Forest Management Certification Assessment Report for - Rainforest ...

Certified by:SmartWood Headquarters65 Millet St. Suite 201Richmond, VT 05477 USATel: 802-434-5491Fax: 802-434-3116www.smartwood.orgContact person: Jon Jicklingjjickling@smartwood.orgForest ManagementCertification AssessmentReport for:Tembec Industries Inc.Certification AssessmentPerformed by:SmartWood Regional Office215 Notre-Dame de l’Ile, #3Gatineau, QC, J8X 3T5Tel: 819-772-5740Fax: 819-772-5740Contact person: Alexandre boursierEmail: aboursier@ra.orgForest Licenses A19040 and A20212 inthe Cranbrook and Kootenay LakeTimber Supply AreasInThe East Kootenay area of SoutheasternBritish Columbia, CanadaACCREDITEDFSC-SECR-0013© 1996 Forest Stewardship Council A.C.FM-02 Dec 2004Operation Contact:Chris Stagg, Chief ForesterBC DivisionAddress: Box 4600Cranbrook BCV1C 4J7Report Finalized: Sept 11, 2006Assessment Date: Oct 12- Nov 28, 2005Assessment Team: Keith MooreCindy PearceTawney LemJohn GunnCertificate issue date:September 29, 2006Certificate code: SW-FM/COC-2033Page 1 of 89

ACRONYMSAAC Allowable Annual CutAOA Archaeological Overview AssessmentAIA Archaeological Impact AssessmentAT Alpine Tundra Biogeoclimatic Ecological ZoneBCTS British Columbia Timber SalesBEC Biogeoclimatic Ecosystem ClassificationBEO Biodiversity Emphasis OptionC & I Criteria and Indicators for Sustainable Forest ManagementCEO Chief Executive OfficerCFLB Crown Forest Land BaseCOSEWIC Committee on the Status of Endangered Wildlife in CanadaCWD Coarse Woody DebrisDMG Tembec’s Decision-Making Group on High Conservations Value ForestsEFAP Employee and Family Assistance ProgramEKCP East Kootenay Conservation ProgramEMS Environmental Management SystemENGO Environmental Non-government OrganizationESA Environmentally Sensitive AreaESSF Engelmann Spruce Sub-alpine Fir Biogeoclimatic Ecological ZoneECA Equivalent Clearcut AreaFDP Forest Development PlanFIA Forest Investment AccountFL Forest LicenceFPC Forest Practices Code of BCFRPA Forest and Range Practices Act of BCFSC Forest Stewardship CouncilGIS Geographic Information SystemHCV High Conservation ValueHCVF High Conservation Value ForestIDF Interior Douglas-fir Biogeoclimatic Ecological ZoneILO International Labour OrganizationIPM Integrated Pest ManagementIWAP Interior Watershed Assessment ProcedureJMAC Joint Management Advisory CommitteeKBHLPO Kootenay Boundary Higher Level Plan OrderKBLUP Kootenay Boundary Land Use PlanKNC Ktunaxa Nation CouncilLRB Labour Relations BoardMF Managed ForestMS Montane Spruce Biogeoclimatic Ecological ZoneMFZ Machine Free ZoneMOFR Ministry of Forests and RangeMSRM Ministry of Sustainable Resource ManagementPage 2 of 89

MWLAP Ministry of Water, Land and Air ProtectionNAR Net Area to be ReforestedNDT Natural Disturbance TypeNGO Non-government OrganizationNon-THLB Non Timber Harvesting Land BaseOGMA Old Growth Management AreaP&C Principles and Criteria of the FSCPEM Predictive Ecosystem MappingPP Ponderosa Pine Biogeoclimatic Ecological ZonePRT Pacific Regeneration TechnologiesRMA Riparian Management AreaRMZ Riparian Management ZoneRONV Range of Natural VariabilityRP Bio Registered Professional BiologistRPF Registered Professional ForesterRRZ Riparian Reserve ZoneRTE Rare, Threatened and EndangeredSFMP Sustainable Forest Management PlanSIBEC Site Index Biogeoclimatic Ecosystem ClassificationSOP Standard Operating ProcedureTAG Tembec’s Technical Advisory Group on High Conservation Value ForestsTEM Terrestrial Ecosystem MappingTFL Tree Farm LicenceTHLB Timber Harvesting Land BaseTSA Timber Supply AreaTSR Timber Supply ReviewTUS Traditional Use StudiesVQO Visual Quality ObjectiveWCB Workers Compensation BoardWHA Wildlife Habitat AreasWTP Wildlife Tree PatchPage 3 of 89

INTRODUCTIONThis report presents the findings of an independent certification assessment conducted by a teamof specialists representing the SmartWood Program of the Rainforest Alliance. The purpose ofthe assessment was to evaluate the ecological, economic and social sustainability of TembecIndustries Inc. forest management in two forest licences (FLs) issued by the government ofBritish Columbia - Forest Licence (FL) A20212 in the Kootenay Lake TSA and FL A19040 inthe Cranbrook Timber Supply Area (TSA). These are located in the East and West Kootenayregion of British Columbia, Canada and are part of Tembec’s Kootenay Columbia and KootenayCentral Regions.These operations were assessed using the accredited Forest Stewardship Council RegionalCertification Standards for British Columbia (October 2005). Throughout the report, thesestandards are referred to as the BC standards. The standards are available on the FSC Canadawebsite at www.fsccanada.org.The full report contains four main sections of information and findings and several appendices.This public summary report plus Appendices I and II provides public information aboutTembec’s forest management in the two areas under assessment and may be distributed bySmartWood or the Forest Stewardship Council (FSC) to interested parties. The remainder of theappendices, including the detailed findings of the assessment in Appendix III, is consideredconfidential, to be reviewed only by authorized SmartWood and FSC staff.The purpose of the SmartWood program is to recognize conscientious land stewardship throughindependent evaluation and certification of forestry practices. Forestry operations that attainSmartWood certification may use the SmartWood and FSC labels for public marketing andadvertising.NOTEThis document includes a summary of the initial assessment in which preconditions were identified.Following this (on page 71) is a summary of the precondition verification audit (PCVA) in whichSmartWood determined that the preconditions were met and all were closed. Please refer to the PCVA,not the assessment, for the final list of conditions.Page 4 of 89

1. Scope of the Certificate1.1. Scope of the certificateThis assessment has reviewed Tembec’s operating areas within the Kootenay Lake andCranbrook Timber Supply Areas (TSAs). Tembec refers to these areas as part of their KootenayCentral and Kootenay Columbia Regional operating areas. A map of these operating areas isincluded as Appendix IX. The areas are to the north, south, east and west of the town ofCranbrook and include an area of approximately 267,834 ha. They include forested areas close tothe smaller towns of Creston, Kimberly, Elko, Fernie, Sparwood and Elkford and near a host ofsmaller communities. In total 29 communities are considered “local” to these two operatingareas.Tembec’s operations are conducted under the provisions of two Forest Licences (FLs) issued tothem by the government of British Columbia. The land is described as Crown land, meaning theownership remains with the provincial government. FLs are long-term tenures for forestmanagement purposes. They are a volume-based tenure allowing Tembec to harvest, grow,process, sell and distribute a specified volume of wood products annually from the two TSAs.Tembec retains the reforestation responsibility until trees are free growing and has responsibilityfor road construction, deactivation and maintenance within the area of its operations. Tembecharvests their assigned annual cut from their assigned operating area in each TSA. The operatingareas have no formal legal status but are a clearly identified and mapped area of land withinwhich Tembec has had the exclusive rights to cut the timber resources for many years.The two operating areas are within the asserted traditional territory of the Ktunaxa NationCouncil (formerly known as Ktunaxa Kinbasket Tribal Council (KKTC) which includes fourBands in Canada – St. Mary’s Band, Lower Kootenay Band, Tobacco Plains Band and AkisqnukBand. There are no treaties that address their claim to ownership of the land and the Ktunaxa arecurrently negotiating a comprehensive land claim covering a large area including Tembec’soperating areas.More detailed information about the Tembec and the areas covered by the certificate is providedin Section 4.0 and in Appendix I and II of this report.1.2 Exclusion of areas from the scope of certificateNo areas in either of Tembec’s operating areas within the two TSAs were excluded from theassessment. All other areas within these two Timber Supply areas that are managed by otherforest tenures holders were excluded. The certificate is restricted to Tembec’s operations withinthe Kootenay Lake and Cranbrook TSAs. The scope of the certification process has focused onwood-based forest products (i.e. raw logs for use in sawmills and pulp facilities) harvested andutilized by Tembec or sold to other facilities. No commercial harvesting of non-timber forestproducts or any other forest resources is covered within the scope of this assessment or thecertificate.Page 5 of 89

Occasionally, land within Tembec’s operating area is withdrawn from the forest managementland base in the TSA to expand coal mining operations, or for infrastructure (such as powerlines)or recreational development (such as skihills). This has not occurred recently but could occur infuture. At that time, land would be withdrawn from the certified area, and the chain of custodycertificate would not cover timber cut from those lands. Tembec would be required to do a“Controlled Wood” assessment if it wished to purchase timber from these lands.Tembec is a large integrated Canadian forest products company that markets solid wood and pulpand paper products in over 50 countries. It has operations in six provinces of Canada – NewBrunswick, Quebec, Ontario, Manitoba, Alberta and British Columbia – and also has operationsin the United States and France. In BC, in addition to the operating areas covered in thisassessment, Tembec’s operations include Tree Farm Licence (TFL) 14 at Parsons BC; theInvermere operating area within the Invermere TSA (FL 19878 and Managed Forest (MF) 72) 1 ;MF 27 and the Dominion Coal Blocks near Sparwood; and two Forest Licences and a PulpwoodAgreement near Chetwynd in northeastern BC.This assessment considered only the operations in the Kootenay Lake and Cranbrook TSA and allother areas are excluded from this certificate. Several of the other Tembec operations alreadyhave FSC/SmartWood certificates, including TFL 14 and the Invermere area in BC and others inOntario and Quebec. Tembec has made a commitment to certify all of its operations to FSCstandards.1 Both TFL 14 and the Invermere operating area (FL A18978 and MF 72) have received FSC certificates.Page 6 of 89

2. ASSESSMENT PROCESS2.1 Certification standard usedThis assessment was conducted using the FSC Certification Standards for British Columbia(version of October 2005). A version of this standard was preliminarily accredited by FSC in2003 with a number of conditions requiring changes and improvements to the standard. InOctober 2005, at the time of the assessment, extensive changes had been made and endorsed byFSC Canada and submitted to FSC for final accreditation. A copy of the October 2005 version ofthe Standards was provided to the team and the assessment was conducted using this finalversion. Immediately following the assessment, on October 31, 2005, the Standards wereaccredited by FSC. The accredited BC standard is available through the FSC Canada website(http://www.fsccanada.org/).2.2 Assessment team and qualificationsThe assessment team consisted of four experienced SmartWood assessors. This same teamundertook assessments of two other Tembec operations in the East Kootenays – TFL 14 at ParsonBC in 2003, and Tembec’s operating area at Invermere, BC in 2004.Keith Moore, M.A., R.P.F. – Team leader and forestry assessor – Keith is a forester and hasworked in forestland management and environmental assessment in Canada and internationallysince 1976. Keith completed the SmartWood Lead Assessor training and been involved withSmartWood and FSC certification since 2000. He has been a team member and team leader onsixteen other SmartWood assessments, pre-condition audits and annual audits in Canada, Russiaand Australia. He co-ordinated the field-testing of three FSC regional standards – the NationalBoreal standard for Canada, the Ontario Boreal standard, and the BC standard. He alsoparticipated in field-testing FSC standards for the Komi Republic in Russia and is presentlyassisting with the development of FSC standards for Montenegro and Kenya. (KM)Cindy Pearce B.S.F, R.P.F. – Social assessor. Cindy is a consultant in natural resource planningand rural community development in BC. She has a B.S.F. from Oregon State University andpost-graduate training in planning and community development at the University of BritishColumbia. Since 1991 her work has focused on the public aspects of resource management,including land use planning, public consultation processes, impact analysis, forest worker issuesand community development planning. Since 2000 she has been involved in the social andeconomic aspects of forest certification. This is her third FSC assessment in BC. (CP)Tawney Lem B.A. – First Nations, socio-economic and planning assessor – Tawney is anindependent consultant who provides policy development and analysis services to First Nations,non-profit groups and the corporate sector in the areas of governance, land use planning, andconsultation processes. She has been a team member on eight SmartWood assessments or annualaudits in BC and Manitoba. Tawney has taken the SmartWood Assessor training course, and hasa Bachelor’s degree in Political Science from the University of British Columbia. The currentfocus of her work includes corporate governance policy training, First Nation’s territory land usePage 7 of 89

planning, and consultation protocol and process design. Prior to this, Ms. Lem spent six yearsmanaging the treaty process for a Vancouver Island First Nation. (TL)John Gunn, Ph.D. Ecologist – John has been a team member or team leader on more than 25SmartWood forest management annual audits and assessments in the northeastern United Statesand Canada. John has also led more than 15 chain of custody audits and assessments throughoutthe United States. John holds a Ph.D. in biology from the University of New Brunswick, aMaster of Forest Science from the Yale University School of Forestry and EnvironmentalStudies, and a B.S. in Wildlife Management from the University of Maine. John’s professionalexperience includes four years as Vice President of Conservation and Land Management for aprivate timber company in Maine. (JG)2.3. Report peer reviewersPeer Reviewer #1 has a B.S. in Forestry and over 20 years experience in forest management inBritish Columbia, including as a silviculturist, forest ecology instructor, and consulting forester.Peer Reviewer #2 is a specialist in community and natural resource sociology, with a Ph.D. inSociology and over a decade of experience working with the forest industry.2.4. Assessment scheduleDate General Location Main activitiesAugust 23-25, 2005 Cranbrook Pre-assessment meeting (KM, TL and CP). Fieldsite selection, Interviewee identification,assessment planningAugust 25-Sept 2,2005September 30-Oct 7,2005October 12-21, 2005October 21-Nov 28,2005CranbrookPreparation of newspaper ads, public notices,assessment public survey, letters to First Nationsand government managers. Delivery of ads tonewspapers, posting of notice on websites, andmailout of letters and notices.Assessors offices Assessors reviewing evidence binders (total of 6binders) and CD of major documents and makingphone calls to set up interviews for assessmentperiod.Cranbrook, Kimberley,Creston, Sparwood, FernieCranbrook and assessorsofficesAssessment period – Assessors doing field-work,and interviews in many locations and documentreview in Tembec offices. Three public OpenHouses and meetings with First Nationsrepresentatives, NGO representatives and localand provincial government representatives.Exit meeting. PowerPoint presentation providedto Tembec on October 21.Additional interviews and document review,receipt of additional evidence documents fromTembec, receipt of surveys and comments frompublic and interested groups. CP in CranbrookPage 8 of 89

December 1-Jan 31,2006June 9, 2006 – June23, 2006Assessors officesdoing interviews. KM, TL and JG conductinginterviews by phone, and reviewing documentsfrom officesAssessors preparing draft report. Additionalinterviews with Tembec staff and additionaldocuments requested and reviewed. Fourconference calls to review material collectivelyand reach decisions. First draft of Appendix III,sent to SmartWood for review. Complete firstdraft sent to Tembec on January 31, 2006Assessors reviewed Tembec comments on firstdraft. Team leader met with Tembec, and theteam prepared revisions to report, Pre-Conditions,CARs and observations in response to Tembeccomments. A complete draft for peer review sentto SmartWood and Tembec for further review.Total number of person-days used for the assessment: 60 person days of preparation and fieldwork. Total level of effort for the whole assessment (including additional stakeholder outreachand report writing) is 123 person days.A full list of sites visited is in Appendix VI.A full list of persons interviewed during the assessment is in Appendix VII.2.5. Evaluation strategySmartWood and the assessment team had conducted assessments of Tembec’s other forestryoperations in the East Kootenay area of British Columbia in 2003 and 2004. Team memberswere familiar with Tembec’s personnel, sustainable forest management plan (SFMP) and forestoperations, as well as the geography of the assessment area, the First Nations, community,economic, social and environmental issues and many of the interested parties.The assessment planning began in the early summer of 2005, with frequent interaction betweenthe team leader, SmartWood task manager and Tembec staff regarding the use of the 2005version of the BC standard, public notification requirements and assessment planning. Threemembers of the team met with Tembec staff in Cranbrook between August 23 and 25, 2005 for amini-scoping and pre-assessment planning meeting. Team members interviewed Tembec staffand representatives of some major interest groups during this period to identify issues expected toarise during the assessment and to understand the scope and nature of some recognized majorissues – including contractor and worker issues, safety and employment standards issues, FirstNations, mountain caribou and high conservation value forests. The team addressed many detailsof the assessment plan with Tembec and began to compile and review documents. Several otherimportant tasks were completed including:• Selection of sites for field assessment;• Completion of the data base of tenure and rights holders, customary users and directlyaffected persons for notification purposes;Page 9 of 89

• Classification of the tenure and rights holders, customary users and directly affectedpersons into categories to develop a Consultation Plan and identify a representativesample of these diverse interests for personal interviews;• Identification of the evidence and documents required in Evidence Binders from Tembecin advance of the field work;• A detailed assessment plan addressing arrangements for notification through newspaperads, public notice and direct contact, the location of open houses, assessment reportstructure, scheduling, report delivery dates and many other logistical issues; and,• A decision to use the February 2005 draft of the BC Standard which was expected to beaccredited later in 2005 by FSC. This standard was in fact endorsed in October 2005, andis the standard that is used throughout this assessment report.The sites to be field reviewed by the forestry assessor (KM) and the ecologist (JG) were selectedby the team leader (KM) from a complete listing of all cutblocks in which logging was conductedin the 2003/04 and 2004/05 operating seasons. Approximately 60 individual blocks andassociated roads were selected for review through a structured sample selection process designedto ensure that each assessor saw examples of all harvesting systems – ground-based, cable andhelicopter yarding – in recent cutblocks and roads in all timber types and all of the subzones in 5forested biogeoclimatic subzones in both operating areas. Sites selected by the forestry assessor(KM) included examples of specific management issues, including visible landscapes; potentiallyunstable terrain; avalanche hazard areas; special harvesting measures for mountain pine beetle;archaeological sites; coarse woody debris and waste; levels of structural retention; silviculturetreatments (site prep); forest fire salvage; heavily harvested watersheds; road construction,maintenance and deactivation; community and domestic watersheds; all classes of streams, lakesand wetlands; areas with high recreational value; and other areas with high public interest orconcern. Sites selected for review by the ecologist (JG) included examples of management of redand blue listed species, particularly mountain caribou, grizzly bears, badgers and cavity nestingbirds; habitat restoration; potential High Conservation Value Forests; access management;wildlife tree patches; levels of structural retention; and landscape level cutting patterns. Twohelicopter overviews were scheduled to fly over two controversial areas of the management unit– the Upper St. Marys/Meachen/Hellroaring area, and the Flathead and Elk River Valleys.Tembec prepared binders with site maps, operating prescriptions and relevant assessmentdocuments for each block selected and gave those to the assessors prior to fieldwork.The team was aware that there were many groups and individuals, with an enormous variety ofrights and interests, who would potentially be interested in providing information and commentsto the assessment team regarding this assessment. The team asked Tembec to compile a currentand complete database of individuals and groups who might be interested in the assessment.Using experience from two previous assessments, the social assessor (CP) worked with Tembecto review the database and to make additions and amendments and remove duplication. Based onthe mailing list that was developed, notices of the assessment were mailed to 530 individualaddresses. In many cases, a single individual represented a number of interests such as localresident, forest recreation user, and user group representative. A two-page survey form seekingcomments about Tembec’s operations, and a map of the assessment area was included with thenotice and a stamped envelope was provided to return the survey to the social assessor.Page 10 of 89

The First Nations assessor (TL) wrote separately to each of the Chiefs and Councils of the fourbands affiliated with the Ktunaxa Nation Council (KNC), the administrator of the KNC, staff andmanagers in varying departments of the KNC, and Ktunaxa businesses including the KtunaxaNation Development Corporation (KNDC). These groups also put the First Nations assessor incontact with forestry co-ordinators from the bands. The assessment process was explained toeach party and a request was made to meet with their representatives.Ads were placed in four local newspapers (Cranbrook Daily Townsman, Kootenay Advertiser,Creston Advance, Fernie Free Press) in the beginning of September 2005 to announce theassessment and the opportunity to comment on Tembec’s operations. Contact with the team wasencouraged by providing the e-mail addresses, fax numbers and phone numbers of the teamleader and social assessor.Notices of the assessment were e-mailed to 9 provincial government agencies and theircomments and assistance requested. A notice was e-mailed to FSC Canada for distribution andnotice was posted on the SmartWood and FSC Canada websites.Two weeks prior to the opening meeting of the assessment, Tembec delivered evidence bindersto each assessor providing documents and information related to each of the indicators in the BCstandard. A complete set of six 3-inch Evidence Binders was given to the team leader. Otherteam members received binders with evidence related to their areas of responsibility. Tembecalso provided a CD with copies of the most important documents (SFMP, Annual Reports,Sustainability Reports, draft HCV assessments). Additional material was provided throughoutthe assessment period.Immediately prior to the assessment, three team members, but particularly the social assessor,made phone calls to confirm interviews with persons identified on the Consultation Plan. Callswere returned to 8 individuals or organizations who responded to the newspaper ads or returnedthe survey form and requested an interview prior to October 7. The team leader developed adaily schedule for all the assessors.The active field and interview portion of the assessment began on October 12, 2005. All fourassessors were present on site from then until October 20. During this period, two assessors (KMand JG) visited 49 different cutblocks from this sample throughout both operating areas andreviewed specific aspects in detail over 6 days of fieldwork. Observations were made alongmany other roads and cutblocks and locations as the assessment team members traveled from siteto site. In addition, team members made two extended helicopter reconnaissance flights over alarge area within both operating areas. A complete list of cutblocks visited and reconnaissanceflights and the aspects of management examined in each is provided in Appendix VI.List of management aspects reviewed by assessment team:Type of siteSitesSitesType of sitevisitedvisitedRoad construction Yes Illegal settlement N/ASoil drainage Yes Bridges/stream crossing YesPage 11 of 89

Workshop No Chemical storage NoTree nursery (off-site private) No Wetland YesPlanned Harvest site Yes Steep slope/erosion YesOngoing Harvest site Yes Riparian zone YesCompleted logging Yes Planting YesSoil scarification Yes Direct seeding N/APlanting site Yes Weed control NoFelling by harvester Yes Natural regeneration YesFelling by forest worker Yes Endangered species YesSkidding/Forwarding Yes Wildlife management YesClearfelling N/A Nature Reserve YesShelterwood management N/A Key Biotope YesSelective felling Yes Special management area YesSanitary cutting Yes Historical site N/APre-commercial thinning N/A Recreational site YesCommercial thinning N/A Buffer zone YesLogging camp N/A Local community YesTwo assessors (CP and TL) interviewed representatives of local governments (5), loggingcontractors (7), union workers (4), loggers (7), tenure holders (18), local interest groups (21),wood processors and users (5), local residents (9) and local equipment dealers (2). The teamleader participated in several interviews particularly where controversial issues had beenidentified in advance. The First Nations assessor met with a total of 19 people, representing theKNC administration, 3 KNC departments, 2 Ktunaxa businesses, 3 bands and 3 Ktunaxa forestrycontractors. Assessment team members (KM, CP and TL) also interviewed 15 representatives ofgovernment agencies involved in forest management, compliance and enforcement, safety andlabour standards.Throughout this portion of the assessment, the team met every evening to compare fieldobservations with findings in interviews or document reviews. Issues being raised with oneassessment team member were discussed with others and followed up with fieldwork or furtherinterviews. All team members had involvement in, and input into, all aspects of the assessment.To the extent possible, any specific sites identified during interviews or in the public surveyswere visited in the field. A special field trip was made to the far western end of the assessmentarea to follow up on concerns for watershed restoration, and additional field trips were made tospecific sites in the caribou zone, a nature park and a community watershed.Open Houses were held in the communities of Creston, Cranbrook and Sparwood through theafternoon and evening on days specified in the newspaper. At least two assessors were present ateach session to listen to comments from interested public. Two assessors (KM and CP) met withthe Mayor and council of the town of Creston, and talked separately with the ChiefAdministrative Officer. The social assessor interviewed representatives of the cities of Fernieand Kimberley and the Regional District of East Kootenay. The social assessor returned toCranbrook in the week of November 14, 2005 to conduct additional interviews. Team memberscontinued to follow up with specific questions and clarifications with Tembec staff, governmentstaff and members of other organizations or members of the public until January 13, 2006.Page 12 of 89

During the assessment period, the assessors interviewed a total of 96 people who were notaffiliated with Tembec. The team interviewed 32 Tembec representatives (both staff andconsultants). A description of the type and number of interested persons contacted andinterviewed is provided in Section 2.6. A brief description of comments made about Tembec’sactivities and the response of the team are provided in Section 3.1. A complete listing of thepersons interviewed is in Appendix VII.The team received a total of 43 written submissions, including 38 surveys, a letter from a localresident, a 6-page submission with analysis at the indicator level from a local environmentalgroup, a 4 page submission from a local resident with comments at the indicator level, and aletter expressing concerns about specific criteria from a local chapter of an environmental group.Report writing began in December 2005. Each assessor prepared findings for each of theindividual indicators in the 2005 BC standard in their area of responsibility. These findings werecirculated and reviewed by each team member. Four lengthy team conference calls were heldbetween December 15, 2005 and January 13, 2006 to discuss and confirm findings and to agreeon the language of Pre-conditions, Corrective Action Requests and Observations where nonconformancewith the Standard was identified. A first draft of the assessment findings(Appendix III of this report) was delivered to the SmartWood task manager for review onJanuary 17, 2006 and a full draft report was sent to Tembec on January 31, 2006. Tembecreviewed the draft and sent comments to the assessment team leader on May 12, 2006. The teamreviewed those comments and completed a final draft of the assessment report on June 23, 2006.The final draft of the assessment report was sent to Tembec and SmartWood for external peerreview. Two peer reviews were conducted in July 2006. SmartWood revised the report in thelight of the reviewer’s comments and sent the report to Tembec for final review. SmartWoodreached its decision late August 2006.2.6. Consultation processThroughout the assessment process, the team made a major effort to contact representatives ofgovernment, First Nations, contractors and workers, communities, tenure holders, interest groups,and interested individuals. Through various notices and newspaper ads, the team encouragedthese interested individuals and groups to provide the team with their comments about Tembecand their forest management practices. The notification process is described in Section 2.5above. The table below provides the number of individuals in various groupings or types whoreceived notice by mail or e-mail.As described in Section 2.5 above, the team interviewed 96 individuals representing a broadrange of interests during the assessment. The table below provides the number of individuals ineach of the various groupings or types who were interviewed by the team. These individualswere interviewed for one or more of the following reasons:• They were chosen by the team from the data base as a representative of a particular groupof interests or as people who represented several different interests (for example, wateruser, range tenure holder, and member of outdoor recreation group) and were contactedby the team; or,Page 13 of 89

• They were identified by others as people with information and informed opinion aboutTembec and were contacted by the team; or,• They contacted the team by phone or e-mail in response to the public notice and requestedto be interviewed; or,• They returned a survey form to the team and requested to be interviewed; or,• They attended an Open House and spoke to one of the team members.Some interviewees represented more than one interest group and provided comments from anumber of different perspectives. Thus, the 96 individuals represented 112 interest group types.In addition to interviews, the team also received input through the survey forms that werereturned to the team and through written submissions. There were a total of 43 writtensubmissions. These are also included in the table below.Interest Group Type(government agency, FirstNation, tenure holder, NGO,local resident, contractor etc.)Number of individuals,or organizationsinformed by mail or e-mail in advanceNumber ofrepresentatives ofinterest groupsconsulted or providinginputProvincial government 9 11Employment practices and safety0 4standardsLocal and regional government 10 5First Nations 9 19Contractors 134 9Labour and forest workers 29* 12Tenure holders 300 17Interest groups 70 21Wood processors 17 5Individual residents 47 9TOTAL 625 112 2Written Submissions 43 3* Does not include workers employed by contractors2 The total number of persons interviewed was 96. They represented 112 different interest groups.3 Some of the persons or groups who provided written submissions were also interviewed by the team.Those people are included in the total number of interviews.Page 14 of 89

3. ASSESSMENT FINDINGS AND OBSERVATIONS3.1. Comments received from Interested Parties During the Assessment 4As described in Sections 2.5 and 2.6, the assessment team conducted 96 interviews with a broadrange of interested parties and received 43 written submissions. The comments received covereda huge array of subjects and ranged from very positive to very critical about Tembec’smanagement of a variety of social, environmental and community issues. The following tablebriefly summarizes comments that suggested non-conformance with the FSC Standard andbriefly provides the team’s response. Most of these issues are complex and are dealt with inmore detail in the auditors’ findings section (Appendix III), which is not included in the publicsummary. It is impossible to list and respond to every single specific issue that was raised.However, the team believes that the Table below identifies the general topics of comment thatwere raised and addressed during the assessment.The assessment team received many positive comments about Tembec’s forest managementpractices and operations. Positive comments were particularly made about: ongoing consultationwith the Ktunaxa Nation Council; dedicated, competent and respected planning staff; extensiveand thorough safety and environmental training programs; and a low accident frequency.The following Table lists comments and assertions that were made by various interestedparties to the assessment team during the assessment. The comments in the middle columnreflect the views of those who made them. They are NOT the views of the assessment teamand are not presented as factual. The left hand column provides the assessment team’sresponse.FSC PrincipleP1: FSCCommitment andLegal ComplianceComments from InterestedParties• Motorized recreation vehiclesdamage forest management areas andlaws to control such activities are notenforced by government.• There may be potential “conflicts”between the law and FSC-BCrequirements involving otherauthorized activities such as oil andgas, coal and coal-bed methane.Assessment Team Response• There has been some vehicle activity inareas closed to vehicle traffic. Thedamage from such activities was notconsidered significant. Tembec istaking steps to prevent illegal activities.Based on the steps taken by Tembec,there is no non-conformance with theStandard.• There are no areas within Tembec’soperating areas that involve timberremoval for coal development or oil andgas or coal bed methane. In the eventthat government approves theseactivities, the area would be excluded4 The assessment team prefers not to use the term “stakeholder” to describe those interested individualsand groups who provided comments to the team either in interviews or in written submissions during theassessment. The term “interested parties” is used in place of “stakeholder”.Page 15 of 89

FSC PrincipleP2: Tenure & UseRights &ResponsibilitiesComments from InterestedParties• There is a concern about compliancewith Indicator 1.6.3 – some woodfrom mining development clearingmay fall in this category.• Tembec does not appear to meetIndicator 2.1.1 – they hold a volumebasedtenure without joint applicationwith the BC Government, andwithout a designated area for harvestcalculations. A “chart area” is not alegally defined management unit. Itis also unclear whether they areworking with the government asrequired.• There are significant overlappingtenures that are underminingAssessment Team Responsefrom the certificate, and the timber cutfrom these areas would not be includedwithin the chain of custody certificate.The team concluded that the mentionedother activities did not represent aconflict between laws and the FSCPrinciples and Criteria.• There will be no “non-FSC products”from the certified area as any coalmining or other developments would beexcluded from the scope of thecertificate. A controlled woodassessment would be required ifTembec obtained this timber andplanned to include it with its certifiedwood. The team interpreted Indicator1.6.3 narrowly to confine it to theoperating areas, not to all of Tembec’sfacilities throughout the EastKootenays. The team did not find anynon-conformance with Indicator 1.6.3.• The team reviewed Criterion 2.1 veryclosely and concluded Tembec is inconformance with the indicators in thisCriterion. Tembec does have a definedoperating area which is mapped andrecognized by government and othertenure holders. While not technically“legal”, it has recently been confirmedthrough a complex internal governmentprocess related to Bill 28. Tembec’spresent exclusive right to harvest in thearea is confirmed. If “legally” definedland area was required, FL’s could notbe certified. Tembec has approachedgovernment seeking a co-operativeapproach, and there is no evidence thatgovernment has refused, or is refusing,to approve plans and permits that areconsistent with meeting FSC standards.Indicator 2.1.1 does not require aseparate AAC determination at thistime. The team has imposed CAR12/06 to require a separate timbersupply analysis for the operating areaswithin each of the TSAs.• There are no overlapping forest tenures.Cattle grazing in riparian areas andmineral exploration roads in potentialPage 16 of 89

FSC PrincipleP3 – IndigenousPeoples’ RightsP3 – IndigenousPeoples’ RightsComments from InterestedPartiesachievement of the standards (i.e.grazing, oil and gas, hard rock miningand commercial recreation).• Land claims have not been settled.(non-Ktunaxa comment)• Indigenous people of the EastKootenays do not control forestmanagement. (non-Ktunaxacomment)• Consultation has been inadequate.(band comment)• Forest management, e.g. reliance onclearcut, is threatening the resourcesof indigenous people. (non-Ktunaxacomment)• Indigenous people are not properlycompensated for their traditionalknowledge. (non-Ktunaxa comment)Assessment Team ResponseHCVF areas are identified as twoactivities under tenure to others that canundermine Tembec’s ability to achievethe management objectives. CAR 4/06is imposed.• The FSC standard does not require that“land claims” be settled in order for thelegal and customary rights ofindigenous people to be respected. Thisis a legal issue of the Crown, not offorestry companies. Tembec isdemonstrating respect for aboriginalrights through a signed Protocol andConsultation & Accommodationagreement. Ktunaxa have not indicatedthat their rights are not being respected.Therefore, there is no nonconformance.• Processes are being jointly developedbetween Tembec and the KNC that willensure that indigenous people havemeaningful input into Tembec’s forestmanagement activities in the Ktunaxaterritory. Additional work on jointmanagement and consultation isrequired at the band level. CAR 5/06has been imposed.• Ktunaxa have expressed generalconcerns about harvest levels and theimpact of harvesting on the land, buthave not reported any specific impactsor damage to their resources. Not allresource interests have beencommunicated to Tembec, but this willincrease with the completion of theKtunaxa land use plan and traditionaluse study. Strategies do need to bedeveloped to address the general valuesthat have already been articulated (e.g.wildlife, cultural heritage, fisheries andplants and grasses). CAR 6/06 has beenimposed.• Ktunaxa report that they have notshared any traditional knowledge withTembec that would requirecompensation.Page 17 of 89

FSC PrincipleP3 – IndigenousPeoples’ RightsComments from InterestedParties• Some of the terms in theConsultation and AccommodationAgreement, e.g. related to financial,technical and logistical capacity, arenot adequate. (band comment)• Tembec needs to increase the amountof economic benefit that bandcontractors are receiving in order toshow respect for their rights. (Bandcomment)• Work at the JMAC subcommitteeshas progressed well, except for at theProcurement subcommittee.• There are a variety of issuesregarding First Nations Contractors.• The level of implementation of theagreements between Tembec andKNC is inadequate at the operationallevel.Assessment Team Response• The Consultation and Accommodationagreement has been signed by the KNC.Concerns about the terms of theagreement are an internal issue betweenthe KNC and the bands. There is nonon-conformance with relatedindicators.• The KNC believes that issues ofrespect and accommodation are beingaddressed in the agreements signedbetween Tembec and the KNC, and thatthese agreements do not extend to bandbusinesses or businesses owned byindividual band members. This is aninternal issue between the KNC and thebands. There is no non-conformancewith related indicators.• Tembec recognizes that they areoutside the initial timeframes forcompleting certain tasks and shouldcomplete the work immediately. Thisdoes not place Tembec in nonconformancewith the standard butneeds to be addressed so Observation3.1.2a has been written.• See P4.• This is an issue recognized and sharedby the parties at the JMAC level.Observations by the assessment teamrecognize this may require additionalcommunications and training of staffand members of both parties. This isaddressed in CAR 20/06.Page 18 of 89

FSC PrincipleP4: CommunityRelations &Workers’ RightsComments from InterestedParties• Tembec has not lived up to itscommitments to continue to provideemployment opportunities and goodsand services benefits to the Crestonarea.Assessment Team Response• Tembec has agreed to a defined level ofbenefits with the City of Creston, but isnot being fully achieved. CARs 7/06and 8/06 are imposed to address therequirement for local employment andpurchasing in the Creston area.Observation 4.1.6 is made to improvecommunication with Creston TownCouncil and interested citizens.P4: CommunityRelations &Workers’ Rights• Opportunities to cooperate with theCreston Valley Community Forest tostrengthen and diversify the localeconomy have not been acted on byTembec.• There is very little employment andgood and services purchased in theElkford/Sparwood area.• Tembec largest logging contractor,Prairie Holdings Inc. is affiliatedwith a polygamist religious group.Some people feel that polygamy isagainst the law in Canada.• The FSC Standard limits assessment ofactions to strengthen and diversify thelocal economy to the provision of a“diversity of timber and non-timberforest products”, so this concern wasnot within the scope of this assessment.The team is aware of some recentexamples of Tembec co-operation withthe Community Forest.• Elkford and Sparwood are historicallyand primarily coal miningcommunities. However, they are withina daily commute from Cranbrook andare included within the definition of the“local area” for the operations withinthe Cranbrook TSA and thus wereincluded within the assessment. TheBC standard requires Tembec toemploy people from within this “local”area for work on this licence, whichTembec does. As well, Tembec has notbeen approached by the local municipalgovernment with concerns about thispractice. No non-conformance wasfound.• The FSC standard focuses on forestmanagement and does not addressreligious or marriage practices so thisconcern is outside the scope of thisassessment.Page 19 of 89

FSC PrincipleP4: CommunityRelations &Workers’ RightsComments from InterestedParties• Tembec’s largest logging contractor,Prairie Holdings Inc. pays lowerwages and does not provide benefitsbecause most of his workers arefamily members and are not paidconsistent with the EmploymentStandards Act. This contractor is thusable to log for lower rates and nowall contractors are expected to workat these rates which isn’t fair.• Intimidation tactics are being usedduring rate and working areanegotiations with loggingcontractors.Assessment Team Response• The assessment team found that mostof the workers for Prairie Holdingswho are assigned to Tembec contractsare not family members, and whilePrairie Holdings wages and benefits areslightly lower than the industryaverage, this is not a concern for theemployees who were interviewed. Wealso found that wages are paidconsistent with the requirements of theEmployment Standards Act and therehad not been any employmentstandards grievances. Tembec’slogging rates are based on a matrixwhich reflects the 2003 bid proposalprocess, where five contracts wereawarded to four logging contractors.These rates are then adjusted based oncutblock conditions and negotiationswith contractors. There are noindicators in the BC Standard thatpermit the assessment team to assessthe ‘fairness’ of these negotiations.• The BC standard addresses protectionof forest workers from discriminationor harassment. The team did not findany evidence of intimidation of forestworkers during the assessment, butacknowledges that very toughnegotiations occur between contractorsand Tembec about the rates paid to thelogging contractors and about the areaswhere they operate. The definition offorest workers extends to theemployees of the licensee andemployees of the contractors - not thelogging contractors (who are limitedcompanies) themselves. Business tobusiness negotiations with the loggingcontractors do not involve workers andare outside the scope of the FSCstandard. Thus, the team did notaddress this concern of the loggingcontractors. A separate concern relatedto pressure on logging contractors andtheir workers to accept potentiallyunsafe work on steep slopes isaddressed separately below in this tableand CAR 9/06 is imposed to addressthis concern.Page 20 of 89

FSC PrincipleP4: CommunityRelations &Workers’ RightsComments from InterestedParties• Tembec’s largest logging contractor,Prairie Holdings Inc. does not hirelocal workers, hires under-agedworkers, has a high accidentfrequency and has causedenvironmental damage through spillsand poor practices.• It was alleged that Prairie HoldingsInc., is an inexperienced loggingcontractor with questionableemployment, safety andenvironmental practices and hasreplaced more experienced loggingcontractors, which is not fair.Assessment Team Response• Most of Prairie Holdings’ workers onTembec contracts live in the Cranbrookarea. Interviews with workers forPrairie Holdings who are not affiliatedwith the owners verify no underageworkers are employed on Tembeccontracts. Review of safety andEnvironmental Management Systemrecords and interviews withrepresentatives of government safetyand environmental conformanceagencies did not verify the safety orenvironmental concerns. No nonconformancewas found.• The process for reducing the number oflong-term contracting companiesworking for Tembec in the two licenceareas is governed by provinciallegislation and includes requirementsthat the process be fair and be approvedby affected contractors. Tembec wentthrough this process. The contractorsapproved the company’s final proposalin which two long-term contractorcompanies lost their contracts andPrairie Holdings maintained theircontract. The assessment teamtherefore, did not evaluate the fairnessof the bid proposal process as thecontractors would not have accepted itif they did not feel it was fair andacceptable. The contractors also didnot ask the team to evaluate it. Forestworkers were not fully informed aboutthis process and, as directly affectedpersons, they should have beeninformed. However as this process isnow completed, no CAR is imposed. ANote for future annual audits (Note4.4.2) is recorded to track compliancewith Indicator 4.4.2 in future. Despitemany rumours and assertions, the teamcould find no reliable evidence of anyquestionable employment, safety orenvironmental practices involvingPrairie Holdings during the term of theassessment (previous 2 years) andunder Prairie Holdings’ currentmanagement.Page 21 of 89

FSC PrincipleP4: CommunityRelations &Workers’ RightsComments from InterestedParties• Tembec has not yet set a rate for thenew designation of “registered foresttechnologist”, but due to higher jobaccountability the rate should behigher than non-registered foresttechnologists.• Ground-based harvesting is beingrequired on very steep slopes, withunacceptable risks to worker safety.• Low morale and high turnover inlogging crews are creating thepotential for increased accidents.Assessment Team Response• This is a new designation in the forestsector and the assessment teamconcluded that Tembec will pay acompetitive rate commensurate withthe qualifications required to completethe work. No non-conformance wasfound.• A review of safety records andinterviews with Worksafe BCrepresentatives did not reveal anincreased number of near misses oraccidents due to this practice. Howeverthere is an increasing use of groundbased equipment on slopes in excess of50% and significant concern fromworkers. The team found that there hasbeen misunderstanding about theWorkplace BC acceptance of a riskrating system developed by Tembec toassess the risks of ground skidding andmechanical harvesting on steep slopes.Additionally some logging contractorsfelt pressured to accept potentiallyunsafe work on steep slopes because ofthe pressures to cut logging costs. Theteam imposed CAR 9/06 to avoidfuture potential safety problems withthese practices on steep slopes.• A review of safety records andinterviews with Worksafe BCrepresentatives did not show anincrease in accidents at this time. ANote to future audits (4.2.2) was madeto reassess this in annual audits.Page 22 of 89

FSC PrincipleComments from InterestedParties• Logging trucks travel too fast onbush roads and highways.• Access management does not meetthe needs of the tenure holders andusers.• There is inadequate road deactivationand lack of attention to concernsexpressed about roads.Assessment Team Response• Safe work procedures for truckersinclude traveling at safe speeds.Review of the EMS and safety recordsshowed a few public complaints aboutspeeding trucks, and that the topic hasbeen raised at safety meetings.Tembec’s response includes postingwarnings at the scales and reminders attail-gate safety meetings. Many trucksare equipped with electronic systemsthat track truck speeds, making itpossible to trace offenders. Given therelatively low number of offenses, andthe actions taken, this was not deemedto be non-conformance warrantingcorrective action.• Access management is a controversialpractice in BC that involves bothprovincial government agencies andforest licensees. The team found thatTembec is handling accessmanagement as well as can beexpected given their limited legalauthority, the range of views andinterests, and the lack of governmentlegislation and enforcement ofclosures. No non-conformance wasfound but Observation 4.4.1a suggeststhat the company should reconsiderthe timelines for notification on roadaccess changes. The team alsoimposed CAR 4/06 to address accessassociated with mining explorationroads in HCVF areas.• Tembec does a good job on roaddeactivation and rehabilitation of spurroads but there is a problem withseasonal deactivation of on-goingmaintenance of non-haul roads anderosion and sedimentation result.CAR 17/06 is imposed.Page 23 of 89

FSC PrincipleP4: CommunityRelations &Workers’ RightsP4: CommunityRelations &Workers’ RightsComments from InterestedParties• Road and landing rehabilitation areincreasing noxious weeds whichreduce forage for ranching. Damageto fences and natural barriers that areimportant to the ranching industryare not repaired.• The level of contact with tenureholders, user groups and the publichas declined so there is not regularenough communication with someranchers and some interest groupsabout harvesting plans, especiallysince harvesting has beenconcentrated in lodgepole pine foreststo deal with the mountain pine beetleoutbreak.Assessment Team Response• The team was told by both Tembec andthe East Kootenay LivestockAssociation that they are committed tocontinuing to work together to resolvethese issues. Given these parties’ longhistory of finding solutions, theirwillingness to work together and theabsence of disputes, no nonconformancewas found. The team didnot specifically assess damage tofencing from logging operations.• Tembec’s consultation process includesmaintaining an extensive contact list,with maps of tenures and interests,regular invitations to review plans andan ‘open door’ to those wanting toprovide input. The team concluded thatTembec meets the consultationrequirements in the standard. However,the recent reduction in Tembec’splanning staff and resources and a lapsein government planning processes ismaking it difficult for staff to maintaina level of consultation that meets theFSC Standard. While no nonconformancewas found, Observation4.4.2 suggests that Tembec shouldconsider whether adequate staff andresources are available to develop stepsto protect the range of sometimesconflicting interests in these operatingareas.Page 24 of 89

FSC PrincipleP5: Benefits fromthe ForestComments from InterestedParties• Current level of clearcut harvestingis not acceptable in the Elkford/Sparwood area, Moyie Lake area andSt. Mary’s Lake area because ofimpacts on viewscapes, local qualityof life, tourism potential and thepotential long-term harvest level.Assessment Team Response• The harvesting in the St. Mary’s Lakearea occurred more than two years ago.The team found that more consultationis needed with concerned individuals inthe Elkford/Sparwood and Moyie Lakeareas where harvesting is concentratedto address the mountain pine beetleoutbreak. Tembec has already met withthe Elk Valley Task Force and iswilling to meet with the Moyieresidents. The team decided no nonconformanceexists but madeObservation 4.4.3 to recognize thatTembec needs to develop steps thatprotect the range of interests in theseareas to avoid disputes or grievances inthe future. Pre-condition 1/06 addressesthe need for complete up-to-dateinformation about the level of harvest inindividual watersheds where Tembechas current operations or plans tooperate in 2007. CAR 18/06 requiresup to date ECA summaries in otherwatersheds.P5: Benefits fromthe Forest• Large debris piles left on landings,with some useable wood, and deepdebris left throughout somecutblocks. Burning of piles lowers airquality.• Concerns about Tembec’s record ofadjusting forest managementpractices to accommodate interestsrelated to the local economy,including tourism, range and qualityof life.• The team agrees that Tembec does notmeet the BC Standard requirement to“minimize waste”. CAR 11/06 isimposed. The team considered smoketo be an inevitable consequence ofburning. Tembec does implementmeasures to reduce the amount ofmaterial in piles and does conductburning in ways to minimize smokerelatedissues.• While Tembec is working toaccommodate other interests, more canbe done, as described more fully in P4above. No non-conformance was foundbut Observation 5.4.1 encouragesTembec to develop and implementcommunication and consultationprocesses to address the concernsexpressed about whether its forestmanagement practices strengthen anddiversify the local economies.Page 25 of 89

FSC PrincipleP6: EnvironmentalImpactComments from InterestedParties• AAC calculations are completed onthe whole Cranbrook and KootenayLake TSAs (including Tembec andother tenure holders), not the areadefined as the management unit forthe purposes of certification. Theassumptions used in that calculationdo not necessarily reflect Tembec’spractices, and even if they did,Tembec’s portion of the AAC for theTSA is based on a percentage of thetotal, including whatever practicesthat may be occurring in otherlicensees’ operating areas (i.e. chartareas).• The assumptions used in theCranbrook and Kootenay Lake TSAsdo not adequately reflect thereliability and uncertainty associatedwith the data and assumptions (theSIBEC growth rates are the antithesisof a margin of safety).• There is no adequate managementplan for non-timber forest products.Improper harvesting may bedamaging mushroom mycelial mats.• A RONV description is in place butthere is not an environmentalbenchmark.• Habitat and access-sensitive speciesseem to be compromised in somecases to meet timber objectives (e.g.OG retention, mature/old on winterranges, riparian reserves, access), butTembec does not seem to be usingAssessment Team Response• The team agrees with this point. CAR12/06 addresses the need for a separateanalysis of timber supply informationand management assumptions forTembec’s operating area. This needs toreflect land base reductions andmanagement strategies and practices setout in Tembec’s SFMP.• The team found that the AACdeterminations do address uncertaintyand risk in the assumptions.• The BC Standard places responsibilityfor non-timber products on Tembeconly if Tembec “harvests or controls theharvest” of NTFPs. Tembec does notharvest or control the harvest, so thisconcern is not within the scope of theassessment and there is no nonconformance.• As part of the SFMP and C&Iframework, Tembec has prepared awritten description of the range ofnatural variability (RONV) associatedwith the natural disturbance regimes inthe BEC subzones found within all ofTembec’s operating areas in BC. Thisdescription includes references toecosystem conditions and ecosystemfunctioning consistent with the FSC-BCGuidance Material on RONV. The teamaccepted this as a benchmark.• Wildlife habitat assessments haveincluded consultations regardingaccess-sensitive species such as grizzlybears. Tembec’s consultations withgrizzly bear researchers have aidedmanagement planning.Page 26 of 89

FSC PrincipleP6: EnvironmentalImpactComments from InterestedPartiesrisk assessment regarding potentialenvironmental impacts.• Past compliance regarding theprotection of rare, threatened andendangered species has been poor.Harvesting by Tembec has directlycontributed to the decline in caribouand destruction of habitat for bulltrout. Tembec is not following the“best available information”regarding caribou management in theSouth Purcells.• No restoration areas defined – thereare significant areas (including someriparian areas and some clearcuts inESSF) that should be designated asrestoration areas (e.g., Kidd Creek,Skelly Creek, Bighorn Creek,extensive areas of fire-maintainedNDT 4 habitats in PP and IDF).Assessment Team Response• Tembec has developed acomprehensive management system thatprovides safeguards to protect rare,threatened and endangered species andtheir habitats. The habitat needs ofthese species are addressed throughboth species-specific and coarse filtermanagement strategies. Severalstrategies, including identification ofHCVF areas are being implemented toprotect the most controversial species,mountain caribou. The team recognizesthat the Caribou situation is veryserious. The team concluded thatTembec is taking steps that are withinits control to facilitate the survival andrecovery of mountain caribou in theabsence of a government endorsedrecovery plan. Other significant factorsexternal to Tembec’s operation will becritical to protection of cariboupopulations in future.• The Team investigated the potentialneed for the designation of restorationareas in several watersheds. Whilerestoration activities were required inthese watersheds, their designation as“restoration areas”, as defined inIndicator 6.3.1, is not necessary toaddress the issues that are identified thewatershed assessments. Restorationactivities in the Rocky MountainTrench are ongoing and part of aplanning process. However, morecoordination is needed with the TrenchRestoration Steering Committee and theMinistry of Forests and Range to planrestoration activities in priority areasand allow for the slashing and burningfollow-up that is required for properimplementation. Further coordinationis also required to prevent or mitigatethe negative impacts on the ecosystemassociated with cattle grazing. (e.g.,spread of noxious weeds and thedegradation of water courses). Allparties appear to be equally responsiblePage 27 of 89

FSC PrincipleP6: EnvironmentalImpactComments from InterestedParties• TSR reports seem to indicateexcessive creation of mid seralstands; other work in TFL 14indicates patch sizes are decreasingsubstantially, snags are disappearing,etc. Seral stages are not met in someareas – especially low emphasisbiodiversity MUs.• There is not an emphasis on naturalregeneration as required by the BCStandard. The TSR Analysis Reportsinvolve the use of improved plantingstock.• There is problem with stand structureand retention of snags and wildlifetrees. There is also little dataregarding coarse woody debris.• Tembec does not meet therequirements for dominant and codominantretention in many cases.Assessment Team Responsefor the inefficiencies. The team imposedCAR 4/06 to address the impacts ofcattle grazing in riparian areas.• The RONV strategy in the SFMPbroadly states that structural classes areto be managed to fall within RONV.However, specific managementstrategies are not presented to achievethis objective for the early seralstructures. CAR 13/06 addresses thisshortcoming. Strategies are in place toaddress patch size and seral stagedistribution. The C & I process hasbeen established to monitor progresstowards meeting targets.• Tembec plants a high proportion of itssites, partly in response to the limitedsite disturbance in current loggingmethods and the potential for siteoccupancy by grasses. They do notshow a preference for naturalregeneration. However, their artificialregeneration methods do use seed fromlocal provenances as required byprovincial legislation and Indicator6.3.5 and many other practices favourthe in-filling of native species withinthe trees that are planted. The teamconcluded there is no non-conformance.• Through the strategies described in theSFMP, Tembec has developed acomprehensive management system torestore or maintain stand structuralconditions compatible with RONV atthe stand and landscape scales. The C& I process is tracking CWD and snagretention data.• Tembec conducted an analysis ofresiduals in cutblocks to evaluatecurrent practice against Indicator 6.3.9.The analysis indicates shortfalls in bothMSdk and ESSFwm BEC subzones,particularly in blocks harvested with acable system. The analyses ofcutblocks did not consider adjacentretention in WTP and riparian areas thatare allowed under the definition ofPage 28 of 89

FSC PrincipleP6: EnvironmentalImpactComments from InterestedParties• Tembec does not manage for matureretention in most Landscape Units.They are only managing to minimumBC Forest Practices Coderequirements which allows reducingold and mature to 16% of what isestimated to occur naturally (1/3drawdown in Low EmphasisBiodiversity areas). This is directlycontrary to FSC-BC standards. Thereare also major concerns about OldGrowth Management Areas.• Access management measures havenot been effective. There are seriouspotential problems in NDT 4 andsome grizzly and caribou areas.• Tembec does not appear to meetCriterion 6.4 (Protected Reserves).There are significant deficiencies inrepresentation in protected areas forthe MS, IDF, ICH, PP and some partsof the ESSF.• Increased road access in somedrainages reduces wildlife and fishpopulations.Assessment Team Response“cutblock area” in Indicator 6.3.9.CAR 14/06 addresses the shortfalls inMSdk and ESSFwm BEC subzones.• Tembec is implementing specificstrategies within the broader Range ofNatural Variability Strategy to maintainor restore seral stage and patch sizedistribution and indirectly addressinterior habitat maintenance. The Teamfound the strategies outlined in theSFMP are being implemented in thefield. As such, the forest managementpracticed by Tembec either maintains orseeks to restore a distribution of seralstages, patch sizes and interior habitatthat are compatible with the range ofnatural variability.• Within the extent of its ability to controlaccess, Tembec does implement accessmanagement measures to meet nontimberobjectives. The SFMP describesaccess-related strategies for specieswhere such strategies are appropriate.The team observed several examples ofroad closures, road deactivation andremoved culverts and bridges, and otheraccess control measures such as gates,during field visits.• Tembec generally has developed aneffective system that maintainsrepresentative samples of ecosystems ina protected reserve network. Thereserve network forms part of acomprehensive strategy presented byTembec to maintain key environmentalvalues across the operating areas. TheTeam found a minor non-conformancein three BEC subzones where shortfallsof protected areas exist. CAR 15/06addresses the shortfalls.• As noted above, Tembec is handlingaccess management issues as well ascan be expected given the range ofviews and interests, and the lack ofgovernment direction. The team agreesthat mining access into high elevationsHCVs with high wildlife values is aPage 29 of 89

FSC PrincipleP6: EnvironmentalImpactComments from InterestedParties• Road construction and maintenanceare not adequate, creating erosionproblems, and work is not stoppedearly enough during wet weatherresulting in road damage.• Riparian and wetland areas andavalanche chutes are overlooked andnot adequately cared for, with treesremoved and equipment operating inthese areas.• Some areas are being overharvestedand exceed the landscape levelharvesting limits (ECAs), especiallyin areas that are mainly lodgepolepine and where harvesting is beingdone to deal with the mountain pinebeetle outbreak.• Logging on steep, unstable slopes ismaking terrain more unstable andincreasing to possibility oflandslides.• Clearcut harvesting is creatingincreased wind damage.• There is a lack of corporatecommitment to supportimplementation of the TrenchRestoration Plan.Assessment Team Responseproblem. CAR 4/06 is imposed.• The team observed surface erosion andlack of maintenance and seasonaldeactivation on many inactive roadsand has imposed CAR 17/06. There donot appear to be problems withconstruction. There have beenconcerns about operations in wetweather, but this appears to be a limitedconcern, and Tembec has shutdown“criteria” which appear to be followed.• Stream and wetland riparian areas aregenerally well protected. Specificriparian issues are addressed in CAR16/06 (regarding the width of machinefree zones) and CAR 4/06 (regardingdamage from cows in riparian areas).CAR 19/06 is imposed to requireTembec to initiate the riparianassessments and variable widthapproach to riparian managementidentified in the BC Standard.• There is a lack of information about theequivalent clearcut area in somewatersheds. This concern is mostsignificant in watersheds where there islogging activity related to mountainpine beetle. Pre-condition 1/06 andCAR 18/06 address this significantconcern.• Tembec does a very good job on terrainassessments and site level assessmentsare regularly conducted. Landslideactivity associated with logging or roadconstruction is minimal.• The team did not observe any problemswith wind damage.• Tembec, along with other parties, is anactive member of the Steering andOperational committees that help guideand direct ecosystem restoration in theEast Kootenays. There are problems inthe implementation of this Plan andwith the amount of funding availablefor the restoration work. This limits thePage 30 of 89

FSC PrincipleP7: ManagementPlanP7: ManagementPlanP8: Monitoring &AssessmentComments from InterestedParties• The management plan lacks specificcommitments and specific targets.• There is confusion and mistrustabout mountain pine beetlemanagement practices and priorities,especially for ‘susceptible’ forests.• The agreements between Tembecand KNC are not fully beenunderstood and being implementedby the Tembec operational staff (e.g.staff are personally interpreting theemployment strategy in a way that isnot consistent with the strategy’sintent). Tembec staff do not fullyunderstand the social components ofthe FSC BC Standard and Tembec’sSFMP, or the new riparianrequirements in the standard.• Interested parties are not familiarwith the SFMP, but interested inknowing more. The best way toinvolve interested people isn’t clear.• No commentsAssessment Team Responseextent of restoration work underway.The problem involves all parties, notTembec alone, and the team concludedthat Tembec is doing its share of workin the Trench.• The team felt the SFMP was a verygood document with specificcommitment and detailed managementstrategies. It includes specific targets.The Sustainability reports provideannual reporting relative to the targets.• The team agrees there is no writtendocumentation about the strategy tomonitor pine beetle or to explain howTembec makes decisions to respond tomonitoring information. There issignificant concern about the harvest of“susceptible forest types”. Precondition2/06 addresses these issues.Pre-condition 1/06 is also related toconcerns about the extent of recent andplanned harvesting in some watershedswhere logging of forest typessusceptible to mountain pine beetle isunderway or planned.• Despite the inclusion of summaryinformation during mandatory springtraining, Tembec has notcommunicated information about itsagreements or commitments to meet thesocial aspects of the standard, or theriparian requirements to staff. CAR20/06 is imposed.• The SFMP is available upon request. Asurvey asking for input on the SFMPwas sent out to the contact list in 2005.Tembec is considering how to seekmore input about the SFMP. The teamconcluded the requirements in the BCstandard are met.Page 31 of 89

FSC PrincipleP9: Maintenance ofHigh ConservationValue ForestComments from InterestedParties• The HCV assessment process is notcomplete and a certificate should notbe granted until the process iscomplete.• There are incomplete draft mapsavailable, but they are not approvedor finalized.• There are no management strategiesor monitoring plans for HCVFs inthis area yet. It is not appropriate togrant a certificate until the process iscomplete.Assessment Team Response• Tembec has refined earlier effortsdesigned to identify High ConservationValue Forests. There is an inclusiveand efficient process underway for thetwo operating areas in this assessment.A comprehensive draft set of HCVFareas for HDCF Categories 1 - 3 hasbeen identified. However, the teamagrees the assessment is not completeand Pre-condition 3/06 is imposed toensure that the assessment andidentification of Category 1, 2 and 3HCVF areas are finalized prior to acertificate being awarded. CAR 23/06requires completion of the Category 4HCV areas. CARs 24/06 and 25/06require completion of the managementstrategies.• Draft maps were viewed by the Team.Pre-condition 3/06 requires that themaps are finalized.• Tembec has produced a draft set ofmanagement strategies, but thedocument does not completely addressspecific management measures, riskassessment methodology, a monitoringprogram, or the development of anadaptive management strategy.Management strategies can only bedeveloped once the HCVF areas arefinalized. CARs 24/06 and 25/06 areimposed to ensure that managementstrategies are developed following thefinalization of HCVF areas. CAR 26/06addresses the need for a monitoringprogram for HCVFs.Page 32 of 89

P10 - Plantations • Clearcut harvesting is creatingmonocultures.• The team reviewed many cutblocks inthe field and concluded there are no“monocultures”. The team alsoreviewed Tembec’s analysis of thesilviculture treatments in its recentcutblocks. We concluded that Tembecdoes not create “plantations” as definedin the BC Standard.3.2. Main strengths and weaknessesPrinciple Strengths WeaknessesP1: FSCCommitment andLegalComplianceP2: Tenure &Use Rights &Responsibilities• Strong EMS system, good system ofinspections and tracking.• Adequate compliance record.• No patterns of recurrent issues.• Corrective action demonstrated afternon-compliances.• Staff and contractors knowledgeableabout requirements.• All fees, royalties, taxes and othercharges are paid in a timely manner.• Absence of illegal activities.• Strong corporate and localcommitment to FSC.• Long term tenure and mappedoperating areas assigned to Tembec.• No overlapping forest tenures• MOFR approval of plans; noindication of constraints.• Discussions with government to seektheir support of certification.• Competent, dedicated and respectedplanning staff and consultants.• Thorough database of tenure holdersand directly affected people and mapbase of tenures and uses.• Significant, ongoing ‘open door’consultation with other tenureholders and users on forestdevelopment plans to develop stepsto accommodate the broad range ofinterests.• Thorough tracking of publicconcerns about operations in the• The relatively few compliance issuesarising in the Cranbrook operating areaappear to be caused from a lack of, orlate, contractor supervision. These canbe monitored in future annual audits(Note 1.1.3)• Activities associated with some rangetenures (cows in riparian zones) andmineral exploration tenures (roads inimportant wildlife areas that areidentified as potential HCVFs)undermine Tembec’s ability to achieveobjectives of management plan. (CAR4/06)• Corporate dispute resolution policydoes not list tenure holders orcontractors. (Observation 2.3.2)• Some concerns are being raised byvarious rights holders and interestgroups. (Observation 2.3.3)Page 33 of 89

P3 – IndigenousPeoples’ RightsP4: CommunityRelations &Workers’ RightsEMS system.• No disputes or grievance notices.• Corporate and EMS policy regardingdispute resolution.• A very progressive protocol andsupporting agreement has beensigned.• Good progress has been madetowards developing strategies toimplement the Consultation andAccommodation agreement.• Continued good work has takenplace in archaeology, both for theidentification and protection of sites.• Opportunities have been provided forKtunaxa to participate in SFMP andHCVF development.• There is no evidence of operationsleading to the diminishment of rights.• There is good consultation with theKtunaxa Nation Council.• Tembec is providing an annualpayment that is helping to increaseKtunaxa’s capacity.• Clear corporate policies andstrategies within the SFMPsupporting local hiring and purchaseof goods and services andemployment practices consistentwith the standard.• Extensive safety and forestmanagement training for staff,contractors and forest workers.• Industry leader in safetyprogramming and activities resultingin very low accident frequency.• No grievances with unionized forestworkers.• Planning staff are competent andwell respected. Members of publicand interest groups feel they provide“open door” consultation on forestdevelopment plans and respond topublic complaints about forestpractices.• Innovative forest management• More consultation is required at theband level. Joint managementprocesses must also be explored wheredesired by the bands. (CAR 5/06).• Strategy development at theProcurement subcommittee isincomplete and has not met agreedtimeframes (Observation 3.1.2).• Ktunaxa have not yet fully articulatedtheir interests to Tembec so their inputis not yet reflected in the SFMP andHCVF. However, Ktunaxa told theteam that they are ready to discuss theirLUP with Tembec and this process hasbegun. CAR 23/06 requires thatTembec consult with Ktunaxa incompleting the designation of HCVFs.CAR 6/06 requires Tembec to workwith the appropriate Ktunaxa entity orentities to develop strategies to addressvalues such as cultural heritage,wildlife, fisheries, grasses and plantsthat Ktunaxa has articulated to Tembec.• Ktunaxa have not yet been involved indevelopment the Monitoring Plan.(CAR 21/06).• Absence of local staff and decliningcontracting and purchase of goods andservices in the Creston area has resultedin widespread public concerns. (CARs7/06 and Observation 4.1.6).• Staff who are responsible for approvingpurchases are fully informed aboutcorporate policies and strategies onpurchase of local goods and services.However, not all staff are aware ofthese policies and commitments. CAR8/06 is imposed.• Minor inconsistencies in the provisionof benefits by contractors, contractorknowledge of their responsibilitiesunder the FSC Standard and provisionof information to displaced persons.(Observations 4.1.3 and 4.1.5).• Specific concerns about increasedground-based harvesting on steepslopes and the rating system for thispractice and general concerns about thePage 34 of 89

P5: Benefits fromthe Forestapproaches developed toaccommodate the wide range ofoften competing interests.• Draft Decision Support Toolprovides a good start for assessingsocial, environmental and economiccosts.• Tembec has demonstrated acommitment to make the investmentsnecessary to maintain the ecologicalproductivity of the forest, despitefinancial challenges.• Local processors are generallypleased with the diversity and priceof timber made available to them.• Wood Procurement Manager has andcontinues to work with localprocessors to identify ways toexpand log sales.• Some activities (cut-to-length, andleaving waste on site) reduce volumeof burn piles.• No MOFR waste billings.• Targets established for leavingcoarse woody debris on site.• Minimal yarding damage or damageto residual trees.• Significant steps taken toaccommodate a wide range of non-potential of low morale and highturnover on logging crews increasingaccident frequency. (CAR 9/06).• Widespread lack of information andconcerns about the logging contractorrationalization process. However thisprocess is now completed and no CARis imposed. Note 4.4.2 is recorded sothe requirements of Indicator 4.4.2 canbe tracked in future.• Minor gaps and confusion in theconsultation process. (Observations4.4.1a and 4.4.1b).• Recent concentration of harvesting inlodgepole pine forests has promptedconcerns about management practicesfrom tenure holders and the public inthe Elk Valley and the Moyie Lakearea. These may result in disputes if notappropriately addressed. (Observation4.4.3).• Concerns from directly affected peopleand the assessment team as to whetherTembec has enough staff and resourcesto develop steps to protect the broadrange of interests to avoid futuregrievances. (Observation 4.4.2).• Tembec has not finalized the DecisionSupport Tool, and does not have aprocess/procedure to set benchmarksfor reducing social and environmentalcosts over time. (CAR 10/06).• Tembec could define when theDecision Support Tool will be used,and could provide for morequantification of costs in the DecisionSupport Tool. (Observation 5.1.3a and5.1.3b).• Tembec Log Quality Guide hasdifferent utilization specifications thanMOFR. Implementation of the LogQuality Guide results in waste materialas a result. (CAR 11/06).• There are mixed views amongst tenureholders and directly affected peopleabout whether Tembec’s practicesstrive to strengthen and diversify thelocal economy. Tembec’s SFMP doesnot include a link to local economicobjectives (Observation 5.4.1a).• Current analyses of timber supply andAAC levels do not reflect Tembec’sspecific land base or its managementPage 35 of 89

P6:EnvironmentalImpacttimber forest uses which strengthenand diversify the local economy.• Recently completed fully spatialTSR3 for Cranbrook TSA, andrecent spatial analysis to updateTSR2 for Kootenay Lake TSA• Extensive GIS and non-spatialinventory data is assembled and usedin landscape and site-level planningand risk assessments.• Ongoing biological inventoriescontribute to knowledge ofenvironmental impacts. (e.g.,Breeding Bird Survey routes, coarsewoody debris).• Range of Natural Variabilityassumptions and risk analysis havebeen developed and incorporatedinto the SFMP, with Strategiesdefined throughout the planningdocument.• Tembec has an extensive knowledgeof habitat protection issues involvingRed and Blue list species. Tembechas a comprehensive managementsystem that provides safeguards toprotect rare, threatened andendangered species and theirhabitats. Strategies have beendeveloped to address speciesprotection needs.• Silvicultural systems appear tomaintain patterns and structureswithin the Range of NaturalVariability, or strategies areconsistently applied on the ground tomitigate risks.• Residual retention at cutblock levelexceeds the Standard.• Unique ecosystem features areidentified (e.g., rare site series,goshawk nests) and protected.• Reforestation and silviculturetreatments are effective andmonitored consistently.• Extensive program of assessmentsand detailed site level evaluation andmapping of hazards and resourcevalues.• Variable width approach to riparianzones. Initial work on riparianassessment unit designation andidentification of riparian reservestrategies and practices to meet FSCrequirements. (CAR 12/06).• Trench restoration managementactivities are performed effectively.However, Tembec can be moreproactive in its communication aboutthe activities that it conducts incollaboration with appropriategovernment and non-governmentTrench Restoration Committeemembers (Observation 4.4.3 wasissued).• Mountain caribou in area are Red listedand appear in decline. A governmentCaribou recovery plan or speciesmanagement plan is not in place butthese are not under Tembec’s control.Some factors critical to caribou survival(predator and access management) arealso not within Tembec control (Precondition3/06 and CARs 23/06, 24/06and 25/06 are issued).• Tembec cannot demonstrate at this timethat habitat requirements for early seraldependant species are not compromisedby stand management activities or thatthe amount of early seral habitat iscompatible with natural disturbanceregimes. (CAR 13/06).• Tembec cannot demonstrate that theminimum retention levels are met incutblocks in MSdk and ESSFwm BECsubzones. (CAR 14/06).• Nearly all BEC variant protection levelsmeet the requirements of Table P6-1.Shortfalls exist for ICH dw1 (-3%), IDFdm2 (-16%), and PP dh2 (-17%). (CAR15/06).• Prescribed minimum width of machinefree zone along riparian areas is not 7metres as required by Standard. (CAR16/06).• Road surface and ditchline erosionalong many roads that are notseasonally deactivated or maintained.(CAR 17/06).• Analyses of ECAs are incomplete or notup-to-date especially in watershedscurrently being harvested in response toPage 36 of 89

P7: ManagementPlanP8: Monitoring& AssessmentP9: Maintenanceof HighConservationbudgets.• No chemical use in forestmanagement. Chemical use forweed control is very small anddirected to invasive (non-native)plants.• No prohibited chemicals used in offsitetree nursery.• No exotic species or GMOs.• SFMP is an excellent document, andmeets the FSC standard with only afew exceptions.• Public comments on the SFMP weresolicited through questionnaires.• Exceptional training related to safetyand most environmental aspects ofthe SFMP.• Active and broad company-wideprogram of ongoing operationalmonitoring.• Recent Sustainability Reports are anexceptional step towards a completemonitoring program, though Tembecrecognizes some details are yet to bedeveloped.• Tembec’s current procedures willallow chain of custody requirementsto be met.• Monitoring reports are availableupon request.• Substantial amount of work on avery thorough HCV assessment andit is almost been completed.mountain pine beetle attack. There ispublic concern about the extent ofrecent harvesting in some watersheds.(Pre-condition 1/06 and CAR 18/06).• Tembec has not implemented theRiparian assessment and variablereserve width approach at the watershedunit level. (CAR 19/06).• The SFMP needs to describe HCVFattributes, but HCVF areas have not yetbeen finalized. (CAR 23/06).• The SFMP does not establishmanagement objectives specifically formountain pine beetle management atlandscape levels. This is the dominantmanagement factor at the moment. It isnot clear how other managementobjectives and strategies for otherforest values set out in the SFMP willbe addressed as operational harvestingactivities focus on mountain pinebeetle. There is public concern aboutthe rationale for harvesting “susceptibleforest types” and other issues related tothe pine beetle. (Pre-condition 2/06).• Some staff are not aware of somecomponents of the SFMP, corporatepolicy and the FSC BC Standardrelated to First Nations and socialcommitments. (CAR 20/06).• Reduced staffing is making it difficultfor Tembec staff to adequatelysupervise the implementation of theSFMP. (Observation 7.3).• Several aspects of the monitoringprogram need to be developed to fullymeet the standard (CARs 21/06 and22/06).• It is not widely known that Tembecprepares annual monitoring reports orthat these reports are publicly available.(Observation 8.5.1).• The HCVF assessment process was notcomplete at the time of the FSCAssessment. (Pre-condition 3/06 andPage 37 of 89

Value Forest • HCV assessment process appears tohave been an effective andcollaborative process involvingnumerous interests and perspectives.P10 - Plantations • No plantation management regimesCAR 23/06).• Thus, the requirements to developmanagement strategies and amonitoring plan have also not yet beenmet. (CARs 24/06, 25/06 and 26/06).3.3. Identified non-conformances and corrective actionsA non-conformance is a discrepancy or gap identified during the assessment between someaspect of the forest management system and one or more of the requirements of the BC standard.Depending on the severity of the non-conformance the assessment team has determined whetherthe non-conformance is major or minor non-conformance. As defined by FSC and SmartWood:• Major non-conformance is a fundamental failure to achieve the objective of the relevantFSC criterion. A number of minor non-conformances against one requirement may beconsidered to have a cumulative effect, and therefore be considered a majornonconformance.• Minor non-conformance is a temporary, unusual or non-systematic non-conformance,for which the effects are limited.A major non-conformance results in a Pre-Condition that must be corrected before thecertificate can be issued. Minor non-conformance usually results in a Corrective ActionRequest (CAR). CARs are requirements that Tembec must agree to, and which must beaddressed, within the specified timeframe. Normally the timeframe is a maximum of one year,but in exceptional circumstances is extended to two years.If Tembec attains FSC/SmartWood certification, all CARs must be addressed and met within thetimeframe stipulated, and will be audited in annual audits following certification.The following is a summary of the 3 Pre-conditions and 23 CARs issued in this report.Pre-Conditions (Total of 3)Pre-condition #:1/06Non-conformance:Major MinorCorrective Action Request:Reference Standard #: 6.5.8Description of non-conformance: Tembec does not have a complete andup-to-date assessment of the Equivalent Clearcut Area in each watershed,and has not identified measures to be taken in watersheds where the ECAexceeds 25%. The team concluded that this is a significant piece ofinformation that is needed to ensure that Indicator 6.5.8 is met, especiallygiven the current situation in which logging is proceeding rapidly insome watersheds in response to the mountain pine beetle and is a majornon-conformance.Page 38 of 89

Tembec shall complete a summary of the current Equivalent Clearcut Area status in allwatersheds in which Tembec has current logging operations, and all watersheds in which itplans to operate in 2007, and shall identify the measures to be taken in any watersheds thatexceed, or that are planned to exceed, 25% ECA.Timeline for Conformance: Prior to certificationPre-condition #:2/06Non-conformance:Major MinorCorrective Action Request:Reference Standard #: 7.1.8Description of non-conformance: Tembec does not have a statement ofmanagement objectives and operational approaches related to mountainpine beetle. Presently, the beetle is the dominant factor influencingTembec’s planning and operational harvesting in the two operating areasand is a significant forest health issue as well. The team found that thelack of management objectives and lack of a clearly stated managementstrategy that addresses how other management objectives and strategiesset out in the SFMP will be met while harvesting in response to the pinebeetle is a major non-conformance with Indicator 7.1.8, and a nonconformancewith Indicator 7.1.6 as well.Tembec shall provide a management plan for the mountain pine beetle that• Provides a statement of management objectives related to monitoring, planning andharvesting to address mountain pine beetle;• Describes the monitoring strategies for mountain pine beetle;• Describes and justifies the specific management actions that are being taken to respondto monitoring results; and• Describes how the specific management actions for the pine beetle are consistent withthe Ecological and Socio-Economic Management Strategies established in the SFMP forother forest values.This document shall be made publicly available.Timeline for Conformance: Prior to certificationPre-condition #:3/06Non-conformance:Major MinorCorrective Action Request:Reference Standard #: 9.1.1Description of non-conformance: At the time of the FSC assessment,Tembec had not fully completed an assessment to determine the presenceof High Conservation Value Forests and associated conservationattributes within the two licences.Tembec shall complete the assessment, designation, and mapping of Categories 1-3 HighPage 39 of 89

Conservation Value Forest areas (as defined in the FSC-BC Regional Standard).Timeline for Conformance: Prior to certificationCorrective Action Requests (Total of 23)CAR #: 4/06 Reference Standard #: 2.1.4Non-conformance: Description of non-conformance: There is excessive cattle grazing withinMajor Minor riparian reserve zones, in streams, and on the margins of wetlands atseveral locations in the Kootenay Central and Kootenay Columbiaoperating areas. Cattle in these areas cause damage to habitats fornesting birds and affect water quality. They also reduce the ground coverof native vegetation and lead to invasion of non-native plant species intoriparian areas. Impacts of cows were noted in or close to streams indomestic watersheds. The grazing undermines the protection of theseimportant values.There are also mineral exploration roads in high elevation forest and nonforestareas with high value, access-sensitive, wildlife species,particularly caribou, grizzly bears and mountain goats. These roadscould undermine the achievement of the objective of the highconservation value forest and need to be addressed.Corrective Action Request:Tembec shall have taken steps, either alone or with other parties, to prevent the impacts andmitigate the damages associated with cattle grazing in riparian areas and mineral explorationroads in designated High Conservation Value Forests.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 5/06 Reference Standard #: 3.1.4, 3.2, 3.3Non-conformance: Description of non-conformance: Tembec is in non-conformance withMajor Minor these indicators because an adequate level of consultation or joint plandevelopment with the bands has not taken place. Tembec understandsthere is a need to re-engage consultation with the bands but there is notyet clarity about which issues the KNC or bands will ultimately handle.Corrective Action Request:Tembec shall demonstrate that they have made progress towards re-establishing regularconsultation with the bands of the Ktunaxa Nation Council (including when harvesting is takingplace in areas of interest to the bands), and shall have established satisfactory processes withthose bands that articulate specific interests related to resource uses and special sites.Timeline for Conformance: By the end of Year 1 of certificationPage 40 of 89

CAR #: 6/06 Reference Standard #: 3.2.1Non-conformance: Description of non-conformance: Tembec has not yet developedMajor Minor strategies to maintain cultural values that have been identified byKtunaxa.Corrective Action Request:Tembec shall have worked with the appropriate Ktunaxa entity or entities to develop strategiesto address articulated values (e.g. cultural heritage, wildlife, fisheries, grasses and plants), andincorporated these strategies into their forest management planning.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 7/06 Reference Standard #: 4.1.1Non-conformance: Description of non-conformance: In the Creston area, Tembec has notMajor Minor met the requirements of Indicator 4.1.1 to provide local employment.Tembec has made commitments in a “communiqué” but thesecommitments were not fully met and some Tembec staff seemed to beunfamiliar with the provisions in the communiqué. In addition, there isan absence of Tembec staff in the Creston area.Corrective Action Request:Tembec shall work with the Creston Town Council and interested citizens to clarify thecompany’s commitment to local employment from operations in FL A20212, examineopportunities for local employment and implement any reasonable options.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 8/06 Reference Standard #: 4.1.6Non-conformance: Description of non-conformance: There has been a recent reduction in theMajor Minor goods purchased locally in the Creston area. Tembec employees workingout of Creston were not aware that the corporate policies supported thelocal purchasing of these supplies and thus did not strongly questiondirection to purchase outside the community.Corrective Action Request:Tembec shall ensure that all appropriate staff is aware of, and is implementing the corporatepurchasing policy regarding supporting local suppliers.Timeline for Conformance: By the end of Year 1 of certification.Page 41 of 89

CAR #: 9/06 Reference Standard #: 4.2.1Non-conformance: Description of non-conformance: The use of the WCB approved riskMajor Minor rating system for operating equipment on steep slopes was not fullyunderstood by some of Tembec’s logging supervisory personnel. Aswell, since the risk rating doesn’t make any reference to either the needto operate within the specifications for each machine or the OHSAregulation, equipment operators may not fully understand the level ofrisk they are accepting when they sign off on these ratings. Duringinterviews, the team heard that some logging contractors felt intimidatedinto accepting potentially unsafe work on steep slopes.Corrective Action Request:CAR 9/06: By the end of Year 1 of certification, Tembec shall• incorporate the OHS regulation sections related to steep slope harvesting into the riskrating systems for ground skidding and mechanical falling on steep slopes to ensure thatcontractors and forest workers are aware that harvesting on slopes in excess of the OHSregulation is generally prohibited;• train staff, logging and harvesting supervision contractors and forest workers on theproper application of the risk rating systems for ground skidding and mechanical fallingon steep slopes;• ensure contractors are aware that, to operate on steep slopes, structures such as skidtrails must be constructed and other safe work procedures implemented to mitigatehazard;• ensure that forest workers are fully informed of the potential safety risks of groundbasedskidding and mechanical falling on steep slopes, and are provided full informationabout their right to refuse unsafe work without discrimination; and,• establish an annual review of the implementation of the steep slope assessmentprocedures and risk ratings to ensure the adequacy of the procedure and make changesas needed.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 10/06 Reference Standard #: 5.1.4Non-conformance: Description of non-conformance: Neither the “Identification andMajor Minor Assessment of Environmental Aspects” process, nor the “DecisionSupport Tool” that are being developed by Tembec includes a specificprocess to set benchmarks for reducing costs that have been identified.In the absence of this process, benchmarks for reducing social andenvironmental costs are absent.Corrective Action Request:Tembec shall elaborate a process to set benchmarks for reducing environmental, social andoperational costs that have been identified.Timeline for Conformance: By the end of Year 1 of certification.Page 42 of 89

CAR #: 11/06 Reference Standard #: 5.3.1Non-conformance: Description of non-conformance: Tembec’s log quality parameters resultMajor Minor in useable logs that meet MOFR merchantability and utilizationstandards being wasted and left on site and in burn piles, beyond therequirements for coarse woody debris. This is not in compliance with theindicator requirement to minimize waste.Corrective Action Request:Tembec shall identify and implement measures to reduce the amount of wood meeting MOFRutilization standards, and not prescribed in site plans to be left to accommodate other ecologicalvalues, that is left on site and in burn piles as waste.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 12/06 Reference Standard #: 5.6.1Non-conformance: Description of non-conformance: Tembec’s current timber supplyMajor Minor analyses and AAC determinations are not specific to its operating areasand do not account for Tembec’s management activities to meet FSCrequirements and the provisions of their SFMP, and thus, do not meet therequirements of the Indicator.Corrective Action Request:Tembec shall complete an analysis of the timber supply specifically for its operating areas inthe Kootenay Lake TSA and Cranbrook TSA. These analyses shall reflect the forest inventoryspecific to the area, and project a sustainable level of harvest from the area that is consistentwith implementing the land base reductions, management strategies and operational practicesthat are set out in Tembec’s SFMP.Timeline for Conformance: By the end of Year 2 of certification.CAR #: 13/06 Reference Standard #: 6.3.4Non-conformance: Description of non-conformance: Tembec cannot demonstrate at this timeMajor Minor that the habitat requirements for early seral dependant species are notcompromised by stand management activities, or that the amount of earlyseral habitat is compatible with natural disturbance regimes.Corrective Action Request:Tembec shall develop and implement a specific strategy to ensure that Tembec’s forestmanagement creates and maintains non-tree-dominated early seral stages in a manner that iscompatible with natural disturbance regimes and meets the needs of early-seral-dependentspecies.Timeline for Conformance: By the end of Year 2 of certification.Page 43 of 89

CAR #: 14/06 Reference Standard #: 6.3.9Non-conformance: Description of non-conformance: Tembec cannot demonstrate that theyMajor Minor meet the minimum required retention levels in cutblock areas(particularly cable harvested cutblock areas) in the MSdk and ESSFwmBEC subzones.Corrective Action Request:Tembec shall demonstrate that retention strategies in cutblock areas in the MSdk and ESSFwmBEC subzones meet the requirements of Indicator 6.3.9, or shall implement a strategy toachieve the minimum retention requirements.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 15/06 Reference Standard #: 6.4.1Non-conformance: Description of non-conformance: Tembec does not currently meet theMajor Minor requirements for protected reserves in the ICH dw1 (-3%), IDF dm2 (-16%), and PP dh2 (-17%).Corrective Action Request:Tembec shall develop a strategy that maintains a sufficient area of the ICHdw1, IDFdm2, andPPdh2 BEC variants in mapped “protected reserves” to meet the requirements of Table P6-1 inthe BC standard.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 16/06 Reference Standard #: 6.5.6Non-conformance: Description of non-conformance: The team observed a number ofMajor Minor locations, particularly on small (Class 6) streams on gentle terrain orwetlands (W3 and W4) where no riparian reserve zones were retainedand where machinery had operated up to 5 metres from the stream orwetland edge. This is consistent with Tembec operating procedures andprovincial regulation but is not in conformance with this indicator.Corrective Action Request:Tembec shall amend its standard operating procedures and site level plans to provide for aminimum 7 m machine-free zone along all streams, lakes and wetlands, except where requiredfor construction of crossings or other approved infrastructure.Timeline for Conformance: By the end of Year 1 of certificationPage 44 of 89

CAR #: 17/06 Reference Standard #: 6.5.7Non-conformance: Description of non-conformance: The team observed diversions of theMajor Minor natural flow of surface water and resulting road and ditch erosion in anumber of locations. This erosion appeared to be a result of inadequateroad maintenance and a lack of seasonal deactivation following logging.This surface erosion along roads that are not active haul roads is “apotential sediment source” as described by the indicator and thus, a nonconformance.Corrective Action Request:Tembec shall have completed an assessment of roads in its operating areas, identified priorityareas for seasonal deactivation to reduce road surface erosion, and implemented measures toreduce surface erosion from road surfaces and ditchlines.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 18/06 Reference Standard #: 6.5.8Non-conformance: Description of non-conformance: Tembec does not have a summary ofMajor Minor the ECA status in each of their active watersheds. Without thisinformation neither Tembec, nor the assessment team, nor the public canbe sure that ECAs are maintained at less than 25%, or at levelsrecommended otherwise by a hydrological assessment as required by theindicator. Pre-condition 1/06 is imposed to require ECA summaries forall watersheds with current operations or operations planned in 2007 andto identify measures to be taken in any watersheds that exceed 25%ECA, prior to certification. CAR 18/06 requires updating of theremaining ECA summaries for watersheds in both operating areas.Corrective Action Request:Tembec shall have updated the ECA status reports for all the watersheds within its operatingareas in Kootenay Lake and Cranbrook TSA.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 19/06 Reference Standard #: 6.5bisNon-conformance: Description of non-conformance: Tembec has not completed anMajor Minor Integrated Riparian Assessment for riparian assessment units within themanagement areas, and has not yet implemented a regime that isconsistent with the results of the assessments or meets the budgetsidentified in the Standard.Corrective Action Request:Tembec shall have:• Completed riparian assessments, consistent with the framework in Appendix B of theBC Standard, in all identified riparian assessment units (anticipated 4-6 watershed levelPage 45 of 89

units) within one of the Riparian Management Regions (or sub-regions as identified inthe Integrated Riparian Assessment report) within the operating areas in the Cranbrookand Kootenay Lake TSAs;• Provided operational-level guidance or training to planning and operational staff aboutthe implementation of this approach within that Riparian Region; and,• Provided a timetable for the orderly completion of riparian assessments within theriparian assessment units in the remaining five Riparian Regions and sub-Regions inTembec’s operating areas in the Cranbrook and Kootenay Lake TSAs.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 20/06 Reference Standard #: Criterion 7.3, 4.1.3, 4.1.4Non-conformance: Description of non-conformance: Some Tembec employees are not awareMajor Minor of some components of the management plan, corporate policy and theFSC BC Standard related to First Nations (particularly the employmentstrategies and opportunities for business relationships), or socialcommitments such as providing local employment opportunities, localgoods and services purchases, and handling disputes and grievances.Corrective Action Request:Tembec shall ensure all appropriate employees are fully informed about the Tembec plans,policies and agreements that meet the requirements of the BC standard (including therequirements in Principle 3 and the agreements with Ktunaxa related to Principle 3, Principle 4,Criteria 5.1 through 5.4 and Criterion 6.5bis) and shall have considered how these requirementsmight affect their work to ensure proper implementation of the management plan.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 21/06 Reference Standard #: 8.1Non-conformance: Description of non-conformance: Tembec’s monitoring plan andMajor Minor programs are not fully complete in terms of meeting the BC standard.Specific items identified in indicators 9.1.2 are not included.Participation of First Nations in the design of the monitoring plan has notbeen completed and it is unclear how information from the monitoringprograms will be incorporated in revisions to the SFMP. Specificmechanisms for quality assurance and quality control within themonitoring program are not provided in the SFMP document.Corrective Action Request:Tembec shall complete a comprehensive Monitoring Plan that:a) Includes the information required in 8.1.2, 8.1.4 d), e) and f) for each measure, andincludes measures that address the components of the BC Standard, particularly in P4and P5;b) Incorporates efforts to include the participation of First Nations and directly affectedpersons in the design of this plan and implementation of monitoring activities;Page 46 of 89

c) Clearly describes how monitoring results will be incorporated in the implementationand revisions to the SFMP and the timeline for revisions; and,d) Includes secure databases and quality control/assurance mechanisms.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 22/06 Reference Standard #: 8.2.7Non-conformance: Description of non-conformance: The recent changes to Principle 4 in theMajor Minor BC standard left inadequate time for Tembec to adjust their SFMP andSustainability Reports. Thus they need to be reviewed to ensure theyinclude all the monitoring required to meet the BC Standard (see 4.1, 4.2and 4.3) as well as elements identified through consultation with FirstNations and directly affected persons.Corrective Action Request:Tembec shall review its monitoring activities for social impacts and revise its monitoringapproaches if needed to meet the requirements of the BC Standard and to be consistent with itsSFMP. Particular emphasis shall be paid to elements identified through consultation with FirstNations and directly affected people.Timeline for Conformance: By the end of Year 2 of certification.CAR #: 23/06 Reference Standard #: 9.1.1Non-conformance: Description of non-conformance: Tembec has not completed anMajor Minor assessment to determine the presence of Category 4 High ConservationValue Forests and has not undertaken consultation with Ktunaxa aboutall HCVFs.Corrective Action Request:Tembec shall complete the assessment, designation and mapping of HCV Category 4 areas andshall have consulted with KNC, directly affected persons, government, environmentalorganizations and relevant local communities during the assessment. Consultation with KNCshall also address the HCVF areas already designated under Categories 1 – 3.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 24/06 Reference Standard #: 9.3.1Non-conformance: Description of non-conformance: Since the HCVF assessment report hasMajor Minor not yet been completed, management strategies are also not complete.Corrective Action Request:In consultation with Ktunaxa, directly affected persons, government, environmentalorganizations and relevant local communities, Tembec shall either:i. Develop specific management measures for each HCVF area or High ConservationPage 47 of 89

ii.Value in HCVF Categories 1-3 potentially affected by Tembec’s managementactivities that are consistent with a precautionary approach; or,Make a written commitment to defer management activities within designatedHCVFs in HCVF Categories 1-3 until appropriate management strategies are inplace.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 25/06 Reference Standard #: 9.3.1Non-conformance: Description of non-conformance: Management strategies have not beenMajor Minor developed for Category 4 HCVF areas and consultation with Ktunaxaand other interested parties has not been completed.Corrective Action Request:In consultation with Ktunaxa, directly affected persons, government, environmentalorganizations and relevant local communities, Tembec shall either:i. Develop specific management measures for each HCVF area or High ConservationValue in HCVF Category 4 potentially affected by Tembec’s management activitiesthat are consistent with a precautionary approach; or,ii. Make a written commitment to defer management activities within designatedHCVFs in HCV Category 4 until appropriate management strategies are in place.Timeline for Conformance: By the end of Year 2 of certification.CAR #: 26/06 Reference Standard #: 9.4.1Non-conformance: Description of non-conformance: Since the HCVF areas and managementMajor Minor measures have not yet been finalized, a program to monitor the status ofHCVFs and the effectiveness of measures has not been set up orimplemented.Corrective Action Request:Tembec shall develop and implement a program to monitor the status of HCVFs and theeffectiveness of measures to maintain or restore conservation attributes.Timeline for Conformance: By the end of Year 2 of certification.3.4. Follow-up actions by client to meet certificationThere are three Major CARs that Tembec will have to address in order to attain FSC certification.These Pre-conditions are reported in the summary above and in the text of appendix III.3.5. ObservationsPage 48 of 89

In cases where the non-conformance is very minor, or the team considered that future nonconformancemight result if some action is not taken, the team has issued an Observation. Asdefined by FSC and SmartWood, an Observation is a voluntary action suggested by the assessmentteam. It is not mandatory but serves as a warning signal that a particular matter may lead to a CARin future annual audits.Following is a list of the 17 Observations issued in this report.ObservationTembec should develop a dispute resolution policy that applies to tenureholders and contractors either by adding these interests to the existingcorporate dispute resolution policy or creating a new policy.Tembec should resolve concerns being raised by rights holders, localforest workers and local residents (see sections 4.1, 4.2 and 4.4) to avoidthe potential for disputes in the future.Tembec should immediately complete Action Item 3 on the ProcurementStrategy Implementation Work Plan (dated November 2004) related toTembec’s development of a written summary of existing procurementprocedures, practices and requirements for pulp, sawmill and FRMwoodlands.Tembec should implement a system to ensure contractors provide wagesand benefits consistent with the industry standard.Tembec should implement a system to ensure contractorsadhere toindicators of the FSC-BC Regional Standards relevant to their activities onthe management unit.Tembec should include a written listing of community employmenttransition services that are available to displaced employees with theirtermination notices to avoid concerns about the services Tembec providesto displaced employees.Tembec should communicate its employment and contracting policies andpractices to the Creston Town Council and interested citizens in theCreston area to clarify how the company provides opportunities for localemployment and services.Tembec should refine its public participation plan by including contractorsand angling guides in the list of user/focus groups in the SFMP, clarifyingresponsibility for distribution of plan review notifications to range tenureholders, and reconsidering a longer timeline for notification about roaddeactivation plans.Tembec should consider whether the differences in how public concernsabout planning versus operations are documented and reported within thecompany create differences in how they are addressed by staff. If thereare differences in how they are dealt with, these should be reconciled.Tembec should assess whether current staffing levels and resources areadequate to address planning and operational issues related to the rightsand interests of the directly affected persons and groups in the operatingReferenceStandard #2.3.22.3.33.1.24.1.24.1.34.1.54.1.64.4.14.4.14.4.2Page 49 of 89

area and to reduce the potential for disputes and grievances with theseinterests. If the current staffing and available resources are deemed to beinadequate they should be increased.Tembec, as an active participant in the Moyie and Elk Valley residentsand ranchers planning forums, should seek to confirm these processes areeffective in addressing the interests of the participants and thus avoidfuture grievances.Tembec should develop criteria for when the Decision Support Tool is tobe used.When using the Decision Support Tool, Tembec should develop morequantification of costs for each alternative to ensure there is a fullassessment of costs, particularly for environmental and social values, andto assist with the setting of benchmarks to balance or reduce these costsover time.Tembec should develop and implement communication and consultationprocesses to address the concerns expressed about whether its forestmanagement practices strengthen and diversify the local economy.Tembec should consider how it will demonstrate that the average of thepresent and projected annual timber harvests over the next decade, andaverages of projected timber harvests over all subsequent decades, do notexceed the projected long-term harvest rate.Tembec should evaluate whether they provide adequate supervision ofstaff, union employees and contractors to ensure proper implementation ofthe strategies outlined in the SFMP with the reduced staffing under thenew regional structure.Tembec should endorse the finalized Sustainability Reports, make thempublicly available and inform the contacts on the stakeholder database thatthey are available.4.4.35.1.35.1.35.4.15.6.47.38.5.13.6. Notes for future annual auditsThroughout the report, the team has noted Notes for Future Annual Audits. These Notes do notindicate any non-conformance with the BC Standard at present, and are not directed to Tembec.They are recorded where the assessment team is aware of some future action and recommendsthat a specific situation should be monitored or audited in future by SmartWood auditors.Note for Future Annual Audits (Note 1.1.3): The audit team should determine the outcome oftwo ongoing investigations in FL A19040.Note for Future Annual Audits (Note 2.1.1a): The audit team should determine the status ofthe replacement of Forest Licences A20212 and A19040 and advise SmartWood if there is anychange in the expected replacement.Note for Future Annual Audits (Note 2.1.1b): The audit team should confirm that futureTimber Supply analyses provide for an AAC determination specific to Tembec’s operating areain each TSA.Page 50 of 89

Note for Future Annual Audits (Note 4.2.2): The audit team should assess Tembec’s safetyprogram and recent safety record to ensure that the low accident rate of the past has beenmaintained.Note for Future Annual Audits (Note 4.4.2): The audit team should review whether Tembecprovides information used in management decisions to directly affected parties.Note for Future Annual Audits (Note 5.6.6): The audit team should determine if the actualannual harvest rate in any year exceeds 690,000 m3 and thus exceeds the projected long-term rateof 552, 961 m3/yr by more than 25%.Note for Future Annual Audits (9.3.2): The audit team should assess the managementstrategies for HCVFs in future annual audits to determine if they meet Indicator 9.3.2.Note for Future Annual Audits (9.4.2 and 9.4.3): The audit team should assess the monitoringprogram for HCVFs to determine if it meets Indicators 9.4.2 and 9.4.3.3.7. Certification recommendationBased on a thorough field review, analysis and compilation of findings by this SmartWoodassessment team, Tembec has demonstrated that their described system of management is beingimplemented consistently over the whole forest area covered by the scope of the assessment.SmartWood concludes that Tembec’s management system, if implemented as described, iscapable of ensuring that all the requirements of the FSC Certification Standards for BritishColumbia (2005) are met across the scope of the certificate.The assessment team recommends that Tembec’s operations within FL A19040 and FL A20212in the Cranbrook and Kootenay Lake TSAs receive joint FSC/SmartWood Forest Managementand Chain of Custody (FM/COC) certification upon successful completion of the 3 Pre-Conditions listed above and agreement with the 23 stipulated Corrective Action Requests(CARs).In order to maintain certification, Tembec will be audited annually on-site and required to remainin conformance with the FSC Principles and Criteria as further defined by the BC regionalstandards. Tembec will also be required to fulfil the corrective action requests (CARs) describedabove. Experts from SmartWood will review continued forest management performance andconformance with the CARs described in this report, annually during scheduled and randomaudits.Page 51 of 89

4. CLIENT SPECIFIC BACKGROUND INFORMATION4.1. Ownership and land tenure descriptionTembec’s Kootenay Central and Kootenay Columbia operating areas that are assessed in thisreport are within the Kootenay Lake and Cranbrook Timber Supply Areas (TSAs) in the East andWest Kootenay region of British Columbia, Canada. Tembec manages these two operating areasunder the provisions of two Forest Licences issued to them by the government of BritishColumbia - Forest Licence (FL) A20212 in the Kootenay Lake TSA and FL A19040 in theCranbrook Timber Supply Area (TSA). The land is described as Crown land, meaning theownership remains with the provincial government on behalf of the public. There are no treatieswith the Ktunaxa First Nation that addresses their claim to ownership of the land. The Ktunaxaare negotiating a comprehensive land claim covering a large area including Tembec’s operatingareas with governments.Forest Licences are granted for 15 years and are replaced with a new FL every 10 years providedperformance requirements are met. They are considered long-term tenures. They are volumebasedtenures that allow Tembec to harvest, grow, process, sell and distribute a specified volumeof wood products annually from the two TSAs. Tembec retains the reforestation responsibilityuntil trees are free growing and has responsibility for road construction, deactivation andmaintenance within the area of its operations. Tembec harvests their assigned annual cut fromtheir assigned operating area in each TSA. These operating areas have no formal legal status butare clearly identified and mapped areas of land within which Tembec has, for many years, hadthe exclusive rights to cut the timber resources. Other forest companies also have forest licencesand are allowed to harvest a specified volume each year from other areas within each of theTSAs. Like Tembec they also have discrete operating areas in other locations in the TSA.4.2. Legislative and government regulatory contextThe British Columbia Ministry of Forests and Range (MOFR) represents the government and thepeople of British Columbia in ensuring that Tembec complies with the provisions of the ForestAct, Forest and Range Practices Act and a host of other provincial legislation. During the twoyears preceding this assessment, Tembec has been required to have forest development plansreviewed and approved by MOFR staff and in place before detailed site level planning andoperations can begin. MOFR compliance and enforcement staff inspect Tembec’s operations andinvestigate any observed violations of legislation.Tembec’s foresters and forest technicians are governed by the provisions of the Foresters Act inthe preparation of forest management plans and the supervision of all forest operations. In thepast three years, forestry professionals have been given increased responsibility for stewardship,as the provincial government has placed an increased reliance on professionals, and reduced theoversight and approval role of government.The provincial government takes a lead role in strategic land-use planning and has led thedevelopment of the Kootenay Boundary Land Use Plan to provide broad management directionin this region for more than 10 years. In the past, the provincial government also led local levelPage 52 of 89

planning processes to resolve conflicts and develop locally appropriate forestry practices. Theprovincial government no longer provides this service leaving a gap that is causing growingconcerns for Tembec and other public land users and interests.Tembec interacts with many other provincial and federal government agencies that issue tenures,manage resources and enforce many environmental and social legal requirements on the Crownlands that comprise the forested and non-forested landscapes within Tembec’s operating areas.These include responsibilities for range tenures, water use tenures, mineral exploration tenures,commercial recreation tenures, guiding and trapping tenures and public use agreements.Government ministries have responsibility to manage rare species, protect habitats and establishprotected areas. They also enforce provisions related to worker safety and labour standards.Tembec has legal rights and responsibilities provided by its Forest Licences but must alsointeract with many other licensed users and with government agencies that use and manage otherforest resources on the same landbase.4.3. First Nations contextThe entire area covered by this assessment is within the asserted traditional territory of theKtunaxa Nation. The Ktunaxa Nation is a distinctly unique linguistic culture, and archaeologicalevidence suggests Ktunaxa people have inhabited the East Kootenay region since the lastglaciation over 10,000 years ago. There are no treaties that determine the land ownership for thearea and the Ktunaxa Nation Council (previously known as Ktunaxa Kinbasket Tribal Council,KKTC) filed a comprehensive land claim with the BC Treaty Commission in 1993. Treatynegotiations are underway.Three of the four communities within the Ktunaxa Nation are located within or close to the twolicences in this assessment – Tobacco Plains Band near Grassmere, St. Mary’s Band nearCranbrook and Lower Kootenay Band near Creston. Their combined population isapproximately 560. The interests of these bands and the KNC are reviewed in Principle 3 inAppendix III.The asserted traditional territory of the Sinixt Nation is located to the west (and outside) of theassessment area. The asserted traditional territory of the Secwepmec Nation (SNTC) is located tothe north and west (and outside) the assessment area. The Shuswap Nation community nearInvermere, also to the north is also outside the assessment area. The assessment team confirmedthat these three aboriginal groups are not considered to have legal or customary rights, or a landclaim, in the assessment area and they are not considered in Principle 3.4.4. Environmental contextTembec’s Kootenay Central and Kootenay Columbia operating areas in the two TSAs cover awide range of sites from the slopes of the Rocky Mountains to the dry valley bottom in the RockyMountain Trench and through the steep valleys of the Purcell Mountains in south-eastern BritishColumbia. It is an area of complex and rugged topography with many lakes, streams and rivers,high peaks, glaciers and avalanche tracks. The forest types are diverse. They include opengrasslands, very dry and open forests, as well as closed canopy forests on steep mountainsidesPage 53 of 89

and sub-alpine and alpine vegetation in six Biogeoclimatic zones – Alpine Tundra (AT);Engelmann Spruce-Sub-alpine fir (ESSF) and Montane Spruce (MS) at high elevations; InteriorCedar Hemlock (ICH) at moderate elevations and in wetter areas; Interior Douglas-fir (IDF)ecosystems in valley bottoms and on the slopes of the Rocky Mountain Trench; and PonderosaPine (PP) in the very dry valleys and low slopes in the Rocky Mountain Trench.The dominant tree species are lodgepole pine, interior Douglas-fir, western larch, Engelmannspruce, sub-alpine fir (balsam) and Ponderosa pine (yellow pine). Other conifers occurring in theoperating area are whitebark pine, white pine, Western hemlock and Western red cedar. Thereare small amounts of aspen, paper birch and cottonwood.The area is internationally known for its concentration of ungulate species including elk, muledeer, whitetail deer, moose, Rocky Mountain bighorn sheep and mountain goat. Other largemammals found within the operating area include mountain caribou, grizzly bear, cougar,wolves, coyotes and black bear. Smaller furbearers include beaver, mink, muskrat, otter, marten,skunk, weasel, badger, wolverine, bobcat, lynx, squirrel, and fox.A total of 47 species of wildlife (fish, birds, amphibians and mammals) found within theoperating areas have been designated as Red Listed (Endangered or Threatened) or Blue Listed(Species of Concern). The American badger, mountain caribou and Rocky Mountain tailed frogare red-listed species that are of significant management concern. The grizzly bear, bighornsheep, flammulated owl, westslope cutthroat trout and bull trout are Blue-listed species that areof significant concern within the area. These are all addressed in Principle 6 in Appendix III.Many of the other listed species are wetland or grassland birds, or are species that are rare withinthe area and not thought to be impacted by forestry activities.Natural disturbances such as fire, insects, and disease have produced a mosaic of seral andstructural stages and age classes in the forests throughout the area. There were numerous firesthat coincided with European settlement and numerous large fires have occurred in recent yearsas well (1985 and 2003). At present, an unprecedented outbreak of mountain pine beetle isattacking vast areas of forest with lodgepole pine trees throughout eastern, southern, and centralBritish Columbia including Tembec’s operating areas. The mountain pine beetle is presently thedominant factor influencing forest management in this area and is addressed in Principles 6, 7and 8 in Appendix III.The operating areas are bordered by, or in close proximity to, twenty-two Provincial Parks.These parks contribute to the significant recreational activity on the operating area and are acomponent of the representation of forest ecosystems and protection of high conservation valuesas described in Principles 6 and 9 in Appendix III.4.5. Socioeconomic contextTembec’s operations in these areas are based around Cranbrook, a city of 19,000 and theprinciple service centre for the region with an airport, hospital, government offices, suppliers andshopping centres. There are five other incorporated communities – Fernie, Kimberley, Elkford,Page 54 of 89

Sparwood and Creston – and a number of small, unincorporated communities along the highwaysthat cross the areas from east to west and south to north.Portions of Tembec’s operating areas are immediately adjacent to these communities andincludes lands that are important to the quality of life as primary water sources, nature parks,areas with recreational trails and viewscapes. Lodgepole pine is the main tree species in many ofthese forests and the extensive harvesting to address the mountain pine beetle outbreak is creatingconcerns within these communities.The regional economy is quite diversified with forestry, mining, ranching, agriculture andtourism operations forming the main bases for year-round employment and economic activity forthese communities. Government is also an important employer. Recreation and tourism-orientedbusinesses and the service sector are expanding quickly with major ski hills and destinationresorts for both summer and winter recreation opening within the operating area. Coal mining isalso expanding. The total population of the area is estimated to be 50-60,000 and is growing.Forestry is not the only or dominant economic activity in the region, but it is important. Tembechas the largest share of timber from the Cranbrook TSA and the second largest from theKootenay Lake TSAs. It owns most of the processing capacity within the region, with a pulpmill and an electrical co-generation facility in Skookumchuck, dimension lumber sawmills inElko and Canal Flats and a finger-joint mill and value added centre in Cranbrook. Tembec is thelargest forest industry employer in both TSAs and a significant contributor to the local economythroughout the Kootenay region.There are many other tenure holders within the operating area – guide-outfitters, trappers,ranchers, water users, commercial recreation users, miners – as well as very active environmentalinterest groups, an extensive number of active public recreational user groups and concernedlocal residents who have lived in the area for many years. In addition, woodlot licensees, otherForest Licence holders and private land-owners have rights and interests in lands adjacent toTembec’s operating areas that can be affected by Tembec’s forest management activities. Asdescribed in Section 2.5, the assessment team identified 300 tenure holders, 70 interest groupsand nearly 50 private land-owners. There are many more private land-owners that are not listedin available databases. Their interests are discussed in Principles 2 and 4 in Appendix III.The growing population and the influx of new residents attracted by the lifestyle and recreationaland outdoor opportunities are creating significantly different social and economic expectationsand demands on Tembec’s forest management than in the past. There is an increased emphasison visual resource management along the highway corridors, and increased demands for wildlifeprotection as well as a desire for access to backcountry areas. The public demands on Tembecare increasing but often some demands are in conflict with others. This provides significantchallenges to Tembec at a time when it is also trying to address the mountain pine beetle attackand address increasing financial constraints.As with most forest companies in the interior of BC, Tembec maintains an efficient but lean levelof forest management staff, with most of the on-site work done by consultants and contractors.Currently, there are 46 management, planning, supervisory and clerical staff members in thePage 55 of 89

Forest Resource Management and 30 unionized employees working in equipment maintenanceand logging. Forty-two (42) forest management consultants work for the company providingplanning, on-site supervision and specialized technical services. Seventy-eight (78) contractorfirms undertake logging, road construction and log hauling. Fourteen (14) silviculturecontractors provide forest management services.In recent years, there have also been significant changes and reduced employment and economicopportunities in the forest industry in BC. Annual allowable cuts have been reduced in someareas and logging costs have risen due to a number of factors including changing public demandsand legal requirements about logging practices. Commodity prices have been volatile andAmerican duties on softwood lumber have had a significant financial impact on the forestindustry. These and other factors have created strong pressures on companies like Tembec toincrease operating efficiencies and reduce costs. Tembec has undertaken a series of initiativesinvolving staff reductions, reductions to the number of contractors and the amount ofemployment provided by its forestry operations and rate renegotiations with its contractingforces. The effects of these changes are discussed in Criterion 4.1 in Appendix III.Page 56 of 89

APPENDIX I: FSC Reporting Form: Detailed FMO informationInformation prepared by Tembec and verified by assessment teamSCOPE OF CERTIFICATEType of certificate:Small/Low Intensity Managed Forest status:Group Certification Status:Number of group members (if applicable):Forest Management – Multi FMU – SingleManagerNot a SLIMFNot a ‘Group’Not ApplicableTotal number of Forest Management Units FMUs:listed below.Two (2) Volume based Forest Licences asDivision of the FMUs within the scope:Number of FMU-s Total forest area FMU group< 100 ha ha100 – 1000 ha ha1000 – 10 000 ha ha> 10 000 ha 2 267,834 haSLIMF FMUsN/A haList of each FMU included in the certificate: Forest Licence A19040 and A20212FMU FMU Owner Area/Volume Forest TypeForest Licence A19040Cranbrook TSATembec Industries Inc. 515,208 cubic metersanually (54.8% ofSubAlpine, Montane,and Columbia ForestForest Licence A20212Kootenay Lake TSATembec Industries Inc,TSA)105,573 cubic metersanually (15.5% ofTSA)620,781m3267, 834 ha (approx.) 5Product categories included in the scope (note: use FSC product category classification system):Type of product:Round WoodOther:Regions of CanadaSubAlpine, Montane,and Columbia ForestRegions of CanadaDescriptionPrincipally round wood sawlogs of various grades, including dry logsand occasionally pulp materialForest Types - Biophysical Description of the Timber Supply AreasThe Cranbrook TSA encompasses approximately 1.4 million hectares. There are three majorphysiographic regions that characterize the varied terrain of the TSA: the Rocky Mountains in the east, the5 267,834 ha is approximate due to the fact this is not an area-based tenure. Percentages of volumeapportionment are not directly translated to percentage of the Timber Harvesting Land Base of the TSA.Page 57 of 89

stunted (or krumholz) trees are common at the lower elevationsof this zone. Overall, rock, ice and grassy meadows (bothCranbrook and Kootenay Lake TSA’s) dominate this zone.Source: TSR3 Analysis Report, May 11/04 and TSR 2 – Kootenay Lake TSA Analysis Report, March2001FMO INFOLocation of certified forests:South East British Columbia as described aboveCity of Cranbrook BC – co-ordinatesForest zoneManagement tenure:Number of FMO employees: A19040: 33.8.A21202: 17.4Total: 51.2Number of forest workers (including contractors)working in forest within the scope of certificate:Latitude: N 49.degrees 31 minutesLongitude: W 115 degrees 45 minutesTemperateIncluding: Sub-Alpine Forest Region,Montane Forest Region, and Columbia ForestRegion(s) of Canada 6Public Forest / Government issued Volume–based Licence.A19040: Employs 146 individual contractorand consulting firms. Many of which haveseveral employees.Note: The individual firms reported would havevarious employees, ranging from single forestryconsultants, to logging contractor crews of 20individuals. Total estimate assumes an averageof two employees per firm.A20212: Employs 92 separate contractor andconsulting firms.An estimated total of 476 forest workers.Species and annual allowable cutBotanical name Common trade name AnnualallowablecutPinus contortaPinus monticolaPinus ponderosaPinus albicaulisPicea engelmanniiPseudotsuga menziesiiLarix occidentalisThuja plicataAbies lasiocarpaTsuga heterophyllaLodgepole pine,Western white pinePonderosa pineWhitebark pine.Engelmann SpruceDouglas Fir (interior)Western Larch, WesternRed Cedar, Alpine FirWestern HemlockActualharvest inlast yearProjectedharvest fornext yearTotal 620,781 m3 700,592 7 m3 620,781 m36 J.S Rowe; Forest Regions of Canada, 1972Page 59 of 89

Government determines AAC, following an extensive Timber Supply Review analysis approximatelyevery five years. The Forest Licence is a grant to the holder, a portion of the AAC determined for thebroader Timber Supply Area (TSA), and does not specify a volume for each species.Total annual estimated log production: 620,781 m3Total annual estimates production of Non-Timber Forest Products:(list all NTFP by product type)N/A m3N/A m3m3FOREST AREA CLASSIFICATIONTotal certified areaCranbrook TSA:416, 196 ha Timber Harvesting Land BaseKootenay Lake TSA: 257, 850 ha THLB in total.Total forest area in scope of certificateForest area that is:Privately managed N/A haState(Publicly) managed 100%Community managedhaArea of production forests (areas where timber may be harvested)Based onTimber harvesting land-base (THLB)Area without any harvesting or management activities (strict reserves)Area without timber harvesting and managed only for production ofnon-timber forest products or servicesArea classified as plantations 8(54.8% of the THLB)227,867 ha15.5% of THLB is39,967ha267,834 ha206,333 han/a han/a haNone haArea or share of the total production forest arearegenerated naturally:After harvest, stands in the MU’s follow varioussilvicultural management regimes depending on theoriginal stand type. Some stand types rely onnatural regeneration while others rely on plantingor a combination of the two.(A19040) 7,922 ha, and(A20212) 255 ha in 2004Combined total: 8,177 haThe percentage of naturallyregenerated stands is 20-25%(Planted stock 75-80%) depending onthe year.Area or share of the total production forest area (A19040) 20, 868 ha, and7 Government Harvest Billing System and the transition to the “take-away” of apportioned volume as aresult of Bill 28 Forest Revitalization Act causes some variances.8 According to FSC definition “plantations” in this context should be understood as forest areas lackingmost of the principal characteristics and key elements of native ecosystems as defined by FSC-approvednational and regional standards of forest stewardship, which result from the human activities of eitherplanting, sowing or intensive silvicultural treatments.Page 60 of 89

egenerated by planting or seeding:After harvest, stands in the MU’s follow varioussilvicultural management regimes depending on theoriginal stand type. Some stand types rely onnatural regeneration while others rely on plantingor a combination of the two(A20212) 6, 860 ha in 2004.Combined total: 27,728 haThe percentage of regenerated standsusing planted stock is 75 – 80 % (20-25% regenerating naturally) dependingon the year.Area or share of the total production forest areregenerated by other or mixed methods (describe):Most all regenerated stands that are planted will have a‘fill – in’ of naturally occurring native species.n/a haConservation values present in the forest (High Conservation Value Forests orHCVF) and respective areas:The draft list of candidate HCVF’s for areas in the Cranbrook (A19040) andKootenay Lake (A20212) Timber Supply Areas, British Columbia, as ofSeptember 23, 2005 include several candidates associated with the company’sadjacent private lands – Managed Forest 27.This represents ‘work in progress’, and the selected areas and the total area withineach are expected to change for the final version.Note: The classification or category * nomenclature (HCVF 1, 2, 3,and 4) arethose described by the definition in the March 2005 FSC-BC Standard as follows:HCVF Attributes*HCVF 1* - Forest areas that contain globally, regionally ornationally significant: concentrations of biodiversity values(e.g. endemism, endangered species, refugia); and/or largelandscape level forests, contained within, or containing themanagement unit, where viable populations of most if not allnaturally occurring species exist in natural patterns ofdistribution and abundance.HCVF 2* - Forest areas that are in or contain rare, threatenedor endangered ecosystems.HCVF 3* - Forest areas that provide basic services of naturein critical or unique situations (e.g. watershed protection,erosion control).HCFV 4*- Forest areas fundamental to meeting basic needsof local communities (e.g. subsistence, health) and/or criticalDescription:Location on FMUsee the followingtablesee the followingtablesee the followingtablesee the followingArea (ha)TBDTBDTBDTBDPage 61 of 89

to local communities’ traditional cultural identity (areas ofcultural, ecological, economic or religious significanceidentified in co-operation with such local communities).tableHCVF Category* Licence Location Area (Ha)1 A19040 Alderidge / Upper Fording 75121 A19040 Big Horn Fish 2491 A19040 Calamity Creek 36921 A19040 Caribou A 158331 A19040 Caribou B 267051 A19040 Caribou C 136851 A19040 Caribou D 13381 A19040 Coppery Creek 24781 A19040 Desolation Creek 74171 A19040 Elk Valley Riparian/Fish B 1321 A19040 Elk Valley Riparian/Fish C 2191 A19040 Etna Fish 1561 A19040 Fenster Creek 23411 A19040 Grizzly Bear 1 29851 A19040 Glencairne Fish 741 A19040 Grizzly Bear 2 78801 A19040 Hosmer Grizzly Linkage 79011 A19040 Line Creek Riparian/Fish 3701 A19040 Lower Elk Fish A 6591 A19040 Lower Flathead 821661 A19040 Lower Wigwam Fish 3161 A19040 Morissey Grizzly Linkage 108131 A19040 Upper Elk Riparian/Fish 4641 A19040 Upper Meachen 20991 A19040 Upper West Fork 37521 A19040 West Side Upper Elk 366531 A19040 Wigwam A 63311 A19040 Wigwam B 10431 A19040 Wigwam C 27521 A19040 Wigwam Fish 14021 A19040 Yahk Tailed Frog WHA 3711 A20212 Caribou KL A 49491 A20212 Caribou KL B 147891 A20212 Mallandaine A 48971 A20212 Mallandaine B 115531 MF27 Alexander GB Linkage 39041 MF27 Elk Valley Riparian/Fish A 11091 MF27 Grave Prairie/Big Ranch 3871HCVF Licence Location Area (Ha)Category*2 A19040 Baker Creek 312Page 62 of 89

2 A19040 Bare Hill 13022 A19040 Blacktail 1792 A19040 Bloom Ridge Grasslands A 4632 A19040 Bloom Ridge Grasslands B 2172 A19040 Brewery Creek 32262 A19040 Celestial Creek 35592 A19040 Elk Lakes Park A 3352 A19040 Elk Lakes Park B 1792 A19040 Englishman Creek 65822 A19040 Etna Creek 8162 A19040 Fussee Lake 19802 A19040 Glencairne 8122 A19040 Kiakho Lake 13932 A19040 Kimberley Nature Park 9292 A19040 Lapoint Face 1632 A19040 Lower Saint Marys 39592 A19040 Lower Wigwam 10542 A19040 Pyramid Creek 25542 A19040 Saint Marys / Redding Creek 29042 A19040 Saugum Lake 73652 A19040 Sawyer Creek 11932 A19040 Tower Creek 38772 A19040 Upper Elk Riparian 51712 A19040 Upper Fitzpatrick 10082 A19040 Upper Wildhorse 26862 A19040 Ward Canyon 14352 A20212 Cold Creek OGMA A 3032 A20212 Cold Creek OGMA B 2162 A20212 Cold Creek OGMA C 5262 A20212 Lilttle Moyie Wetlands 822 A20212 Little Moyie CH 2372 A20212 Little Moyie Grasslands 8492 A20212 Mission Creek CH 1282 A20212 Upper Irishman 6382 A20212 Upper Kid Cedar A 3732 A20212 Upper Kid Cedar B 2352 A20212 Upper Russell Creek 1474HCVF Licence Location Area (Ha)Category*3 A19040 Baker Cr. TBD3 A19040 Barkshanty TBD3 A19040 Boivan TBD3 A19040 Caithness TBD3 A19040 Cotton TBD3 A19040 Cummings and face north ofTBDCummings3 A19040 Denver (St Mary Lake) TBD3 A19040 Elk R. at Elkford TBD3 A19040 Ewin/Chaucey TBDPage 63 of 89

3 A19040 Fairy TBD3 A19040 Fernie Alpine Resort TBD3 A19040 Glencairn TBD3 A19040 Hartley/Mutz/Face TBD3 A19040 Kimberly TBD3 A19040 Lakit TBD3 A19040 Lewis TBD3 A19040 Lewis face/Lazy Lake TBD3 A19040 Lladnar Face TBD3 A19040 Lower St. Mary above Perry TBD3 A19040 Matthew TBD3 A19040 N. Elk River TBD3 A19040 Nordstrum TBD3 A19040 Perry TBD3 A19040 Prudhomme TBD3 A19040 Redding/St. Mary TBD3 A19040 Slopes west of Elk R. TBD3 A19040 Upper St. Mary TBD3 A19040 W. side of Hwy. TBD3 A19040 Wigwam/Lodgepole/Lower Elk TBD3 A19040 Wildhorse TBD3 A20212 Between Irishman and Moyie Lake TBD3 A20212 Christopher/Ryan Face TBD3 A20212 Englishman TBD3 A20212 Face between Russell & Thompson TBD3 A20212 Face Norhtwest side of hwy 3 TBD3 A20212 Face units south of Barkshanty andTBDGlencairn3 A20212 Glenlily TBD3 A20212 Hawkins TBD3 A20212 Hazel/Jensen/Kristina/KitchenerTBDCreeks3 A20212 Irishman/Colleen TBD3 A20212 Kid TBD3 A20212 Kingsgate West TBD3 A20212 Kitchener Face TBD3 A20212 Little Moyie TBD3 A20212 Russell TBD3 A20212 Thompson TBDPage 64 of 89

APPENDIX II: Public summary of the management planInformation provided by Tembec and verified by the assessment teamTembec’s Sustainable Forest Management Plan (SFMP) – summary for Management Units within thescope of the Certificate. Forest License A19040 and A20212 in the Cranbrook and Kootenay LakeTimber Supply Areas.Main objectives of forest management are: to be a low-cost, profitable integrated forest productscompany converting forest resources into innovative and competitive quality products for customerswhile protecting the environment and creating positive long-term social, cultural and economicbenefits for the region and its people, employees and shareholders.Main priority: The Sustainable Forest Management Plan describes Tembec’s long-tern commitmentsto Criteria and Indicators of sustainability as well as the FSC principles – through implementation ofthe strategies outlined.Secondary priority: To provide overarching guidance for the operational plans submitted togovernment agencies for approval.Other priorities: Demonstrate the company’s support of the Forest Stewardship Council Principlesand Criteria.Forest composition:The forests of the Cranbrook TSA are dominated by Lodgepole pine, Douglas-fir, Western larch,Engelmann spruce, and Subalpine fir or Balsam fir.Within the Timber Harvesting Land-base (THLB) of the Kootenay Lake TSA, Douglas-fir, Westernlarch, Engelmann spruce, Subalpine fir, Lodgepole pine, Western red cedar and Western hemlockpredominate.Western white pine, Ponderosa pine, White bark pine, Aspen, Birch and Cottonwood occur in smalleramounts in both TSA’s.Dominant tree species of the Timber Supply Area(s) are shown in the following Tables following thissection.Description of Silvicultural system(s) used:Tembec uses a combination of even and uneven aged management systems for both Forest Licenseoperations FL A19040 and FL A20212. Primary systems include:Clearcuts with reserves (5-year average by area is): 71.8 % and 57.5% respectively.Clearcuts that include road ‘rights-of-way’ account for: 22.5% and 40.9% respectively.Wildlife trees or wildlife tree patches often constitute the reserves in the ‘clearcut with reserves’Page 65 of 89

system category.Shelterwood systems make up 3.5% in FLA19040 and 1.0% for A20212, withSeed Tree (0.1% and 0.6%) systems also being utilized.The additional tables show the breakdown for each of the two Forest Licences follow this sectionOther types of management (explain): N/AN/A %Harvest methods and equipment used:The majority of the harvesting systems are “conventional” ground-based systems, involvingskidders and/or small crawler tractors and forwarding equipment. The next most commonsystem (by volume) is cable yarding, with the remaining small percentage being done byhelicopters.Additional information is included in tabular form below.Estimate of maximum sustainable yield for main commercial species:The Timber Supply Review (analysis) completed by government results in an AAC determination bythe Chief Forester of the province. Each Timber Supply Area will have an extensive TSR (review)usually every five years. Cranbrook has just completed their AAC determination November 2005(974,000m3). Kootenay Lake TSR was completed and in effect January 2002 (681,300m3).The volume–based Forest Licences are apportioned within the TSA’s. The current apportionment forTembec’s Licences within the scope of the certificate are:515,208 m3 for FL A19040 in Cranbrook, and105,573 m3 for FL A20212 in Kootenay Lake.Explanation of the assumptions (e.g. silvicultural) upon which estimates are based and reference to thesource of data (e.g. inventory data, permanent sample plots, yield tables) upon which estimates arebased upon.During the extensive Timber Supply Reviews several reports are generated that serve the purpose ofdetermining an AAC. The acceptability of all the supporting data, and current management practicesand assumptions are included in the first key-reporting phase entitled the ‘Data Package’.The second report ‘The Analysis Report’ describes in detail how all the approved ‘data’ andassumptions have been used in the estimation of the base-case harvesting flow. The analysis furtherdescribes alternative harvest rates in the short and long term, and resultant socio-economic impactsand results of alternative harvest rates. This report also includes a sensitivity component that describesthe reliability associated with certain data and forecasts.The Chief Forester in his/her unfettered determination uses all these reports in their rationale for theAAC. This is then described in a final ‘Determination Report’.Forest management organizational structure and management responsibilities from senior managementPage 66 of 89

to operational level (how is management organized, who controls and takes decisions etc.)Tembec woodlands (Forest Resource Management Division –FRM) in the Kootenay portion of BritishColumbia is organised into two Regions - Kootenay Columbia and Kootenay Central.The Kootenay Central staff manages Forest Licence A20212, while FL A19040 is managed jointly byboth Kootenay Central and Columbia staff in approximately an equal portion.FRM Administrative staff resources in the Cranbrook office provide overarching strategic directionand administrative services to all regional staff (Chief Forester, Divisional Forester, Biologist,Information Systems, Purchasing, R&D, Human Resources and Accounting).Forestry in British Columbia is a ‘restricted field of practice’ in that only registered professionals (i.e.RPF’s) can undertake certain activities and are accountable for the forestry activities (practices) forwhich they are qualified. Tembec employs some 19 Registered Professional Foresters, whose ethicaland professional responsibilities go beyond a responsibility to their employer.Structure of forest management units (division of forest area into manageable units etc.)The BC Ministry of Forests is the primary manager of public forests (Crown) in the province, and thetwo Management Units included in this certificate are within their Southern Interior Forest Region.The region is made up of 12 Forest Districts, of which the Rocky Mountain District and KootenayLake District are the two pertaining to this assessmentIn the case of the Kootenay Lake District, the district boundary is also the Timber Supply Areaboundary for which an AAC is determined. The Rocky Mountain Forest District however, has twoTSA’s and one Tree Farm Licence - for each of these a separate AAC is determined.Tembec’s Forest Licence A19040 is within the Cranbrook TSA, of the Rocky Mountain ForestDistrict; andForest Licence A20212 is within the Kootenay Lake Forest District (and TSA).Monitoring procedures (including yield of all forest products harvested, growth rates, regeneration,and forest condition, composition/changes in flora and fauna, environmental and social impacts offorest management, costs, productivity and efficiency of forest management)The Sustainable Forest Management Plan outlines some 44 strategies that are in place to achieve theindicators of sustainability outlined in the plan. Extensive monitoring occurs for almost everymeasurable socio-economic, environmental aspect of these – as well as compliance with the laws.Monitoring these aspects provides the necessary feed-back loop to ensure the company has done whatthey have said - as well as those that we are obligated to do under the law. The scope of themonitoring ranges from - ensuring that the next crop of trees (surveys, etc,) is free- to grow, toreporting the financial results to our shareholders (using proper accounting systems and procedures).Specific monitoring strategies are included in the plan.Page 67 of 89

Environmental protection measures, e.g. buffer zones for streams, riparian areas, etc., protectionmeasures for Rare Threatened and Endangered Species and habitatThe management strategies described in the SFMP provide the full details of the environmentalindicators of sustainability. The overarching criteria for the environmental aspects are described to:Sustain biological richness and it’s associated values,Sustain the productivity of the forests and associated soil resources,Sustain forest ecosystems and their contribution to global carbon cycles, andSustain water quality and quantity.In many instances additional criteria for social and economic sustainability also contribute to theenvironmental protection measures, such as, ensuring that forest management sustains ongoingopportunities for a range of quality of life benefits (recreation, HCVF’s, and first nation culturalvalues).Section 3 of the plan describes all the Criteria and Indicators of Sustainability for the ManagementUnits.Forest compositionCranbrook TSA – Dominant Trees Species within the THLBTree Species Scientific Name PercentLodgepole pine (Pl) Pinus contorta 45.1%Douglas-fir (Fd) Pseudotsuga menziesii 17.9%Western Larch (Lw) Larix occidentalis 12.3%Engelmannn spruce Picea engelmannii 9.7%(Se)Subalpine fir (Ba) Abies lasiocarpa 8.0%Ponderosa Pine (Py) Pinus ponderosa 2.6%Western hemlock, western red cedar, whitebark pine, birch,aspen, and western white pine – less common in the TSA.Source: TSR3 Analysis Report, May 11/04Kootenay Lake TSA – Composition of THLB by Tree Species GroupTree Species Groups*Scientific NamePercentDouglas-fir (FD) Pseudotsuga menziesii 35.2Lodgepole Pine (Pl) Pinus contorta 26.5Balsam/Spruce (BS) Abies sp,/Piceaengelmanni25.5Cedar/Hemlock (CH) 12.8Source: TSR 2 – Kootenay Lake TSA Analysis Report, March 2001 (Figure 3)Page 68 of 89

Description of Silvicultural system(s) used:FL A19040 Five Year (2000-2004) Average Area & Volume Percentages by SilvicultureSystemVOLUMEAREAFive Year TotalsM3 % HA %Clearcut with Reserves 2,297,261 69.6 11,050.7 71.8Clearcut (includesR/W)883,771 26.83,458.2 22.5Shelterwood 80,831 2.4 542.2 3.5Selection Cut 16,105 0.5 215.9 1.5Patch 15,041 0.5 51.0 0.3Retention Cut 7,394 0.2 27.1 0.2Commercial Thin 1,799

Forest Licence A20212: Harvesting methods used on the management unit for the five yearaverage (2000-2004) is 84% by volume “conventional” ground-based, involving skidders and/orsmall crawler tractors. Approximately 16% by volume is harvested using cable yarding.FL A19040 Five Year (2000-2004) Average Area & Volume Percentagesby Harvest SystemVolumeAREA5 Year Totals M3 % Ha %Conventional (small cat /,skidder,2,776,700 84forwarder)13,568 88Cable 451,474 14 1,541.0 10Helicopter 74,083 2 273.8 2TOTAL 3,302,257 15,382.8Source: Tembec FRM Annual Reports. Numbers reflect October 1 to September 30 fiscal year.Tembec Log Production & Delivery Schedule - Schedule 3. Volume reflects ‘Total Volume’ i.e. all log grades that have crossed thescales.FL A20212 Five Year (2000-2004) Average Area & Volume Percentagesby Harvest SystemVolumeAREA5 Year Totals M3 % Ha %Conventional (small cat /,skidder,536,633forwarder)84% 2,328.1 85%Cable 104,234 16% 396.1 15%TOTAL 640,867 2,724.2Source: Tembec FRM Annual Reports. Numbers reflect October 1 to September 30 fiscal year.Tembec Log Production & Delivery Schedule - Schedule 3. Volume reflects ‘Total Volume’ i.e.all log grades that have crossed the scales.Page 70 of 89

Certified by:SmartWood Headquarters65 Millet St. Suite 201Richmond, VT 05477 USATel: 802-434-5491Fax: 802-434-3116www.smartwood.orgContact person: Jon Jicklingjjickling@smartwood.orgForest ManagementPreconditionVerification AuditReport for:Tembec Industries Inc.Certification AuditPerformed by:SmartWood Canada Office215 Notre-Dame de l'Ile, #3Getineau, QC, J8X 3T5Tel: 819-772-5740Fax: 819-772-5740Contact person: Alexandre BoursierEmail: aboursier@ra.orgForest Licenses A19040 andA20212 inCranbrook and Kootenay LakeTimber Supply AreasinThe East Kootenay area of SoutheasternBritish Columbia, CanadaACCREDITEDFSC-ACC-004© 1996 Forest Stewardship Council A.C.FM-32 May 2006Audit Dates: September 12-29 2006Report Finalized: September 29, 2006Auditors:Keith MooreJohn GunnOperation Contact: Chris Stagg, Chief ForesterBC DivisionAddress: Box 4600Cranbrook, BC, V1C 4J7Page 71 of 89

1. AUDIT PROCESS1.1 Auditors and qualifications:Keith Moore, M.A., R.P.F. – Keith is a forester and has worked in forestland managementand environmental assessment in Canada and internationally since 1976. Keith completed theSmartWood Lead Assessor training and been involved with SmartWood and FSCcertification since 2000. He has been a team member and team leader on eighteen otherSmartWood assessments, Pre-condition audits and annual audits in Canada, Russia andAustralia. He co-ordinated the field-testing of three FSC regional standards – the NationalBoreal standard for Canada, the Ontario Boreal standard, and the BC standard. He alsoparticipated in field-testing FSC standards for the Komi Republic in Russia and is presentlyassisting with the development of FSC standards for Montenegro and Kenya. Keith was theteam leader for the assessment in 2005. (KM)John Gunn, Ph.D. Ecologist – John has been a team member or team leader on more than 25SmartWood forest management annual audits and assessments in the northeastern UnitedStates and Canada. John has also led more than 15 chain of custody audits and assessmentsthroughout the United States. John holds a Ph.D. in biology from the University of NewBrunswick, a Master of Forest Science from the Yale University School of Forestry andEnvironmental Studies, and a B.S. in Wildlife Management from the University of Maine.John’s professional experience includes four years as Vice President of Conservation andLand Management for a private timber company in Maine. John was the ecologist on theassessment team in 2005. (JG)1.2 Audit process and scheduleDateSeptember 12,2006 to Sept28, 2006Location /main sitesMain activitiesAuditors offices • Document reviews and interview with KariStuart-Smith, Forest Scientist, Tembec andkey staff member involved with HCVFdesignation; Joe Gnucci, Area Forester, andEirik Pighin, Planning Forester, Tembec.(JG)• Interview with Candace Batycki, BCEndangered Forest Program, ForestEthicsand member of the HCVF Senior DecisionMakers Group. (JG)• Interview with John Bergenske, ExecutiveDirector, WildSight and member of theHCVF Senior Decision Makers Group. (JG)• Document reviews, interviews and requestsfor clarification and additional informationfrom Dave Brown, Divisional Forester;Bruce Pope, GIS and Inventory Forester,Page 72 of 89

Total number of person days used for the audit: 4.5 daysBrian Dureski, Planning Superintendent, andSteve Temple, Area Forester, Tembec• External review of Mountain Pine BeetlePlan by previous peer reviewer of assessmentreport (AB, and KM)• Final review of documents and report writing(JG and KM)2. AUDIT FINDINGS AND RESULTS2.1 Changes in the forest management of the FMONo significant changes have occurred since the assessment.2.2 Stakeholder issuesNo new issues were identified in this Pre-condition verification audit. It was limited to a deskreview of information submitted to meet the Pre-conditions, supplemented by telephoneinterviews.2.3 Certification Standards: maintenance of established performanceThis Pre-condition verification audit was a desk audit of material submitted to meet thePreconditions and telephone interviews. It did not involve any field-work. No attempt wasmade to verify maintenance of established performance.2.4 Compliance with Preconditions and CARsThe section below reviews the materials submitted by Tembec to address each of the 3 Preconditionsestablished in the Certification Assessment Report (September 11, 2006). For eachPrecondition, a finding is presented along with a description of its current status using thefollowing categories. The following classification is used to indicate the status of theprecondition:Precondition/ CARStatus CategoriesClosedOpenExplanationFMO has successfully met thePrecondition and addressed theunderlying noncompliance.FMO has not met the Precondition;underlying noncompliance is stillpresent.Page 73 of 89

Pre-condition #:1/06Non-conformance:Major MinorCorrective Action Request:Reference Standard #: 6.5.8Description of non-conformance: Tembec does not have a complete andup-to-date assessment of the Equivalent Clearcut Area in each watershed,and has not identified measures to be taken in watersheds where the ECAexceeds 25%. The team concluded that this is a significant piece ofinformation that is needed to ensure that Indicator 6.5.8 is met, especiallygiven the current situation in which logging is proceeding rapidly insome watersheds in response to the mountain pine beetle and is a majornon-conformance.Tembec shall complete a summary of the current Equivalent Clearcut Area status in allwatersheds in which Tembec has current logging operations, and all watersheds in which itplans to operate in 2007, and shall identify the measures to be taken in any watersheds thatexceed, or that are planned to exceed, 25% ECA.Timeline for Conformance: Prior to certificationAudit findings: Tembec submitted two pieces of information to address this Pre- condition.The first was a report providing Equivalent Clearcut Areas (ECA) for 22 Riparian AssessmentUnits (also called riparian watersheds) within the operating areas of Tembec’s two forestlicences. A map of each watershed was attached to the report. This report indicates that 2 ofTembec’s units marginally exceed an ECA of 25%, (26.5% and 28.4%). Tembec made awritten commitment to engage a qualified registered professional to undertake a Peak FlowSensitivity Assessment as described in the “hydrological strategy” in the Sustainable ForestManagement Plan (SFMP, Sept 2005) and to develop management strategies for these areasthat are consistent with the SFMP, and the Mountain Pine Beetle Operational Plan describedbelow.The identification of the 22 riparian assessment units is a useful step in integrating theequivalent clearcut area concerns with the requirements (CAR 19/06) to develop riparianassessments to meet Indicator 6.5 bis in the BC standard. However, these Riparian AssessmentUnits include a number of individual discrete watersheds within them (called sub-units) andreflect a grouping of the individual watersheds into the Riparian Assessment Unit rather thanactual individual watersheds. ECAs are required for the sub-unit watersheds in order to meetIndicator 6.5.8. Thus, the team requested Tembec to prepare an additional analysis identifyingECAs at the watershed, or sub-unit level, and specifically for the watersheds where Tembec hadoperations planned in 2006-2007.Tembec then prepared a table showing the ECA status (in %) for 44 individual sub-unitwatersheds in which Tembec has operations or plans operations in 2006 and 2007. Thesewatersheds are within 14 of the 22 Riparian Assessment Units. This table also shows whetherhydrological assessments have been completed within these watersheds. The team confirmedthat there are no operations planned, at present, within any watersheds within any of the otherPage 74 of 89

Riparian Assessment Units in the operating areas of the licence. Thus, with this table, Tembechas met the requirement of the first part of the Pre-condition to provide a summary of the ECAstatus of its watersheds with active logging operations.In addition to the ECA tables and completed hydrological assessments for many of thewatersheds, Tembec also developed a specific “Mountain Pine Beetle Management Strategy forwatersheds with Hydrological Concerns” as part of the Mountain Pine Beetle Operational Plandescribed in Precondition 02/06 below and has made commitments to follow this strategy,consistent with its SFMP.The ECA summary table indicates that 12 watersheds (out of the 44) exceed the 25% ECAthreshold established in Indicator 6.5.8. In 6 of these watersheds, Tembec has had ahydrological assessment completed by a qualified professional and told the team that it isfollowing the recommendations of that assessment report. Thus, although the ECAs exceedthe 25% threshold, Tembec is meeting Indicator 6.5.8 by following the recommendations of ahydrological assessment. One watershed is too small to require an assessment. Tembec madea commitment to continue to follow these recommendations in any new blocks logged in thesewatersheds in response to the mountain pine beetle.There are 5 watersheds - the Yahk River (in Gilnockie RAU), Hawkins Face and Yahk Face(in Little Moyie RAU), Hodge (in Matthew RAU) and Carroll (in Russell RAU) where theECA exceeds 25%, and where hydrological assessments had not been completed at the time ofthis report. Tembec is actively conducing Peak Flow Sensitivity analyses for some of theseareas at present. Tembec made a commitment to the team that they will not undertake anynew harvesting operations beyond the operations already underway or approved in existingcutting permits in the latter 4 of these watersheds until a hydrological assessment is completed.In the Yahk River, there are special circumstances related to some blocks approved in a forestdevelopment plan, but not currently approved in a cutting permit. However, Tembec told theteam that the ECA calculation for the Yahk River unit is current to 2006 and includes all areasplanned for harvest under the approved forest development plan. Thus, operations in newcutting permit areas will be part of the approved forest development plan areas and will notincrease the ECA beyond the currently calculated 25.3%. Thus the team does not considerthese as “new areas” in the sense that they have already been accounted for.The team concluded that the management strategies outlined in the SFMP and Mountain PineBeetle operational plan, and the commitment to either following the recommendations ofhydrological assessments, or not to undertake new harvest in any watersheds without anassessment, in all the watersheds that exceed 25%, meets the second requirement of the Preconditionto identify the measures to be taken in any watersheds that exceed, or that are plannedto exceed, 25% ECATherefore, the team concluded that Tembec has met the requirements of this Pre-condition. Theteam did not verify any information in the field and accepts Tembec’s commitment toundertake hydrological assessments prior to commencing operations in any new (not currentlyapproved areas) within the watersheds that exceed the 25% threshold as required by theIndicator. The completion of the hydrological assessments should be verified in the nextPage 75 of 89

annual audit.Status: Met and Closed.Follow-up Action:Note for Future Annual Audits (6.5.8): At the first annual audit, the audit team shouldconfirm that hydrological assessments have been completed for all watersheds where there areactive logging operations and where ECAs exceed 25%, and that Tembec is following therecommendations of those assessments and the strategies identified in its SFMP and MountainPine Beetle Operational Plan.Pre-condition #:2/06Non-conformance:Major MinorCorrective Action Request:Reference Standard #: 7.1.8Description of non-conformance: Tembec does not have a statement ofmanagement objectives and operational approaches related to mountainpine beetle. Presently, the beetle is the dominant factor influencingTembec’s planning and operational harvesting in the two operating areasand is a significant forest health issue as well. The team found that thelack of management objectives and lack of a clearly stated managementstrategy that addresses how other management objectives and strategiesset out in the SFMP will be met while harvesting in response to the pinebeetle is a major non-conformance with Indicator 7.1.8, and a nonconformancewith Indicator 7.1.6 as well.Tembec shall provide a management plan for the mountain pine beetle that:• Provides a statement of management objectives related to monitoring, planning andharvesting to address mountain pine beetle;• Describes the monitoring strategies for mountain pine beetle;• Describes and justifies the specific management actions that are being taken to respondto monitoring results; and• Describes how the specific management actions for the pine beetle are consistent withthe Ecological and Socio-Economic Management Strategies established in the SFMP forother forest values.This document shall be made publicly available.Timeline for Conformance: Prior to certification.Audit findings: Tembec provided SmartWood with a “Mountain Pine Beetle - OperationalPlan” dated September 1, 2006 and signed by the Divisional Forester. This is a verycomprehensive 22 page document supported by 4 appendices, 2 of which provide detailedmanagement strategies for mountain pine beetle developed by MOFR for the Cranbrook andKootenay Lake Forest Districts. The lengthy Appendix documents show the provincialstrategies for each of the 62 landscape units designated by the government as BeetlePage 76 of 89

Management Units within the two timber supply areas. Tembec must follow these provincialstrategies in these units that fall within the operating areas of their two forest licences.Thus, the plan explains the legislative framework and context for pine beetle management anddescribes in detail the inter-related responsibilities of the provincial government and Tembec.With this context, the second half of the Plan then lays out in detail how Tembec will conductpine-beetle related harvesting and road construction activities to address and meet each of thestrategies set forth in Tembec’s Sustainable Forest Management Plan and protect the valuesidentified in the SFMP.Appendix 3 of the Plan includes a checklist that has been developed to provide operationalplanning staff guidance to ensure that this linkage to the SFMP occurs in all operationalplanning activities (i.e. not just those associated with Mountain Pine Beetle).SmartWood obtained an external review of this plan. The reviewer, who was familiar with thePre-condition and the circumstances related to mountain pine beetle in south-eastern BC,commented that the plan confirmed that Tembec is working closely with the provincialgovernment and local interested parties on various strategies and scenarios and is addressingcontingencies. He describes several aspects of the plan as “good”.This Pre-condition was a Principle 7 pre-condition – it was directed to the preparation andsubmission of a plan. The Mountain Pine Beetle Operational Plan submitted by Tembec is acompanion document to Tembec’s Sustainable Forest Management Plan (September 2005) andprovides specific information about how the company manages for Mountain Pine Beetleinfestations in the Cranbrook and Kootenay Lake Timber Supply Areas. The team concludedthat the submitted by Tembec contains the information set out in the Pre-condition.The plan has been sent to interested parties – WildSight and the Ktunaxa Nation Council.Tembec placed advertisements in local papers in the weeks of September 4 and September 11,2006 announcing that the plan is publicly available and providing information about howinterested parties could obtain copies. This meets the final requirement of the Pre-condition.Tembec’s current logging activities occur almost entirely in areas affected by mountain pinebeetle and involve the types of logging activities described in this plan. There is someindication that public concerns about the pine beetle harvesting that were identified during theassessment have also been expressed since the assessment. One recent concern about damageto recreational trails in the Kimberly Nature Park was brought to the attention of an assessmentteam member. Thus, is it very important to ensure that harvesting activities for mountain pinebeetle do in fact follow the measures and meet the commitments outlined in this plan. Theteam recommends that future annual audits should visit sites of recent pine beetle harvest, orsites where concerns have been raised, to confirm that the actual harvest activities confirm tothe measures outlined in this Plan. The external reviewer pointed out that the annual auditcould also address a concern that the Ministry of Forests and Lands makes Tembec harvest atunsustainable rates in an effort to salvage trees killed by the pine beetle. If issues related toharvest rates arise they can be addressed in the annual audits.Page 77 of 89

Status: Met and Closed.Follow-up Action:Note for Future Annual Audits: The audit team should visit sites of recent pine beetle harvest,or sites where concerns have been brought to SmartWood’s attention, to confirm that the actualharvest activities and the annual rate of harvest conform to the measures outlined in this Plan.Pre-condition #:3/06Non-conformance:Major MinorCorrective Action Request:Reference Standard #: 9.1.1Description of non-conformance: At the time of the FSC assessment,Tembec had not fully completed an assessment to determine the presenceof High Conservation Value Forests and associated conservationattributes within the two licences.Tembec shall complete the assessment, designation, and mapping of Categories 1-3 HighConservation Value Forest areas (as defined in the FSC-BC Regional Standard).Timeline for Conformance: Prior to certification.Audit findings: At the time of the initial assessment (October 2005), a comprehensive draft setof HCVF areas had been identified following several workshops involving a 12 memberTechnical Advisory Group (TAG) representing a diverse group of interested parties. Since thattime, the TAG has refined the boundaries of the HCVF areas and several meetings were held bythe Senior Decision Makers Group (SDMG) to review, reconcile, and approve the draft HCVFareas. The TAG and SDMG process is described in detail in the full Certification AssessmentReport (September 11, 2006).The TAG and the SDMG have completed their work and agreed on a final set of areas to bedesignated as High Conservation Value Forests and Endangered Forests (as defined byForestEthics) within the Cranbrook and Kootenay Lake TSAs. The report entitled “HighConservation Value Forests in Tembec’s Operating Areas in the Cranbrook and Kootenay LakeTSAs, South-East British Columbia” (Stuart-Smith and Wells, September 2006), summarizesthe assessment and designation process for HCVF areas consistent with HCV categories 1through 3 as defined in the accredited BC FSC Standard. With the exception of the deferredareas described below, a set of Final Maps have been developed that identify boundaries ofHCVF areas to an acceptable level of detail for planning and operational purposes. In somecases, such as with Category 3 HCVF (see below), boundaries will be refined in the fieldduring operational reconnaissance activities.Decisions have been deferred on four draft HCVF areas where further information is required,where delineation remains controversial, or where input from the Ktunaxa Nation Council(KNC) is required. A decision on the delineation of HCVF areas considered to have mountaincaribou habitat value has been deferred until a governmental decision is made regardingrecovery plans for the South Purcell Herd, or until the Spring of 2007, whichever comes first.With the exception of mountain pine beetle salvage operations, harvests and road buildingPage 78 of 89

activities will be deferred. The SDMG has agreed to an interim strategy regarding potentialsalvage operations within the combined areas designated by the KBLUP Variance 4 and Kinleyand Utzig 2002 caribou habitat mapping. The strategy requires consultation by Tembec withtwo representatives of WildSight and one from ForestEthics, prior to initiating any salvageoperations within potential mountain caribou HCVF areas. This interim strategy has beenemployed on at least two occasions, including site visits to the areas of proposed activity. Onthose occasions, WildSight and ForestEthics were satisfied with the proposed salvageoperation. However, the agreement does not specify a formal dispute resolution frameworkshould there be an objection to a proposed harvest. Interviews with Tembec and SDMGmembers determined that there is a verbal agreement in place whereby the TAG and SDMGprocess (used in HCVF designation) would be invoked if there were a need to resolve a dispute.Both parties have faith that the dialogue will continue in the positive manner that has developedduring the HCVF designation process for all of Tembec’s operating areas to date. The HCVFdesignation following the reconvening of the TAG and SDMG process after a governmentdecision (or lack of decision by Spring 2007) on mountain caribou recovery will need to be afocus of the first annual audit.An interim strategy of deferring harvests and road building activities has been adopted for thethree other draft HCVF areas. In the Flathead, Tembec has agreed to defer harvesting androad-building activities at least five years until more definitive conservation strategies beingpursued by local and national ENGOs are in place. In the Wigwam and Mallandine areas,HCVF designation has been deferred to allow for consultation with KNC and additional fieldtrips to areas of interest.HCVF Category 3 polygons have been designated in a general manner with further detailedlevel assessments and risk analysis to be conducted in the field within each polygon tospecifically identify areas that pose a high risk to the identified High Conservation Value.Tembec’s internal spatial planning process is sufficient to alert planners to proposed activitieswithin HCVF polygons. The detailed assessments will then take place prior any developmentin identified HCVF polygons. Management and monitoring strategies for these HCVFpolygons have been identified by Green (2005). This is a precautionary approach towardsCategory 3 High Conservation Values and is reasonable considering the constraints of fieldtime required to refine HCVF polygons and the low risk involved with Tembec’s planningprocess.Based on documentation submitted by Tembec, and interviews conducted with Tembec staffand members of the Senior Decision Makers Group, the team concluded that Tembec hassatisfactorily completed the assessment, designation, and mapping of Categories 1-3 HighConservation Value Forest areas (as defined in the FSC-BC Regional Standard). Tembec hascompleted this extensive assessment in a technically thorough and inclusive manner. WhereHCVF designation issues are still unresolved, Tembec is taking a precautionary approachinvolving interim strategies and a plan for resolution that is the result of a consultative process.Reference: Green, K. 2005. High Conservation Value (3) Forests – Preliminary Assessment ForTembec’s Operating Area within the Rocky Mountain and Kootenay Lake TSA. Report forTembec. November 2005.Page 79 of 89

Status: Met and Closed.Follow-up Action:Note for Future Annual Audit (9.1): At the first annual audit, the audit team should reviewthe designation of the mountain caribou HCVF following the reconvening of the TAG andSDMG process after a government decision (or lack of decision) by Spring 2007.2.5 New corrective actions and observationsThere are no new CARs or Observations following this PCVA. Three additional Notes forFuture Annual Audits are included as follows:Note for Future Annual Audits (6.5.8): At the first annual audit, the audit team should confirmthat hydrological assessments have been completed for all watersheds where there are activelogging operations and where ECA’s exceed 25%, and that Tembec is following therecommendations of those assessments and the strategies identified in its SFMP and MountainPine Beetle Operational Plan.Note for Future Annual Audits (7.1): The audit team should visit sites of recent pine beetleharvest, or sites where concerns have been brought to SmartWood’s attention, to confirm that theactual harvest activities and the annual rate of harvest conform to the measures outlined in thisPlan.Note for Future Annual Audit (9.1): At the first annual audit, the audit team should review thedesignation of the mountain caribou HCVF following the reconvening of the TAG and SDMGprocess after a government decision (or lack of decision) by Spring 2007.2.6 Audit recommendation and final CARsAudit Conclusions:Preconditions (s) closed, certification recommended.No follow-up requiredNew CAR issued (document new noncompliance in CAR table below)Precondition(s) openComments/ Follow-upactions at next audit:Three Notes for Future Annual Audits are recorded above.Page 80 of 89

Finalized complete CAR List (Total of 23 CARs):CAR #: 4/06 Reference Standard #: 2.1.4Non-conformance: Description of non-conformance: There is excessive cattle grazing withinMajor Minor riparian reserve zones, in streams, and on the margins of wetlands atseveral locations in the Kootenay Central and Kootenay Columbiaoperating areas. Cattle in these areas cause damage to habitats fornesting birds and affect water quality. They also reduce the ground coverof native vegetation and lead to invasion of non-native plant species intoriparian areas. Impacts of cows were noted in or close to streams indomestic watersheds. The grazing undermines the protection of theseimportant values.There are also mineral exploration roads in high elevation forest and nonforestareas with high value, access-sensitive, wildlife species,particularly caribou, grizzly bears and mountain goats. These roadscould undermine the achievement of the objective of the highconservation value forest and need to be addressed.Corrective Action Request:Tembec shall have taken steps, either alone or with other parties, to prevent the impacts andmitigate the damages associated with cattle grazing in riparian areas and mineral explorationroads in designated High Conservation Value Forests.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 5/06 Reference Standard #: 3.1.4, 3.2, 3.3Non-conformance: Description of non-conformance: Tembec is in non-conformance withMajor Minor these indicators because an adequate level of consultation or joint plandevelopment with the bands has not taken place. Tembec understandsthere is a need to re-engage consultation with the bands but there is notyet clarity about which issues the KNC or bands will ultimately handle.Corrective Action Request:Tembec shall demonstrate that they have made progress towards re-establishing regularconsultation with the bands of the Ktunaxa Nation Council (including when harvesting is takingplace in areas of interest to the bands), and shall have established satisfactory processes withthose bands that articulate specific interests related to resource uses and special sites.Timeline for Conformance: By the end of Year 1 of certificationPage 81 of 89

CAR #: 6/06 Reference Standard #: 3.2.1Non-conformance: Description of non-conformance: Tembec has not yet developedMajor Minor strategies to maintain cultural values that have been identified byKtunaxa.Corrective Action Request:Tembec shall have worked with the appropriate Ktunaxa entity or entities to develop strategiesto address articulated values (e.g. cultural heritage, wildlife, fisheries, grasses and plants), andincorporated these strategies into their forest management planning.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 7/06 Reference Standard #: 4.1.1Non-conformance: Description of non-conformance: In the Creston area, Tembec has notMajor Minor met the requirements of Indicator 4.1.1 to provide local employment.Tembec has made commitments in a “communiqué” but thesecommitments were not fully met and some Tembec staff seemed to beunfamiliar with the provisions in the communiqué. In addition, there isan absence of Tembec staff in the Creston area.Corrective Action Request:Tembec shall work with the Creston Town Council and interested citizens to clarify thecompany’s commitment to local employment from operations in FL A20212, examineopportunities for local employment and implement any reasonable options.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 8/06 Reference Standard #: 4.1.6Non-conformance: Description of non-conformance: There has been a recent reduction inMajor Minor the goods purchased locally in the Creston area. Tembec employeesworking out of Creston were not aware that the corporate policiessupported the local purchasing of these supplies and thus did not stronglyquestion direction to purchase outside the community.Corrective Action Request:Tembec shall ensure that all appropriate staff is aware of, and is implementing the corporatepurchasing policy regarding supporting local suppliers.Timeline for Conformance: By the end of Year 1 of certification.Page 82 of 89

CAR #: 9/06 Reference Standard #: 4.2.1Non-conformance: Description of non-conformance: The use of the WCB approved riskMajor Minor rating system for operating equipment on steep slopes was not fullyunderstood by some of Tembec’s logging supervisory personnel. Aswell, since the risk rating doesn’t make any reference to either the needto operate within the specifications for each machine or the OHSAregulation, equipment operators may not fully understand the level ofrisk they are accepting when they sign off on these ratings. Duringinterviews, the team heard that some logging contractors felt intimidatedinto accepting potentially unsafe work on steep slopes.Corrective Action Request:Tembec shall• incorporate the OHS regulation sections related to steep slope harvesting into the riskrating systems for ground skidding and mechanical falling on steep slopes to ensure thatcontractors and forest workers are aware that harvesting on slopes in excess of the OHSregulation is generally prohibited;• train staff, logging and harvesting supervision contractors and forest workers on theproper application of the risk rating systems for ground skidding and mechanical fallingon steep slopes;• ensure contractors are aware that, to operate on steep slopes, structures such as skidtrails must be constructed and other safe work procedures implemented to mitigatehazard;• ensure that forest workers are fully informed of the potential safety risks of groundbasedskidding and mechanical falling on steep slopes, and are provided full informationabout their right to refuse unsafe work without discrimination; and,• establish an annual review of the implementation of the steep slope assessmentprocedures and risk ratings to ensure the adequacy of the procedure and make changesas needed.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 10/06 Reference Standard #: 5.1.4Non-conformance: Description of non-conformance: Neither the “Identification andMajor Minor Assessment of Environmental Aspects” process, nor the “DecisionSupport Tool” that are being developed by Tembec includes a specificprocess to set benchmarks for reducing costs that have been identified.In the absence of this process, benchmarks for reducing social andenvironmental costs are absent.Corrective Action Request:Tembec shall elaborate a process to set benchmarks for reducing environmental, social andoperational costs that have been identified.Page 83 of 89

Timeline for Conformance: By the end of Year 1 of certification.CAR #: 11/06 Reference Standard #: 5.3.1Non-conformance: Description of non-conformance: Tembec’s log quality parameters resultMajor Minor in useable logs that meet MOFR merchantability and utilizationstandards being wasted and left on site and in burn piles, beyond therequirements for coarse woody debris. This is not in compliance with theindicator requirement to minimize waste.Corrective Action Request:Tembec shall identify and implement measures to reduce the amount of wood meeting MOFRutilization standards, and not prescribed in site plans to be left to accommodate other ecologicalvalues, that is left on site and in burn piles as waste.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 12/06 Reference Standard #: 5.6.1Non-conformance: Description of non-conformance: Tembec’s current timber supplyMajor Minor analyses and AAC determinations are not specific to its operating areasand do not account for Tembec’s management activities to meet FSCrequirements and the provisions of their SFMP, and thus, do not meet therequirements of the Indicator.Corrective Action Request:Tembec shall complete an analysis of the timber supply specifically for its operating areas inthe Kootenay Lake TSA and Cranbrook TSA. These analyses shall reflect the forest inventoryspecific to the area, and project a sustainable level of harvest from the area that is consistentwith implementing the land base reductions, management strategies and operational practicesthat are set out in Tembec’s SFMP.Timeline for Conformance: By the end of Year 2 of certification.CAR #: 13/06 Reference Standard #: 6.3.4Non-conformance: Description of non-conformance: Tembec cannot demonstrate at thisMajor Minor time that the habitat requirements for early seral dependant species arenot compromised by stand management activities, or that the amount ofearly seral habitat is compatible with natural disturbance regimes.Corrective Action Request:Tembec shall develop and implement a specific strategy to ensure that Tembec’s forestPage 84 of 89

management creates and maintains non-tree-dominated early seral stages in a manner that iscompatible with natural disturbance regimes and meets the needs of early-seral-dependentspecies.Timeline for Conformance: By the end of Year 2 of certification.CAR #: 14/06 Reference Standard #: 6.3.9Non-conformance: Description of non-conformance: Tembec cannot demonstrate that theyMajor Minor meet the minimum required retention levels in cutblock areas(particularly cable harvested cutblock areas) in the MSdk and ESSFwmBEC subzones.Corrective Action Request:Tembec shall demonstrate that retention strategies in cutblock areas in the MSdk and ESSFwmBEC subzones meet the requirements of Indicator 6.3.9, or shall implement a strategy toachieve the minimum retention requirements.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 15/06 Reference Standard #: 6.4.1Non-conformance: Description of non-conformance: Tembec does not currently meet theMajor Minor requirements for protected reserves in the ICH dw1 (-3%), IDF dm2 (-16%), and PP dh2 (-17%).Corrective Action Request:Tembec shall develop a strategy that maintains a sufficient area of the ICHdw1, IDFdm2, andPPdh2 BEC variants in mapped “protected reserves” to meet the requirements of Table P6-1 inthe BC standard.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 16/06 Reference Standard #: 6.5.6Non-conformance: Description of non-conformance: The team observed a number ofMajor Minor locations, particularly on small (Class 6) streams on gentle terrain orwetlands (W3 and W4) where no riparian reserve zones were retainedand where machinery had operated up to 5 metres from the stream orwetland edge. This is consistent with Tembec operating procedures andprovincial regulation but is not in conformance with this indicator.Corrective Action Request:Tembec shall amend its standard operating procedures and site level plans to provide for aPage 85 of 89

minimum 7 m machine-free zone along all streams, lakes and wetlands, except where requiredfor construction of crossings or other approved infrastructure.Timeline for Conformance: By the end of Year 1 of certificationCAR #: 17/06 Reference Standard #: 6.5.7Non-conformance: Description of non-conformance: The team observed diversions of theMajor Minor natural flow of surface water and resulting road and ditch erosion in anumber of locations. This erosion appeared to be a result of inadequateroad maintenance and a lack of seasonal deactivation following logging.This surface erosion along roads that are not active haul roads is “apotential sediment source” as described by the indicator and thus, a nonconformance.Corrective Action Request:Tembec shall have completed an assessment of roads in its operating areas, identified priorityareas for seasonal deactivation to reduce road surface erosion, and implemented measures toreduce surface erosion from road surfaces and ditchlines.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 18/06 Reference Standard #: 6.5.8Non-conformance: Description of non-conformance: Tembec does not have a summary ofMajor Minor the ECA status in each of their active watersheds. Without thisinformation neither Tembec, nor the assessment team, nor the public canbe sure that ECAs are maintained at less than 25%, or at levelsrecommended otherwise by a hydrological assessment as required by theindicator. Pre-condition 1/06 is imposed to require ECA summaries forall watersheds with current operations or operations planned in 2007 andto identify measures to be taken in any watersheds that exceed 25%ECA, prior to certification. CAR 18/06 requires updating of theremaining ECA summaries for watersheds in both operating areas.Corrective Action Request:Tembec shall have updated the ECA status reports for all the watersheds within its operatingareas in Kootenay Lake and Cranbrook TSA.Timeline for Conformance: By the end of Year 1 of certification.Page 86 of 89

CAR #: 19/06 Reference Standard #: 6.5bisNon-conformance: Description of non-conformance: Tembec has not completed anMajor Minor Integrated Riparian Assessment for riparian assessment units within themanagement areas, and has not yet implemented a regime that isconsistent with the results of the assessments or meets the budgetsidentified in the Standard.Corrective Action Request:Tembec shall have:• Completed riparian assessments, consistent with the framework in Appendix B of theBC Standard, in all identified riparian assessment units (anticipated 4-6 watershed levelunits) within one of the Riparian Management Regions (or sub-regions as identified inthe Integrated Riparian Assessment report) within the operating areas in the Cranbrookand Kootenay Lake TSAs;• Provided operational-level guidance or training to planning and operational staff aboutthe implementation of this approach within that Riparian Region; and,• Provided a timetable for the orderly completion of riparian assessments within theriparian assessment units in the remaining five Riparian Regions and sub-Regions inTembec’s operating areas in the Cranbrook and Kootenay Lake TSAs.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 20/06 Reference Standard #: Criterion 7.3, 4.1.3, 4.1.4Non-conformance: Description of non-conformance: Some Tembec employees are not awareMajor Minor of some components of the management plan, corporate policy and theFSC BC Standard related to First Nations (particularly the employmentstrategies and opportunities for business relationships), or socialcommitments such as providing local employment opportunities, localgoods and services purchases, and handling disputes and grievances.Corrective Action Request:Tembec shall ensure all appropriate employees are fully informed about the Tembec plans,policies and agreements that meet the requirements of the BC standard (including therequirements in Principle 3 and the agreements with Ktunaxa related to Principle 3, Principle 4,Criteria 5.1 through 5.4 and Criterion 6.5bis) and shall have considered how these requirementsmight affect their work to ensure proper implementation of the management plan.Timeline for Conformance: By the end of Year 1 of certification.Page 87 of 89

CAR #: 21/06 Reference Standard #: 8.1Non-conformance: Description of non-conformance: Tembec’s monitoring plan andMajor Minor programs are not fully complete in terms of meeting the BC standard.Specific items identified in indicators 9.1.2 are not included.Participation of First Nations in the design of the monitoring plan has notbeen completed and it is unclear how information from the monitoringprograms will be incorporated in revisions to the SFMP. Specificmechanisms for quality assurance and quality control within themonitoring program are not provided in the SFMP document.Corrective Action Request:Tembec shall complete a comprehensive Monitoring Plan that:a) Includes the information required in 8.1.2, 8.1.4 d), e) and f) for each measure, andincludes measures that address the components of the BC Standard, particularly inP4 and P5;b) Incorporates efforts to include the participation of First Nations and directly affectedpersons in the design of this plan and implementation of monitoring activities;c) Clearly describes how monitoring results will be incorporated in the implementationand revisions to the SFMP and the timeline for revisions; and,d) Includes secure databases and quality control/assurance mechanisms.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 23/06 Reference Standard #: 9.1.1Non-conformance: Description of non-conformance: Tembec has not completed anMajor Minor assessment to determine the presence of Category 4 High ConservationValue Forests and has not undertaken consultation with Ktunaxa aboutall HCVFs.Corrective Action Request:Tembec shall complete the assessment, designation and mapping of HCV Category 4 areas andshall have consulted with KNC, directly affected persons, government, environmentalorganizations and relevant local communities during the assessment. Consultation with KNCshall also address the HCVF areas already designated under Categories 1 – 3.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 24/06 Reference Standard #: 9.3.1Non-conformance: Description of non-conformance: Since the HCVF assessment report hasMajor Minor not yet been completed, management strategies are also not complete.Corrective Action Request:Page 88 of 89

In consultation with Ktunaxa, directly affected persons, government, environmentalorganizations and relevant local communities, Tembec shall either:i. Develop specific management measures for each HCVF area or High ConservationValue in HCVF Categories 1-3 potentially affected by Tembec’s managementactivities that are consistent with a precautionary approach; or,ii. Make a written commitment to defer management activities within designatedHCVFs in HCVF Categories 1-3 until appropriate management strategies are inplace.Timeline for Conformance: By the end of Year 1 of certification.CAR #: 25/06 Reference Standard #: 9.3.1Non-conformance: Description of non-conformance: Management strategies have not beenMajor Minor developed for Category 4 HCVF areas and consultation with Ktunaxaand other interested parties has not been completed.Corrective Action Request:In consultation with Ktunaxa, directly affected persons, government, environmentalorganizations and relevant local communities, Tembec shall either:i. Develop specific management measures for each HCVF area or High ConservationValue in HCVF Category 4 potentially affected by Tembec’s management activitiesthat are consistent with a precautionary approach; or,ii. Make a written commitment to defer management activities within designatedHCVFs in HCV Category 4 until appropriate management strategies are in place.Timeline for Conformance: By the end of Year 2 of certification.CAR #: 26/06 Reference Standard #: 9.4.1Non-conformance: Description of non-conformance: Since the HCVF areas andMajor Minor management measures have not yet been finalized, a program to monitorthe status of HCVFs and the effectiveness of measures has not been setup or implemented.Corrective Action Request:Tembec shall develop and implement a program to monitor the status of HCVFs and theeffectiveness of measures to maintain or restore conservation attributes.Timeline for Conformance: By the end of Year 2 of certification.Page 89 of 89