating in accordance with these modified standards in the field and did not find the low level of poplar utilization to be an impediment to forest renewal. On November 18, 2009, NFM approached MNR Wawa District for permission to amend its FMP to modify the FMP conifer utilization standards, citing the lack of markets for conifer pulpwood and chips. The request was to allow an increase in the minimum top diameter size from 10-cm to 14 cm. MNR did not reply in writing but indicated that it would not support such a request at a meeting with the NFM general manager soon after. In discussions with the audit team MNR indicated that their unwillingness to support such an amendment was tied to the deficit in NFM s Renewal Trust Account at the time. Despite the lack of an approval to do so, Haavaldsrud Timber s harvesting operations began topping its conifer at roadside to a target 14-cm top. At the audit wrap-up meeting on September 21, 2012, representatives of both NFM and JRM acknowledged this to be the case. Their stated rationale was that operations would have otherwise closed and that this material will be picked up for biomass, where possible, when the cogeneration plant is operational. Unlike the FMP, the FMP discusses the use of biomass as fuel for the cogeneration plant. Table FMP-15 contains a category for biomass and notes that non-sawlog volumes are to be used in the cogeneration plant or the pellet plant. Discussion: The market constraints that led to the NFM-FMP amendment request letter and to the Company s actions were significant impediments to full utilization. With the closures of Terrace Bay Pulp, Marathon Pulp, St. Mary s Paper and others, NFM was unable to dispose of the softwood pulpwood component of its harvest and Haavaldsrud Timber has been unable to fully dispose of its chips. Haavaldsrud has partnered with Anmar Limited of Sudbury to build a 10 MW cogeneration plant at its Hornepayne location. Operating as Becker Cogeneration Limited, the plant is under construction and is expected to start up by this time next year. Once running, the plant is expected to use 100,000 m 3 of mill residue and 70,000 m 3 of harvesting residue within a 45-km hauling radius, including slash and roadside poplar from which the veneer logs have been cut. This is a commendable initiative that will go a long way toward solving the softwood utilization issue. With the re-start of the Terrace Bay mill by AV Terrace Bay Inc. and the eventual start-up of the Becker Cogeneration plant, the issue of unutilized, merchantable softwood on the Nagagami will be greatly reduced. In the meantime, action needs to be taken to clean-up the conifer that has been left at roadside and to ensure that issues of this type do not happen again. KBM Forestry Consultants Inc. 22

28 Conclusion: Nagagami Forest - Independent Forest Audit The issue associated with large conifer tops left at roadside must be resolved by MNR Wawa District and NFM. Recommendation 5: MNR Wawa District and NFM come to an agreement on the conifer utilization associated with topping in excess of 10 cm diameter that will, as a minimum, specify precisely: o what merchantable material that has been left unutilized without authorization will be recovered for use, and the Crown charges that will apply on this material, and o what merchantable material that has been left unutilized without authorization is beyond recovery for economic or other reasons, and the Crown charges that will apply on this material. KBM Forestry Consultants Inc. 23

29 Principle 4.0: Plan Implementation Criteria 4.4: Renewal Independent Forest Audit Record of Finding Recommendation 6 Procedure: Assess whether site preparation and regeneration treatments were consistent with the FOP; the FOP was consistent with the SGRs; the FOP was certified by an R.P.F. or other qualified individual; and actual operations were appropriate and effective for the actual site conditions encountered. Background Information and Summary of Evidence: All of the procedures associated with this criterion found the renewal program to be professionally implemented and producing good results with one exception: The annual report data reveals the following trends: Audit Province Treatment Source Total Natural Regen Planned % harvest 60% 60% 60% 60% 56% 60% 54% Actual % harvest 136% 39% 46% 98% 99% 87% 48% Seeding Planned % harvest % Actual % harvest % Planting Planned % harvest 23% 23% 23% 23% 23% 23% 31% Actual % harvest 54% 27% 100% 35% 39% 44% 44% SIP Planned % harvest 22% 22% 22% 22% 9% 20% 40% Actual % harvest 5% 55% 7% 2% 24% 21% 40% Tending Planned % harvest 58% 58% 58% 58% 40% 55% 45% Actual % harvest 0% 84% 146% 32% 51% 52% 47% Harvest FMP Planned 3,711 3,711 3,711 3,711 3,188 18,032 AR Actual 2,743 2,922 1,037 2,507 1,959 11,168 AR/FMP (%) 74% 79% 27.93% 68% 61% 62% 59% There is twice as much area direct planted without site preparation than was planned. The relative amount of harvest area planted matches the provincial average but the site preparation planned and actual is significantly less than the provincial ten-year average on a harvest area ratio basis. The company compensates for reduced site preparation by carefully executing planting (hand scalping) and tending programs. Tree seedling survival is excellent and growth rates are good. The forest soil conditions favour mixedwood forests and balsam fir is abundant in the understory. The current harvesting methods intended to protect advanced growth on some sites and the stand and site guides requirements that require protection of residual stems and patches, all contribute to enhancing residual structure and persistence of balsam fir. These practices combined with horse logging up to 1970s, fire suppression and relatively lower rates of current harvest levels may create unnaturally high levels of balsam fir, which are susceptible to periodic budworm outbreaks. Previous audits (2002 and 2007) identified that an increase in balsam fir is a forest health concern. The 2007 IFA suggested that mechanical site preparation and prescribed burning be considered as options to address these forest health concerns. KBM Forestry Consultants Inc. 24

30 From FMP 2011 pg 321: Nagagami Forest - Independent Forest Audit Objective 4.3 states that there is one target candidate area for high complexity prescribed burn during the 10 year planning period. The burn is expected to occur in block number 776, which contains 116 hectares that was harvested in the FMP period. The current forests units in this block are SF1, SB1 and SB3 and the expected future forest units are SF1 and LC1. The FMP team would like to see the use of this tool in one block in this planning period. In the past MNR supported the use of PBs in forest renewal and the PB s were seen as excellent training opportunities for fire staff where fires could be suppressed in a more controlled and safer fashion than actual wildfire. However, MNR support for the use of PBs in forest renewal has been practically non-existent in recent years with complete cost recovery expected from the SFL for all aspects of the operation including full cost of suppressing unexpected excursions outside of the proposed PB boundary. Therefore, due to the uncertainty and associated liabilities with PBs SFL holders have been unable to support this renewal treatment. MNR has recently revised its prescribed burn policies using a risk management approach that should make this treatment cost effective. Discussion: MNR currently relies on natural fire pattern emulation at the landscape and stand scales as a course filter biodiversity conservation strategy. This strategy is a cornerstone of provincial policy. Site preparation (fire or mechanical) helps emulate natural disturbance events like fire and wind throw at the micro site scale and helps to reduce balsam fir and increase the growth rates of pine and spruce. Studies have shown site preparation can increase growth rates. 3 A jack pine direct planted in 2009 without site preparation is shown in the foreground left panel. A seedling planted the same day on exposed mineral soil from wind throw (background left panel and right panel) is much larger and illustrates the potential benefits of mechanical site preparation. 3 Hawkins, C., Steele, W, and T. Letchford, The economics of site preparation and the impacts of current forest policy: evidence from central British Columbia, Can. J. For. Res, 36: KBM Forestry Consultants Inc. 25

31 Conclusion: Mechanical site preparation and prescribed burning have the potential to improve silvicultural results on the Nagagami Forest. NFM should examine increasing the use of these methods. Recommendation 6: NFM investigate the costs and benefits of increased productivity and reduced balsam fir composition through the use of mechanical site preparation and prescribed burns by establishing and monitoring trials within the next two years. KBM Forestry Consultants Inc. 26

32 Principle 6: Monitoring Independent Forest Audit Record of Finding Best Practice Criteria 6.3: Silviculture Standards and Assessment Program Procedure 6.3.2: Assess whether the SFL/management unit assessment program is sufficient and is being used to provide the required silviculture effectiveness monitoring Background Information and Summary of Evidence: The audit team sampled Free to Grow (FTG) surveyed area and the sampled observations agreed with the data collected by the Company. This marks a considerable improvement over observations made in the previous audit where large variances were observed. In addition, these data were used in the Year Ten Annual Report to track silviculture success. Discussion: FTG data help update the inventory and assess silvicultural program effectiveness. The FMPM requires Table AR-13 to describe silviculture effectiveness and regeneration effectiveness in the Year Ten AR. Although regeneration success is 98%, silviculture success is 55%. Silviculture success is achieved when a silviculture ground rule produces the expected forest unit. There are many problems with this type of analysis. The forest estate model recognizes that forests will succeed along multiple pathways. The SGRs recognize a range of outcomes as being acceptable but can only list one forest unit as the measure of a successful outcome when in fact several could be as successful from a forest level planning perspective. Low success rates send a negative message to the public, suggesting that the reforestation program is not up to par, when in fact it could reflect artifacts of models and classifications schemes. This is a significant issue in Ontario, where relatively low value and yields do not generate incomes or rationale for intensive forestry on the majority of sites. More intensive forestry involves more inputs into the system to control the outcomes. An example of intensive forest management would be a spruce plantation where cleaning and tending eliminate all other species and hence impact future species composition and growth. Reliance on extensive forestry produces more variable outcomes compared to plantation forestry found in temperate and tropical countries, yet might be a perfectly rational strategy. JRM did some additional analyses that consisted of a transition matrix that tracks how forest units have changed since time of harvest to the condition when assessed as Free to Grow. This is much more meaningful than reporting whether or not a single post harvest succession pathway was successfully realized. The report also describes the factors that influence each post harvest succession pathway. The analysis provides information to refine silvicultural practices and improve model forecasts in the next plan. Conclusion: The audit team found that the additional analyses of forest renewal outcomes to be a best practice. Best Practice 1: The analysis of forest renewal outcomes conducted by JRM in conjunction with MNR. KBM Forestry Consultants Inc. 27

33 Principle 8: Contractual Obligations Independent Forest Audit Record of Finding Recommendation 7 Criteria : Compliance inspections and reporting; compliance with compliance plan Procedure: See IFAPP Section 6 Background Information and Summary of Evidence: An issue directly related to the utilization of softwood tops, discussed in Recommendation 5, is the compliance reporting that was done for it. The audit team observed large conifer tops in slash piles on a number of harvest blocks that were not properly reported in FOIP. None of the compliance inspection reports filed by the Company covering the period from November 18, 2009 to March 31, 2011 identified large conifer tops in the slash piles as an Operational Issue related to conifer utilization. These omissions occurred, despite the fact that photos attached to two of the reports (one Company and one MNR) clearly show the large tops. The audit team observed merchantable conifer (large tops) in slash piles in blocks 808, 934, 947, 954, 961 and 968. The company contends that operations were not complete in the sense that it still intended to return for biomass once the cogeneration plant was running. This intent was documented in comments by JRM inspectors on some inspection reports. The company cited this as evidence that they were not trying to conceal anything and that their intentions were clear regarding the recovery and use of this material as bio-energy feedstock. This photo, taken in December 2010 and attached to MNR- FOIP Report #470286, shows topping of conifer at a diameter larger than that allowed. KBM Forestry Consultants Inc. 28

34 This photo is associated with NFM Inspection Report # for Block 961 Discussion: NFM inspectors should have reported an Operational Issue on each block in which conifer tops containing merchantable wood were being produced. According to the Forest Operations Inspection Handbook, An Operational Issue describes a situation that arises when operations vary from normal operating practices or from the standards and requirements in the Forest Management Plan, Annual Work Schedule or Forest Operations Prescription, or from the terms and conditions of licenses, permits or other approval documents, as identified during a forest operations compliance inspection. An Operational Issue makes or has the potential to make a forest operation non compliant with the regulatory framework. In this case, the fact that MNR had not granted permission to NFM to use a larger conifer topping standard created an Operational Issue on harvest blocks where large tops were being generated. The onus is on the licence holder s inspector to report Operational Issues, allowing MNR inspectors to verify such reports so that follow-up actions can occur. Some completed harvest inspection reports did mention unutilized merchantable wood and the Company s plan for it. Conclusion: Some harvest compliance inspection reports submitted by NFM during implementation of the FMP were not accurate in that inspectors did not identify topping of conifer at 14 cm as an Operational Issue. MNR compliance reports also failed to identify this issue. Recommendation 7: NFM and MNR Wawa District review compliance reporting practices and ensure that there is a clear understanding and consistent application of the concept of Operational Issues associated with compliance inspection reporting requirements. KBM Forestry Consultants Inc. 29