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The economic feasibility of commercial thinning in second growth forests on the British Columbia coast Dehouwer, Jonathan 2012

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The Economic Feasibility of Commercial Thinning in Second Growth Forests on the British Columbia Coast Jonathan Dehouwer  Frst 497  ABSTRACT This report is a detailed analysis of commercial thinning in second growth forests on the British Columbia coast. It provides insight into the possibility of a coastal forest products company, Western Forest Products, located in Gold River, British Columbia, to implement a commercial thinning treatment. Data from existing stands was inputted into TIPSY 4.2 to run a series of scenarios to attempt to clarify economic viability based on a series of input variables. It was found that given the inputted variables, commercial thinning is at this time not economically viable. Although, there is potential for future uses of a commercial thinning program, and is briefly evaluated throughout the report. The details in the methods section of this report would help allow someone who is interested in running TIPSY to further analyze this topic to easily set up comparable runs with their own input variables.  TABLE	
  OF	
  CONTENTS	
   i.	
   Introduction	
  ........................................................................................................................	
  5	
   ii.	
   Background	
  .......................................................................................................................	
  7	
   Benefits	
  of	
  Commercial	
  Thinning	
  ................................................................................................	
  7	
   Commercial	
  Thinning	
  in	
  British	
  Columbia	
  ...............................................................................	
  7	
   Methods	
  for	
  Commercial	
  Thinning	
  .............................................................................................	
  8	
   Thinning	
  Intensity	
  ............................................................................................................................	
  8	
   Thinning	
  Type	
  ....................................................................................................................................	
  9	
   Timing	
  of	
  Thinning	
  ...........................................................................................................................	
  9	
   Disadvantages	
  of	
  Commercial	
  Thinning	
  .................................................................................	
  10	
   Performing	
  a	
  commercial	
  thinning	
  treatment	
  ......................................................................	
  10	
   Approvals	
  ...................................................................................................................................................................	
  10	
   Jobs	
  ................................................................................................................................................................................	
  11	
   Harvesting	
  System	
  Selection	
  ..............................................................................................................................	
  12	
   iii.	
   Methods	
  ..........................................................................................................................	
  12	
   Stand	
  Description	
  Inputs	
  ..............................................................................................................	
  14	
   Economic	
  Inputs	
  ..............................................................................................................................	
  15	
   Silviculture	
  costs	
  .....................................................................................................................................................	
  16	
   Road	
  Development	
  .................................................................................................................................................	
  16	
   Tree	
  to	
  Truck	
  ............................................................................................................................................................	
  16	
   Haul	
  Costs	
  ...................................................................................................................................................................	
  17	
   Other	
  costs	
  .................................................................................................................................................................	
  17	
   Market	
  Analysis	
  .......................................................................................................................................................	
  17	
   Discount	
  Assumptions	
  ..........................................................................................................................................	
  18	
   Scenarios	
  ............................................................................................................................................	
  19	
   Scenario	
  1:	
  Base	
  Case	
  80%	
  Fd	
  20%	
  Hw	
  ........................................................................................................	
  19	
   Scenario	
  2:	
  Thinning	
  at	
  age	
  43	
  of	
  current	
  stand	
  .......................................................................................	
  19	
   Scenario	
  3:	
  Fertilizing	
  After	
  Commercial	
  Thinning	
  .................................................................................	
  20	
   Scenario	
  4:	
  Thinning	
  on	
  Private	
  Land	
  ............................................................................................................	
  20	
   Scenario	
  5:	
  Thinning	
  with	
  a	
  reduced	
  tree-­‐to-­‐truck	
  cost	
  of	
  29.00/m3	
  ..............................................	
  20	
   Scenario	
  6:	
  Thinning	
  with	
  a	
  tree-­‐to-­‐truck	
  of	
  45.00/m3	
  .........................................................................	
  21	
   iv.	
   Results	
  .............................................................................................................................	
  21	
   Reading	
  TIPSY	
  Output	
  Tables	
  .....................................................................................................	
  21	
   Scenarios	
  ............................................................................................................................................	
  22	
   Graphs	
  .................................................................................................................................................	
  27	
   v.	
   Discussion	
  ........................................................................................................................	
  29	
   Comparing	
  Scenarios	
  .....................................................................................................................	
  29	
   Knowledge	
  Gaps	
  ..............................................................................................................................	
  32	
   Risks	
  and	
  Assumptions	
  .................................................................................................................	
  33	
   Risks	
  .............................................................................................................................................................................	
  33	
   Assumptions	
  .............................................................................................................................................................	
  34	
   Decision	
  Making	
  for	
  Implementing	
  a	
  Commercial	
  Thinning	
  Treatment	
  .....................	
  34	
   vi.	
   Conclusions	
  ....................................................................................................................	
  34	
   Recommendations	
  ..........................................................................................................................	
  35	
   Works	
  Cited	
  ............................................................................................................................	
  36	
   	
    3	
    Appendices	
  ..............................................................................................................................	
  38	
   Appendix	
  I:	
  Cruise	
  Report	
  E500-­‐E505	
  .....................................................................................	
  38	
   	
    LIST	
  OF	
  TABLES	
   Table	
  1	
  -­‐	
  Input	
  Variables	
  into	
  Stand	
  Descriptions	
  in	
  TIPSY	
  .................................................................	
  15	
   Table	
  2	
  -­‐	
  Input	
  variable	
  costs	
  for	
  TIPSY	
  ........................................................................................................	
  15	
   Table	
  3	
  -­‐	
  Description	
  of	
  Scenarios	
  and	
  tree	
  to	
  truck	
  costs	
  ...................................................................	
  19	
   Table	
  4	
  -­‐	
  Scenario	
  1	
  TIPSY	
  Table	
  .....................................................................................................................	
  22	
   Table	
  5	
  -­‐	
  Scenario	
  2	
  TIPSY	
  Table	
  .....................................................................................................................	
  23	
   Table	
  6	
  -­‐	
  Scenario	
  3	
  TIPSY	
  Table	
  .....................................................................................................................	
  24	
   Table	
  7	
  -­‐	
  Scenario	
  4	
  TIPSY	
  Table	
  .....................................................................................................................	
  24	
   Table	
  8	
  -­‐	
  Scenario	
  5	
  TIPSY	
  Table	
  .....................................................................................................................	
  25	
   Table	
  9	
  -­‐	
  Scenario	
  6	
  TIPSY	
  Table	
  .....................................................................................................................	
  26	
   Table	
  10	
  -­‐	
  NPV	
  and	
  volumes	
  of	
  each	
  Scenario	
  at	
  current,	
  10,	
  and	
  20	
  years	
  .................................	
  27	
   Table	
  11	
  -­‐	
  Comparison	
  between	
  Scenario	
  1	
  and	
  100%	
  Douglas-­‐fir	
  base	
  case	
  ............................	
  27	
   Table	
  12	
  -­‐	
  NPV	
  of	
  each	
  Scenario	
  at	
  current,	
  10,	
  and	
  20	
  years	
  .............................................................	
  29	
   Table	
  13	
  -­‐	
  Year	
  of	
  and	
  Value	
  of	
  Maximum	
  NPV	
  .........................................................................................	
  30	
   Table	
  14	
  -­‐	
  Maximum	
  Site	
  Values	
  ......................................................................................................................	
  30	
   	
    LIST	
  OF	
  FIGURES	
   Figure	
  1	
  -­‐	
  3	
  Month	
  Log	
  Prices	
  as	
  of	
  November	
  30,2011	
  (per	
  m3)	
  .................................................	
  18	
   Figure	
  2	
  -­‐	
  Fir	
  H-­‐grade	
  Log	
  Prices	
  from	
  1990-­‐2007	
  .........................................................................	
  18	
   Figure	
  3	
  -­‐	
  Net	
  Present	
  Value	
  from	
  Years	
  40-­‐70	
  .............................................................................	
  28	
   Figure	
  4	
  -­‐	
  NPV	
  from	
  years	
  70	
  to	
  125	
  .............................................................................................	
  28	
   Figure	
  5	
  -­‐	
  Site	
  Value	
  from	
  years	
  40-­‐125	
  ........................................................................................	
  29	
    	
   	
    	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
    	
    4	
    i.  INTRODUCTION	
  	
    Over	
  the	
  last	
  century,	
  logging	
  on	
  the	
  British	
  Columbia	
  Coast	
  has	
  grown	
  at	
  an	
  accelerating	
  rate	
   from	
  what	
  it	
  was	
  in	
  the	
  early	
  1900’s	
  (BC	
  Ministry	
  of	
  Forests,	
  2010).	
  In	
  1910,	
  the	
  BC	
  provincial	
   Annual	
  Allowable	
  Cut	
  (AAC)	
  was	
  around	
  1	
  million	
  m3.	
  In	
  1987	
  and	
  2005	
  the	
  ACC	
  reached	
  90	
   million	
  m3.	
  Those	
  numbers	
  represent	
  total	
  provincial	
  cut	
  levels.	
  On	
  average,	
  the	
  AAC	
  for	
  the	
   coast	
  is	
  between	
  50-­‐70%	
  of	
  that	
  total	
  cut	
  (Ministry	
  of	
  Forests,	
  2011).	
  The	
  harvesting	
  leads	
  to	
  a	
   re-­‐distribution	
  of	
  age	
  class	
  structures	
  on	
  the	
  BC	
  coast	
  creating	
  second	
  growth	
  forests.	
  Many	
  old	
   growth	
  forests	
  that	
  were	
  harvested	
  earlier	
  in	
  the	
  century	
  are	
  now	
  reaching	
  volumes	
  that	
  are	
   merchantable	
  under	
  today’s	
  market	
  conditions.	
  Second	
  growth	
  stands	
  have	
  been	
  harvested	
  on	
   the	
  BC	
  coast	
  since	
  the	
  1990’s	
  but	
  harvest	
  rates	
  have	
  increased	
  recently	
  due	
  in	
  large	
  part	
  to	
  an	
   increase	
  in	
  demand	
  from	
  China	
  for	
  raw	
  logs	
  and	
  dimensional	
  lumber	
  of	
  a	
  lower	
  grade.	
   	
   Following	
  the	
  BC	
  forest	
  industry’s	
  slow-­‐down	
  during	
  the	
  latter	
  half	
  of	
  the	
  2000’s,	
  this	
  demand	
   from	
  China	
  has	
  revitalized	
  the	
  industry	
  and	
  has	
  caused	
  many	
  forest	
  product	
  companies	
  to	
  ramp	
   up	
  their	
  production.	
  Consequently,	
  an	
  increase	
  of	
  harvesting	
  of	
  second	
  growth	
  forests	
  is	
   beginning	
  to	
  occur.	
  Second	
  growth	
  forests	
  often	
  have	
  low	
  costs	
  due	
  to	
  their	
  close	
  proximity	
  of	
   wood	
  from	
  the	
  forests	
  to	
  mills	
  and	
  sortyards,	
  gentler	
  terrain,	
  and	
  existing	
  road	
  networks	
  that	
   only	
  need	
  to	
  be	
  re-­‐activated	
  rather	
  than	
  requiring	
  major	
  road	
  building	
  costs	
  (Henderson,	
  2011).	
   Questions	
  are	
  beginning	
  to	
  arise	
  over	
  the	
  practice	
  of	
  clearcut	
  logging	
  these	
  second	
  growth	
   forests	
  especially	
  at	
  younger	
  ages	
  of	
  40-­‐60	
  years.	
  Some	
  argue	
  that	
  ecosystem	
  based	
  forestry	
   science	
  suggests	
  that	
  these	
  forests	
  should	
  be	
  left	
  to	
  regrow	
  with	
  only	
  minor	
  controlled	
  thinnings	
   until	
  an	
  age	
  of	
  120	
  (Henderson,	
  2011).	
   	
   Looking	
  to	
  the	
  future	
  of	
  sustainably	
  managing	
  our	
  forests,	
  there	
  may	
  be	
  a	
  need	
  to	
  re-­‐evaluate	
   the	
  management	
  of	
  these	
  second	
  growth	
  forests.	
  These	
  younger	
  forests	
  differ	
  from	
  a	
   biodiversity	
  standpoint	
  as	
  they	
  have	
  higher	
  tree	
  densities,	
  and	
  lower	
  variations	
  in	
  tree	
  size	
  and	
   canopy	
  structure	
  than	
  old	
  growth	
  (Lindh,	
  2004).	
  When	
  a	
  stand	
  is	
  thinned	
  it	
  opens	
  up	
  the	
   canopy,	
  allowing	
  for	
  light	
  to	
  reach	
  the	
  understory	
  and	
  subsequently	
  driving	
  vegetation	
  growth.	
   It	
  has	
  been	
  found	
  that	
  after	
  thinning	
  second	
  growth,	
  there	
  is	
  a	
  significant	
  increase	
  in	
  the	
  amount	
   of	
  nitrogen	
  fixing	
  species	
  of	
  grasses	
  sedges,	
  and	
  matted	
  vines	
  that	
  can	
  occur	
  7-­‐23	
  years	
  after	
  the	
    	
    5	
    treatment	
  (Lindh,	
  2004).	
  These	
  benefits	
  can	
  lead	
  to	
  a	
  more	
  diverse	
  stand	
  that	
  promotes	
   biodiversity	
  and	
  resembles	
  select	
  old	
  growth	
  characteristics.	
   	
   This	
  report	
  is	
  designed	
  to	
  look	
  at	
  the	
  opportunities	
  that	
  a	
  commercial	
  thinning	
  program	
  may	
   bring	
  to	
  a	
  landowner	
  or	
  licensee.	
  Commercial	
  thinning,	
  when	
  implemented	
  at	
  the	
  right	
  time	
  and	
   in	
  the	
  right	
  stand,	
  is	
  a	
  valuable	
  strategic	
  management	
  tool	
  that	
  may	
  increase	
  value	
  and	
  wood	
   flow	
  available	
  within	
  a	
  forest	
  estate	
  (BC	
  Ministry	
  of	
  Forests,	
  1999).	
  Some	
  more	
  of	
  the	
  traditional	
   objectives	
  of	
  Commercial	
  Thinning	
  are	
  to:	
   1. obtain	
  wood	
  volume	
  or	
  revenues	
  earlier	
  than	
  at	
  final	
  harvest;	
   2. improve	
  the	
  growth	
  of	
  residual	
  trees;	
   3. improve	
  the	
  quality	
  of	
  the	
  stand	
  by	
  removing	
  dead,	
  diseased,	
  and	
  deformed	
  trees;	
   4. capture	
  some	
  of	
  the	
  production	
  that	
  would	
  otherwise	
  be	
  lost	
  to	
  competition	
  mortality;	
   5. obtain	
  certain	
  species	
  and	
  size	
  classes	
  for	
  specialty	
  products.	
   	
   The	
  focus	
  of	
  this	
  report	
  will	
  be	
  on	
  Western	
  Forest	
  Products	
  (WFP)	
  Tree	
  Farm	
  License	
  (TFL)	
  and	
   private	
  lands	
  in	
  the	
  Gold	
  River	
  area	
  on	
  the	
  West	
  Coast	
  of	
  Vancouver	
  Island.	
  This	
  area	
  is	
  located	
   within	
  the	
  Coastal	
  Western	
  Hemlock	
  (CWH)	
  Biogeoclimatic	
  zone	
  in	
  the	
  submontane	
  very	
  wet	
   maritime	
  (vm)	
  subzone	
  with	
  pockets	
  of	
  dry	
  maritime	
  (dm).	
  Data	
  collected	
  for	
  this	
  report	
  has	
   been	
  made	
  available	
  by	
  the	
  Gold	
  River	
  operation	
  and	
  includes	
  cruise	
  data	
  and	
  production	
   reports.	
  	
   	
   The	
  main	
  objective	
  of	
  this	
  report	
  was	
  to	
  determine	
  whether	
  it	
  would	
  be	
  economically	
  viable	
  for	
   WFP	
  to	
  commercially	
  thin	
  second	
  growth	
  stands	
  now,	
  at	
  a	
  volume	
  equal	
  to	
  the	
  total	
  planned	
   clearcut	
  harvested	
  second	
  growth	
  stands	
  for	
  the	
  year	
  2011	
  but	
  over	
  a	
  larger	
  area.	
  This	
  was	
  done	
   by	
  running	
  a	
  software	
  program	
  named	
  Table	
  Interpolation	
  Program	
  for	
  Stand	
  Yields	
  (TIPSY),	
  to	
   obtain	
  stand	
  volumes	
  and	
  values	
  for	
  different	
  commercial	
  thinning	
  scenarios.	
  A	
  cost	
  analysis	
  and	
   operational	
  feasibility	
  assessment	
  was	
  also	
  conducted	
  to	
  determine	
  market	
  values	
  for	
  harvested	
   timber	
  now	
  and	
  into	
  future	
  predicted	
  markets.	
  Furthermore,	
  the	
  feasibility	
  of	
  implementing	
  a	
   commercial	
  thinning	
  treatment	
  on	
  private	
  versus	
  public	
  land	
  was	
  evaluated	
  along	
  with	
  the	
   effect	
  a	
  government	
  assistance	
  program	
  and	
  funding	
  may	
  have	
  on	
  the	
  company’s	
  decision	
  to	
   implement	
  a	
  commercial	
  thinning	
  program.	
  	
    	
    6	
    ii.  BACKGROUND	
    BENEFITS	
  OF	
  COMMERCIAL	
  THINNING	
   Commercial	
  thinning	
  has	
  many	
  benefits	
  including	
  the	
  improvement	
  of	
  stand	
  quality,	
  volume,	
   and	
  economic	
  value.	
  The	
  main	
  goal	
  of	
  commercial	
  thinning	
  is	
  to	
  increase	
  flexibility	
  in	
  the	
  timing	
   and	
  quantity	
  of	
  wood	
  flow	
  available	
  at	
  the	
  forest	
  estate	
  level	
  (BC	
  Ministry	
  of	
  Forests,	
  1999).	
   Commercial	
  thinning	
  can	
  also	
  be	
  used	
  to	
  meet	
  visual	
  and	
  adjacency	
  constraints,	
  and	
  as	
  a	
  means	
   to	
  break	
  up	
  stands	
  that	
  are	
  concentrated	
  in	
  similar	
  seral	
  stages	
  and	
  create	
  a	
  diverse	
  age	
   structure	
  in	
  areas	
  where	
  large	
  areas	
  are	
  in	
  similar	
  age	
  classes.	
  Commercial	
  thinning	
  can	
  help	
   achieve	
  overall	
  forest	
  health	
  objectives	
  and	
  can	
  also	
  be	
  used	
  as	
  a	
  preventative	
  measure	
  such	
  as	
   “beetle	
  proofing”	
  a	
  stand	
  against	
  such	
  biological	
  disturbance	
  agents	
  like	
  the	
  mountain	
  pine	
   beetle	
  (Collins,	
  1996).	
  It	
  can	
  also	
  be	
  used	
  to	
  meet	
  other	
  non-­‐timber	
  objectives,	
  which	
  can	
   include	
  forage	
  for	
  animals	
  such	
  as	
  mule	
  deer,	
  by	
  opening	
  up	
  the	
  forest	
  canopy	
  allowing	
  for	
   increased	
  forage	
  on	
  expected	
  new	
  vegetation	
  growth	
  (Serrouya,	
  2008).	
  	
    	
   COMMERCIAL	
  THINNING	
  IN	
  BRITISH	
  COLUMBIA	
   In	
  the	
  past,	
  commercial	
  thinning	
  treatments	
  have	
  been	
  implemented	
  in	
  BC,	
  though	
  only	
  on	
  a	
   minor	
  scale.	
  From	
  1984	
  to	
  1993,	
  an	
  average	
  of	
  only	
  150	
  ha/year	
  was	
  commercially	
  thinned.	
  In	
   1994,	
  as	
  more	
  research	
  showed	
  the	
  benefits	
  of	
  commercial	
  thinning,	
  there	
  was	
  a	
  substantial	
   increase	
  in	
  treatments,	
  to	
  1400	
  ha,	
  and	
  in	
  1995,	
  2100	
  ha	
  were	
  commercially	
  thinned	
  (Collins,	
   1996).	
  Virtually	
  all	
  thinning	
  has	
  been	
  on	
  the	
  coast	
  and	
  in	
  most	
  cases	
  has	
  been	
  carried	
  out	
  on	
   private	
  land	
  and	
  Tree	
  Farm	
  Licenses.	
  	
   	
   Up	
  to	
  1999,	
  most	
  of	
  the	
  research	
  on	
  commercial	
  thinning	
  was	
  from	
  Europe	
  and	
  eastern	
  North	
   America	
  (BC	
  Ministry	
  of	
  Forests,	
  1999).	
  To	
  date,	
  there	
  has	
  been	
  some	
  but	
  limited	
  development	
   and	
  research	
  on	
  the	
  subject	
  in	
  BC.	
  This	
  has	
  occurred	
  for	
  a	
  number	
  of	
  different	
  reasons.	
  The	
   single	
  most	
  important	
  being	
  that	
  commercial	
  thinning	
  was	
  deemed	
  unprofitable	
  for	
  major	
   industry	
  players	
  due	
  to	
  declining	
  log	
  prices,	
  especially	
  in	
  the	
  low	
  grade	
  J	
  and	
  gang	
  logs	
  that	
   typically	
  are	
  removed	
  from	
  a	
  thinned	
  stand.	
  These	
  grades	
  account	
  for	
  about	
  60%	
  of	
  the	
  total	
   volume	
  extracted	
  from	
  these	
  stands	
  (Collins,	
  1996).	
  Thinning	
  is	
  a	
  costly	
  treatment	
  that	
  requires	
   intensive	
  planning,	
  management	
  and	
  training.	
  It	
  is	
  significantly	
  more	
  costly	
  than	
  conventional	
    	
    7	
    logging,	
  and	
  in	
  order	
  for	
  a	
  commercial	
  thinning	
  treatment	
  to	
  be	
  implemented	
  it	
  has	
  to	
  have	
   support	
  from	
  senior	
  level	
  management	
  (Lambrick,	
  1996).	
    	
   METHODS	
  FOR	
  COMMERCIAL	
  THINNING	
   Commercial	
  thinning	
  is	
  a	
  treatment	
  that	
  requires	
  specialized	
  machinery	
  and	
  high	
  inputs	
  of	
   personnel	
  training.	
  There	
  are	
  two	
  main	
  types	
  of	
  harvesting,	
  the	
  first	
  uses	
  cable	
  machinery	
  such	
   as	
  yarders	
  and	
  skyline	
  systems	
  and	
  the	
  other	
  ground	
  based,	
  which	
  includes	
  skidders	
  and	
  loaders	
   (Lambrick,	
  1996).	
  Falling	
  can	
  be	
  completed	
  by	
  either	
  hand-­‐falling	
  or	
  with	
  machines	
  such	
  as	
  a	
   single-­‐grip	
  harvester.	
  	
   	
   Ground	
  based	
  systems	
  use	
  prime-­‐movers	
  with	
  wheels	
  or	
  tracks	
  which	
  need	
  to	
  be	
  able	
  to	
  enter	
  a	
   stand	
  from	
  a	
  road	
  or	
  work	
  from	
  designated	
  trails	
  (Lambrick,	
  1996).	
  Trails	
  require	
  optimal	
  soil	
   conditions,	
  flatter	
  terrain	
  and	
  need	
  to	
  be	
  positioned	
  as	
  to	
  create	
  limited	
  site	
  disturbance.	
  An	
   area	
  can	
  be	
  permanently	
  “degraded”	
  by	
  roads	
  and	
  other	
  approved	
  access	
  by	
  up	
  to	
  7%	
   (Lambrick,	
  1996).	
  Use	
  of	
  ground	
  based	
  systems	
  depends	
  on	
  terrain	
  and	
  soil	
  conditions.	
  	
  Second	
   growth	
  stands	
  that	
  are	
  at	
  a	
  prime	
  age	
  for	
  commercial	
  thinning	
  (40-­‐60	
  years)	
  are	
  often	
  found	
  in	
   the	
  lower,	
  flatter	
  sections	
  of	
  most	
  of	
  the	
  valleys	
  on	
  the	
  coast,	
  and	
  therefore	
  ground	
  based	
   systems	
  may	
  be	
  applicable	
  in	
  these	
  cases.	
  A	
  push	
  towards	
  these	
  ground	
  based	
  systems	
  would	
   lead	
  to	
  lower	
  costs	
  as	
  they	
  can	
  be	
  significantly	
  less	
  costly	
  than	
  cable	
  thinning.	
  	
    	
   THINNING	
  INTENSITY	
   Commercial	
  thinning	
  treatments	
  aim	
  to	
  increase	
  the	
  growth	
  of	
  the	
  residual	
  trees	
  in	
  the	
  stand	
  by	
   increasing	
  the	
  amount	
  of	
  growing	
  space,	
  but	
  are	
  restrained	
  by	
  other	
  factors	
  including	
  site	
   quality,	
  species,	
  age,	
  and	
  vigour	
  (BC	
  Ministry	
  of	
  Forests,	
  1999).	
  A	
  tree	
  that	
  is	
  showing	
  limited	
   vigour	
  due	
  to	
  stress	
  or	
  injury	
  may	
  not	
  be	
  able	
  to	
  realize	
  the	
  benefits	
  of	
  this	
  increased	
  growing	
   space.	
  Therefore,	
  it	
  is	
  important	
  to	
  determine	
  a	
  thinning	
  intensity	
  that	
  will	
  provide	
  results	
  based	
   on	
  the	
  stand	
  management	
  objectives.	
  A	
  heavy	
  thinning	
  may	
  result	
  in	
  better	
  residual	
  tree	
   growth,	
  but	
  overall	
  volume	
  in	
  the	
  stand	
  will	
  be	
  lower.	
  In	
  low	
  intensity	
  thinnings	
  residual	
  trees	
   fully	
  utilize	
  the	
  available	
  growing	
  space,	
  but	
  individual	
  tree	
  growth	
  may	
  not	
  be	
  as	
  high	
  (BC	
   Ministry	
  of	
  Forests,	
  1999).	
  Land	
  managers	
  should	
  use	
  Stand	
  Density	
  Index	
  (SDI)	
  or	
  Relative	
    	
    8	
    Density	
  Index	
  (RDI)	
  to	
  rank	
  stands	
  for	
  commercial	
  thinning,	
  where	
  a	
  desired	
  residual	
  stem	
  count	
   or	
  residual	
  basal	
  area	
  is	
  based	
  on	
  normal	
  basal	
  area	
  (BC	
  Ministry	
  of	
  Forests,	
  1999).	
    	
   THINNING	
  TYPE	
   There	
  are	
  four	
  types	
  of	
  thinning	
  that	
  are	
  practiced	
  in	
  forestry	
  applications.	
  The	
  four	
  types	
  of	
   thinning	
  are	
  (BC	
  Ministry	
  of	
  Forests,	
  1999):	
   	
   	
   	
    Low	
  thinning	
  –	
  removing	
  lower	
  crown	
  class,	
  leaving	
  tallest	
  trees	
    Crown	
  thinning	
  -­‐	
  removes	
  some	
  trees	
  in	
  the	
  middle	
  and	
  upper	
  crown	
  classes	
  to	
  favour	
   the	
  best	
  dominant	
  and	
  co-­‐dominant	
  trees.	
   	
   Selection	
  or	
  high	
  thinning	
  –	
  removes	
  dominant	
  and	
  co-­‐dominant	
  trees	
  to	
  release	
  trees	
   in	
  the	
  lower	
  crown	
  classes	
   	
   Systematic	
  or	
  geometric	
  thinning	
  –	
  removes	
  trees	
  in	
  a	
  predetermined	
  pattern	
  such	
  as	
   rows.	
  Crown	
  class	
  is	
  disregarded	
  in	
  this	
  case.	
   	
   	
   In	
  order	
  to	
  determine	
  which	
  thinning	
  type	
  to	
  use,	
  one	
  simple	
  indicator	
  would	
  be	
  to	
  determine	
  a	
   thinning	
  ratio	
  based	
  on	
  the	
  mean	
  DBH	
  of	
  cut	
  trees,	
  and	
  the	
  mean	
  stand	
  DBH	
  before	
  thinning.	
   This	
  may	
  not	
  be	
  the	
  best	
  descriptor	
  of	
  thinning	
  types,	
  as	
  the	
  most	
  accurate	
  would	
  be	
  to	
  take	
   measurements	
  of	
  diameter	
  distributions	
  before	
  and	
  after	
  thinnings,	
  along	
  with	
  determining	
   residual	
  density,	
  basal	
  area,	
  and	
  preferred	
  tree	
  characteristics	
  for	
  removal	
  or	
  retention.	
  The	
   type	
  of	
  treatment	
  to	
  be	
  used	
  comes	
  down	
  to	
  management	
  objectives	
  of	
  land	
  managers.	
  For	
   example,	
  if	
  looking	
  at	
  reducing	
  fire	
  hazards	
  within	
  a	
  stand,	
  a	
  low	
  thinning	
  would	
  be	
  most	
   suitable	
  as	
  it	
  would	
  remove	
  the	
  intermediary	
  trees	
  that	
  could	
  act	
  as	
  ladder	
  fuels	
  moving	
  the	
  fire	
   from	
  the	
  ground,	
  up	
  into	
  the	
  canopy	
  (Interface	
  Forestry,	
  2011).	
  Economically,	
  choosing	
  a	
  low	
   thinning	
  will	
  not	
  bring	
  the	
  volume	
  and	
  size	
  of	
  logs	
  needed	
  for	
  sales,	
  whereas	
  a	
  high	
  thinning	
   removes	
  dominant,	
  larger	
  trees	
  that	
  could	
  provide	
  more	
  value	
  from	
  the	
  stand	
  in	
  the	
  short	
  term.	
   The	
  disadvantage	
  to	
  removing	
  more	
  dominant	
  trees	
  is	
  that	
  the	
  trees	
  left	
  behind	
  will	
  take	
  longer	
   to	
  reach	
  merchantable	
  values.	
  In	
  finding	
  an	
  optimal	
  strategy	
  it	
  is	
  necessary	
  to	
  balance	
  short	
   term	
  and	
  long-­‐term	
  goals.	
    	
   TIMING	
  OF	
  THINNING	
   	
    9	
    Commercial	
  thinning	
  is	
  best	
  suited	
  for	
  stands	
  in	
  an	
  active	
  height	
  growth	
  period	
  and	
  is	
  completed	
   before	
  the	
  peak	
  mean	
  annual	
  increment	
  (MAI)	
  is	
  reached.	
  If	
  thinning	
  is	
  carried	
  out	
  in	
  an	
  older	
   stand,	
  the	
  trees	
  growth	
  will	
  already	
  be	
  slow	
  and	
  there	
  will	
  be	
  no	
  response	
  to	
  the	
  treatment.	
  Any	
   delays	
  in	
  thinning	
  can	
  result	
  in	
  a	
  decline	
  in	
  release	
  potential,	
  higher	
  risk	
  of	
  windthrow,	
  and	
   greater	
  volume	
  lost	
  to	
  natural	
  mortality.	
  Late	
  thinnings	
  can	
  be	
  done	
  in	
  stands	
  that	
  are	
   considered	
  windfirm,	
  but	
  must	
  be	
  tied	
  to	
  specific	
  management	
  objectives	
  such	
  as	
  harvest	
  of	
   some	
  volume	
  from	
  stands	
  with	
  adjacency	
  constraints	
  (BC	
  Ministry	
  of	
  Forests,	
  1999).	
    	
   DISADVANTAGES	
  OF	
  COMMERCIAL	
  THINNING	
   There	
  are	
  few	
  possible	
  disadvantages	
  to	
  implementing	
  a	
  commercial	
  thinning	
  program.	
  One	
  of	
   the	
  biggest	
  concerns	
  is	
  residual	
  stand	
  damage	
  (BC	
  Ministry	
  of	
  Forests,	
  1999).	
  This	
  often	
  occurs	
  if	
   the	
  timing	
  of	
  the	
  thinning	
  is	
  not	
  planned	
  correctly,	
  improper	
  machinery	
  is	
  used,	
  or	
  equipment	
   operators	
  are	
  careless	
  with	
  felled	
  trees	
  being	
  transported	
  through	
  the	
  stand.	
  Post	
  thinning,	
   snow	
  and	
  wind	
  damage	
  can	
  occur	
  when	
  the	
  newly	
  opened	
  up	
  stand	
  can	
  become	
  susceptible	
  to	
   these	
  elements.	
  These	
  can	
  affect	
  a	
  stand	
  in	
  a	
  way	
  that	
  will	
  begin	
  to	
  negate	
  the	
  positive	
  benefits	
   of	
  the	
  commercial	
  thinning.	
  	
   	
   Furthermore,	
  if	
  not	
  done	
  right,	
  cumulative	
  volume	
  can	
  be	
  reduced	
  when	
  commercial	
  thinning	
   (Listar,	
  1999).	
  For	
  example	
  if	
  the	
  wrong	
  method	
  is	
  used,	
  it	
  may	
  not	
  provide	
  the	
  most	
  optimal	
   volume	
  in	
  the	
  future.	
  This	
  falls	
  in	
  line	
  with	
  the	
  economic	
  risks	
  that	
  are	
  inherent	
  in	
  commercial	
   thinning.	
  Before	
  any	
  type	
  of	
  commercial	
  thinning	
  program	
  is	
  implemented,	
  a	
  full	
  analysis	
  should	
   be	
  done	
  to	
  make	
  sure	
  that	
  financial	
  and	
  management	
  objectives	
  are	
  going	
  to	
  be	
  met.	
   	
   Training	
  crews	
  to	
  perform	
  a	
  commercial	
  thinning	
  can	
  also	
  be	
  a	
  challenge	
  to	
  an	
  operation.	
  The	
   added	
  time	
  to	
  ensure	
  that	
  workers	
  are	
  more	
  careful	
  with	
  their	
  machinery,	
  are	
  aware	
  of	
  lower	
   productivity	
  expectations,	
  and	
  the	
  general	
  need	
  for	
  more	
  skilled	
  workers	
  due	
  to	
  the	
  nature	
  of	
   commercial	
  thinning	
  adds	
  to	
  the	
  complexity	
  of	
  such	
  treatments.	
  A	
  proper	
  training	
  program	
   needs	
  to	
  be	
  put	
  in	
  place	
  in	
  order	
  to	
  ensure	
  efficiency	
  and	
  productivity.	
    	
   PERFORMING	
  A	
  COMMERCIAL	
  THINNING	
  TREATMENT	
   APPROVALS	
   	
    10	
    According	
  to	
  Policy	
  2.13	
  ‘Commercial	
  Thinning’	
  in	
  the	
  Resource	
  Management	
  Ministry	
  policy	
   manual	
  (2007),	
  any	
  commercial	
  thinning	
  treatments	
  will	
  be	
  considered	
  to	
  be	
  part	
  of	
  the	
  AAC.	
   This	
  allows	
  for	
  increased	
  flexibility	
  in	
  timber	
  flow,	
  environmental	
  considerations,	
  and	
  social	
   values.	
  The	
  policy	
  indicates	
  that,	
  ideally,	
  commercial	
  thinning	
  will	
  be	
  planned	
  and	
  implemented	
   within	
  regional	
  districts	
  and	
  included	
  in	
  regional	
  five-­‐year	
  Forest	
  &	
  Range	
  Resource	
  programs	
   and	
  that	
  district	
  managers	
  are	
  in	
  charge	
  of	
  making	
  sure	
  that	
  opportunities	
  to	
  utilize	
  commercial	
   thinning	
  are	
  proactive	
  when	
  markets	
  are	
  good	
  and	
  management	
  unit	
  strategic	
  objectives	
  are	
   met.	
  	
   	
   This	
  policy	
  manual	
  was	
  originally	
  developed	
  in	
  October	
  1997,	
  and	
  predicted	
  that	
  10-­‐15%	
  of	
  BC’s	
   annual	
  AAC	
  would	
  be	
  from	
  commercial	
  thinning	
  (BC	
  Ministry	
  of	
  Forests,	
  1997).	
  This	
  has	
  not	
   occurred	
  and	
  commercial	
  thinning	
  is	
  mostly	
  non-­‐existent	
  across	
  the	
  province.	
  Up	
  to	
  this	
  point	
   there	
  is	
  no	
  current	
  legislation	
  specified	
  just	
  for	
  commercial	
  thinning,	
  except	
  for	
  what	
  is	
  found	
  in	
   this	
  manual	
  that	
  is	
  over	
  a	
  decade	
  old.	
  Operations	
  that	
  look	
  to	
  start	
  a	
  commercial	
  thinning	
   treatment	
  may	
  be	
  at	
  odds	
  with	
  the	
  process	
  of	
  how	
  to	
  implement	
  a	
  thinning	
  program.	
  According	
   to	
  the	
  policy,	
  a	
  silviculture	
  prescription	
  is	
  needed	
  that	
  contains	
  details	
  on	
  residual	
  stand	
   conditions	
  and	
  stocking	
  levels	
  and	
  maximum	
  limitations	
  on	
  site	
  disturbance.	
  A	
  post-­‐harvest	
   assessment	
  must	
  be	
  done	
  immediately	
  after,	
  followed	
  by	
  a	
  free	
  growing	
  survey	
  to	
  ensure	
   residual	
  crop	
  is	
  free	
  from	
  stress	
  factors	
  such	
  as	
  blow	
  down	
  and	
  snow	
  break.	
  Standard	
  cutting	
   permits	
  and	
  timber	
  sale	
  licenses	
  will	
  be	
  used	
  to	
  authorize	
  commercial	
  thinning	
  under	
  the	
   districts	
  AAC.	
  Stumpage	
  will	
  be	
  incurred	
  along	
  with	
  penalties	
  for	
  excessive	
  removal	
  of	
  trees	
  and	
   excessive	
  damage	
  to	
  residual	
  trees	
  or	
  the	
  site.	
  	
  	
    JOBS	
   Before	
  implementing	
  any	
  commercial	
  thinning	
  program	
  it	
  needs	
  to	
  be	
  decided	
  whether	
  the	
   work	
  is	
  to	
  be	
  done	
  by	
  WFP	
  employees	
  or	
  contractors.	
  This	
  will	
  have	
  to	
  be	
  decided	
  upon	
  based	
   on	
  what	
  the	
  company’s	
  objectives	
  are	
  in	
  terms	
  of	
  what	
  they	
  want	
  economically	
  as	
  well	
  as	
  in	
  job	
   creation	
  and	
  job	
  diversity.	
  As	
  previously	
  mentioned,	
  one	
  disadvantage	
  of	
  commercial	
  thinning,	
  is	
   the	
  high	
  amount	
  of	
  training	
  required	
  in	
  the	
  beginning	
  of	
  the	
  operation,	
  leading	
  to	
  a	
  lack	
  in	
  initial	
   productivity.	
  There	
  will	
  also	
  have	
  to	
  be	
  supervision	
  from	
  a	
  manager	
  or	
  supervisor	
  from	
  within	
   the	
  company.	
  This	
  will	
  ensure	
  that	
  crews	
  will	
  be	
  kept	
  on	
  track	
  and	
  address	
  any	
  operational	
   issues	
  that	
  are	
  sure	
  to	
  arise	
  during	
  the	
  beginning	
  stages	
  of	
  the	
  operation.	
  	
    	
    11	
    HARVESTING	
  SYSTEM	
  SELECTION	
   To	
  begin,	
  there	
  is	
  no	
  one	
  optimal	
  system	
  for	
  commercial	
  thinning.	
  There	
  are	
  many	
  variables	
  that	
   can	
  occur	
  within	
  a	
  stand	
  or	
  cutting	
  permit	
  that	
  could	
  pose	
  challenges	
  in	
  a	
  single	
  system.	
  In	
  most	
   cases	
  the	
  optimum	
  system	
  should	
  be	
  selected	
  at	
  the	
  stand	
  level	
  (Lambrick,	
  1996).	
  To	
  keep	
  this	
   discussion	
  basic,	
  only	
  two	
  of	
  the	
  major	
  systems	
  will	
  be	
  outlined,	
  cable	
  thinning	
  and	
  ground	
   based.	
  	
   	
   Cable	
  thinning	
  is	
  advantageous	
  when	
  the	
  following	
  factors	
  are	
  present	
  (Lambrick,	
  1996):	
   •  Large	
  cut	
  tree	
  average	
  of	
  .30	
  cubic	
  meters	
  average	
  or	
  better	
    •  Heavy	
  volume	
  per	
  hectare	
    •  Steep,	
  hummocky	
  or	
  wet	
  terrain	
    •  Fairly	
  good	
  access	
  roads	
  and	
  yarding	
  distances	
  of	
  less	
  than	
  200	
  meters	
    Ground	
  based	
  thinning	
  is	
  advantageous	
  when	
  the	
  following	
  factors	
  are	
  present:	
   •  Smaller	
  tree	
  average	
  or	
  future	
  trend	
  to	
  cut	
  smaller	
  trees	
    •  Lower	
  volume	
  per	
  hectare	
    •  Low	
  Slope	
  and	
  soils	
  with	
  low	
  risk	
  to	
  disturbance	
    •  Desire	
  to	
  thin	
  younger	
  age	
  classes	
    •  Need	
  for	
  lighter	
  entries	
  to	
  minimize	
  windthrow	
  risk	
    •  Necessity	
  to	
  be	
  able	
  to	
  recover	
  blowdown	
  cost	
  effectively	
    	
   In	
  a	
  study	
  performed	
  on	
  Tree	
  Farm	
  License	
  39	
  near	
  Port	
  McNeil,	
  BC	
  it	
  was	
  found	
  that	
  the	
  use	
  of	
   a	
  ground-­‐based	
  loader	
  for	
  forwarding	
  was	
  about	
  60%	
  lower	
  in	
  cost	
  than	
  for	
  cable	
  yarding	
  (Clark,	
   1998).	
  This	
  was	
  a	
  commercial	
  thinning	
  experiment	
  to	
  determine	
  costs	
  and	
  site	
  disturbances	
   using	
  different	
  equipment	
  types.	
  Also,	
  the	
  study	
  determined	
  that	
  manual	
  falling	
  was	
  more	
  cost	
   effective	
  than	
  mechanical	
  falling.	
  	
    iii.  METHODS	
    TIPSY	
   In	
  order	
  to	
  analyze	
  the	
  general	
  feasibility	
  of	
  commercial	
  thinning,	
  a	
  series	
  of	
  scenarios	
  were	
   developed	
  to	
  test	
  what	
  the	
  stand	
  level	
  outcomes	
  would	
  be	
  with	
  regards	
  to	
  volumes,	
  economic	
    	
    12	
    values,	
  and	
  overall	
  stand	
  mortality.	
  These	
  scenarios	
  were	
  run	
  through	
  TIPSY	
  modeling	
  software	
   and	
  then	
  evaluated	
  based	
  on	
  their	
  economic	
  viability.	
   	
   TIPSY	
  4.2	
  is	
  a	
  software	
  program	
  developed	
  by	
  the	
  BC	
  Ministry	
  of	
  Forests	
  for	
  predicting	
  the	
  yield	
   of	
  managed	
  and	
  natural	
  stands	
  (Di	
  Lucca,	
  2002).	
  TIPSY	
  is	
  calibrated	
  using	
  data	
  from	
  research	
   plots	
  and	
  permanent	
  sample	
  plots	
  in	
  areas	
  throughout	
  the	
  province.	
  It	
  is	
  the	
  only	
  real	
  source	
  of	
   data	
  for	
  managed	
  stands	
  in	
  BC,	
  and	
  provides	
  an	
  approximation	
  of	
  what	
  would	
  happen	
  in	
  a	
   particular	
  managed	
  stand.	
   	
   One	
  of	
  the	
  inherent	
  limitations	
  of	
  TIPSY	
  is	
  the	
  inability	
  of	
  the	
  user	
  to	
  enter	
  existing	
  stand	
  data	
   and	
  then	
  have	
  it	
  extrapolate	
  from	
  that	
  point	
  into	
  the	
  future	
  to	
  see	
  the	
  future	
  condition	
  of	
  the	
   stand.	
  Instead,	
  all	
  stands	
  are	
  grown	
  from	
  year	
  zero	
  based	
  on	
  user-­‐input	
  site	
  index	
  and	
  initial	
   stand	
  density.	
  This	
  posed	
  a	
  problem	
  for	
  analysis	
  in	
  this	
  report,	
  as	
  volumes	
  of	
  existing	
  second	
   growth	
  stands	
  were	
  needed	
  in	
  order	
  to	
  compare	
  future	
  volumes	
  if	
  the	
  current	
  stand	
  was	
   thinned	
  or	
  if	
  it	
  was	
  left	
  to	
  continue	
  growing.	
  	
   	
   In	
  order	
  to	
  make	
  this	
  comparison	
  as	
  realistic	
  as	
  possible,	
  existing	
  stand	
  data	
  that	
  included	
   volumes	
  and	
  area	
  were	
  needed.	
  This	
  data	
  was	
  obtained	
  from	
  WFP	
  appraisal	
  reports	
  for	
  second	
   growth	
  blocks	
  E500-­‐505	
  located	
  in	
  the	
  lower	
  Gold	
  River	
  Valley	
  off	
  of	
  the	
  Ucona	
  Mainline	
  (see	
   appendix	
  A).	
  The	
  blocks	
  are	
  not	
  located	
  right	
  next	
  to	
  each	
  other,	
  but	
  rather	
  are	
  all	
  part	
  of	
  a	
   larger	
  cutting	
  permit.	
  These	
  blocks	
  are	
  planned	
  to	
  be	
  logged	
  within	
  the	
  coming	
  year	
  and	
  have	
  an	
   average	
  age	
  of	
  43	
  and	
  44	
  years.	
  In	
  order	
  to	
  more	
  accurately	
  evaluate	
  WFP’s	
  operation	
  as	
  a	
   whole,	
  the	
  data	
  from	
  this	
  cutting	
  permit	
  was	
  extrapolated	
  to	
  represent	
  the	
  entirety	
  of	
  all	
  the	
   second	
  growth	
  stands	
  within	
  the	
  tenure	
  that	
  are	
  of	
  this	
  age.	
  To	
  do	
  this,	
  a	
  general	
  approximation	
   was	
  made	
  on	
  species	
  compositions	
  of	
  these	
  second	
  growth	
  stands.	
  This	
  was	
  found	
  by	
  dividing	
   the	
  volumes	
  of	
  each	
  species	
  in	
  cutting	
  permit	
  E	
  by	
  the	
  total	
  volume	
  of	
  the	
  permit.	
  	
   	
   Example:	
  	
   	
   Total	
  Douglas-­‐fir	
  Volume	
  =	
  44,633	
  	
  	
  	
  	
  	
  	
  	
  Total	
  Volume	
  from	
  Cutting	
  Permit	
  =	
  55,237	
   	
   Douglas-­‐fir	
  percentage	
  composition	
  =	
  44,633/55,237	
  =	
  0.80	
  or	
  80%	
   	
    	
    13	
    Based	
  on	
  the	
  cruise	
  reports,	
  there	
  were	
  four	
  other	
  species	
  found	
  within	
  the	
  permit,	
  western	
  red	
   cedar,	
  western	
  hemlock,	
  Sitka	
  spruce	
  and	
  alder.	
  Though	
  all	
  these	
  species	
  were	
  present,	
  the	
  only	
   two	
  dominant	
  ones	
  were	
  Douglas-­‐fir	
  (80%)	
  and	
  hemlock	
  (20%),	
  the	
  others	
  were	
  negligible.	
  At	
   this	
  point,	
  another	
  shortfall	
  of	
  the	
  TIPSY	
  software	
  is	
  its	
  inability	
  to	
  run	
  a	
  mixed	
  species	
  stand	
  for	
   its	
  commercial	
  thinning	
  model.	
  Therefore,	
  once	
  again,	
  simplification	
  of	
  the	
  stands	
  was	
  made	
   using	
  a	
  100%	
  Douglas-­‐fir	
  stand.	
  This	
  shouldn’t	
  pose	
  much	
  of	
  an	
  error	
  since	
  a	
  high	
  proportion	
  of	
   the	
  permit	
  is	
  Douglas-­‐fir,	
  and	
  from	
  personal	
  knowledge	
  of	
  the	
  area	
  a	
  good	
  percentage	
  of	
  second	
   growth	
  stands	
  on	
  the	
  tenure	
  are	
  mostly	
  Douglas-­‐fir	
  dominated.	
  	
   	
   Due	
  to	
  the	
  fact	
  that	
  TIPSY	
  cannot	
  use	
  existing	
  stand	
  data,	
  a	
  series	
  of	
  steps	
  were	
  taken	
  to	
   develop	
  a	
  base	
  model	
  that	
  imitated	
  the	
  stand	
  conditions	
  from	
  stands	
  in	
  cutting	
  permit	
  E.	
  This	
   was	
  done	
  by	
  looking	
  at	
  the	
  total	
  volume/ha	
  from	
  the	
  cutting	
  permit	
  (total	
  volume	
  (55,237m3)	
  /	
   area	
  (108.4	
  ha)),	
  to	
  get	
  an	
  average	
  per	
  hectare	
  volume	
  of	
  509	
  m3.	
  A	
  base	
  Tipsy	
  model	
  of	
  80%	
   Douglas-­‐fir	
  and	
  20%	
  coastal	
  western	
  hemlock	
  was	
  run,	
  with	
  the	
  goal	
  of	
  finding	
  a	
  planting	
  density	
   and	
  site	
  index	
  that	
  would	
  yield	
  509	
  m3/ha	
  at	
  age	
  43.	
  After	
  changing	
  the	
  inputs	
  around	
  and	
   creating	
  different	
  combinations	
  for	
  the	
  variables,	
  a	
  planting	
  density	
  of	
  2000	
  and	
  a	
  site	
  index	
  of	
   33	
  for	
  Douglas-­‐fir	
  and	
  31	
  for	
  coastal	
  western	
  hemlock	
  were	
  the	
  right	
  inputs	
  to	
  produce	
  the	
   desired	
  results.	
  	
  	
    	
   STAND	
  DESCRIPTION	
  INPUTS	
   	
   TIPSY	
  uses	
  a	
  variety	
  of	
  input	
  variables	
  that	
  need	
  to	
  be	
  correct	
  in	
  order	
  for	
  the	
  most	
  accurate	
   results	
  to	
  be	
  produced	
  (Table	
  1);	
  these	
  include	
  the	
  forest	
  region,	
  district	
  and	
  biogeoclimatic	
   zone.	
  The	
  WFP	
  gold	
  river	
  operation	
  is	
  located	
  in	
  the	
  Coast	
  forest	
  region	
  and	
  the	
  Campbell	
  River	
   forest	
  district	
  in	
  the	
  Coastal	
  Western	
  Hemlock	
  (CWH)	
  biogeoclimatic	
  zone.	
  The	
  average	
  slope	
  is	
   also	
  required,	
  which	
  in	
  the	
  area,	
  according	
  to	
  cruise	
  reports,	
  is	
  around	
  30%.	
  The	
  next	
  step	
  is	
  to	
   enter	
  the	
  species	
  composition.	
  Due	
  to	
  the	
  fact	
  that	
  TIPSY	
  can	
  only	
  run	
  single	
  species	
  thinnings,	
  a	
   pure	
  Douglas	
  fir	
  stand	
  is	
  used	
  for	
  all	
  the	
  scenarios,	
  except	
  for	
  the	
  base	
  case	
  which	
  consisted	
  of	
   the	
  80-­‐20	
  mix	
  of	
  Douglas-­‐fir	
  and	
  western	
  hemlock	
  respectively.	
  When	
  inputting	
  the	
  species	
  a	
   site	
  index	
  is	
  needed.	
  The	
  site	
  indices	
  chosen	
  were	
  approximations	
  for	
  the	
  area	
  as	
  a	
  whole	
  given	
   by	
  one	
  of	
  the	
  operations	
  foresters	
  at	
  WFP	
  (Nielsen,	
  2011-­‐2012).	
   	
    	
    14	
    Table	
  1	
  -­‐	
  Input	
  Variables	
  into	
  Stand	
  Descriptions	
  in	
  TIPSY	
    Forest	
  Region	
   District	
   Biogeoclimatic	
  zone	
   Slope	
   Species	
  Composition	
   Site	
  Index	
   Planting	
  Density	
   Commercial	
  Thinning	
  (used	
  for	
   thinning	
  scenarios)	
    Coast	
  Forest	
  Region	
   Campbell	
  River	
   CWH	
   30%	
   80%	
  Fd	
  ,	
  20%	
  Hw	
   33	
  for	
  Fd	
  and	
  31	
  for	
  Hw	
   2000	
  SPH	
   To	
  400	
  sph	
  @27	
  m	
  Top	
  height	
    	
   When	
  performing	
  a	
  commercial	
  thinning	
  simulation	
  in	
  TIPSY,	
  there	
  are	
  a	
  few	
  input	
  variables	
   needed	
  in	
  order	
  to	
  run	
  the	
  model.	
  The	
  timing	
  of	
  the	
  thinning	
  treatments	
  are	
  determined	
  by	
  the	
   model	
  based	
  on	
  the	
  top	
  heights	
  of	
  the	
  trees	
  in	
  the	
  stand.	
  The	
  options	
  are	
  to	
  thin	
  at	
  a	
  height	
  of	
   21,	
  27,	
  or	
  33	
  meters.	
  A	
  residual	
  density	
  is	
  then	
  chosen	
  to	
  leave	
  the	
  post-­‐thinned	
  stand	
  with	
  a	
   given	
  number	
  of	
  stems	
  greater	
  than	
  12.5	
  cm	
  dbh.	
  A	
  number	
  of	
  different	
  scenarios	
  were	
  run	
   based	
  on	
  different	
  heights	
  to	
  attempt	
  to	
  achieve	
  an	
  age	
  that	
  resembles	
  the	
  current	
  stand	
  on	
   cutting	
  permit	
  E.	
  All	
  thinnings	
  performed	
  to	
  400	
  sph	
  at	
  a	
  top	
  height	
  of	
  27	
  meters,	
  occurs	
  at	
  year	
   40.7	
  (which	
  is	
  the	
  closest	
  that	
  could	
  be	
  extrapolated	
  to	
  43	
  years).	
   	
   Fertilization	
  promotes	
  residual	
  tree	
  vigour	
  and	
  growth,	
  and	
  can	
  be	
  simulated	
  in	
  TIPSY.	
  The	
  input	
   variables	
  for	
  these	
  include	
  how	
  many	
  years	
  after	
  planting	
  you	
  want	
  to	
  perform	
  the	
  treatment,	
   and	
  the	
  effectiveness	
  of	
  the	
  fertilizer.	
  The	
  default	
  effectiveness	
  is	
  80%,	
  and	
  was	
  used	
  for	
  all	
   fertilization	
  runs.	
    	
   ECONOMIC	
  INPUTS	
   TIPSY	
  has	
  the	
  option	
  to	
  include	
  an	
  economic	
  analysis	
  by	
  generating	
  an	
  output	
  that	
  shows	
  costs	
   and	
  potential	
  sales	
  data	
  for	
  logs.	
  There	
  are	
  a	
  number	
  of	
  variables	
  needed	
  in	
  order	
  to	
  perform	
  an	
   economic	
  and	
  financial	
  analysis	
  of	
  a	
  stand	
  in	
  TIPSY	
  (e.g.	
  Table	
  2).	
  This	
  can	
  be	
  a	
  useful	
  tool	
  in	
   examining	
  the	
  economic	
  and	
  financial	
  viability	
  of	
  your	
  stand	
  under	
  various	
  cost	
  and	
  price	
   assumptions.	
  	
   	
   Table	
  2	
  -­‐	
  Input	
  variable	
  costs	
  for	
  TIPSY	
    Silviculture	
  Costs	
   Road	
  Development	
    	
    Site	
  Prep	
   Fertilization	
   Road	
  Reactivation	
    $100/ha	
   $222/ha	
  *	
  Where	
  applicable	
   $625/ha	
    15	
    Tree	
  to	
  Truck	
   Haul	
  Cost	
    Harvesting	
   Haul	
  Distance	
   Towing	
  &	
  Barging	
    Other	
  Costs	
    Overhead	
   Other	
  Harvest	
  Costs	
   Discount	
  rate	
   Real	
  Price	
  Increase	
   Real	
  Cost	
  Increase	
   Real	
  Increase	
  Duration	
   Analysis	
  Base	
  year	
    Discount	
   Assumptions	
    $30/m3	
  	
  for	
  Clearcut	
  $37.81/m3	
  CT	
   $5.80/m3	
   *Would	
  be	
  lumped	
  in	
  with	
  logs	
  from	
  rest	
   of	
  operation	
  for	
  harvest	
  $2.20/m3	
   $1154/ha	
   $0.25/m3	
  	
   1.25	
   3.10	
   0.56	
   25	
  years	
   Year	
  41	
  @	
  commercial	
  thinning	
  age	
    	
    SILVICULTURE	
  COSTS	
  	
   Silviculture	
  costs	
  are	
  relatively	
  low,	
  due	
  to	
  the	
  lack	
  of	
  planting	
  and	
  regeneration	
  needs	
  for	
  a	
   commercial	
  thinning	
  stand.	
  A	
  value	
  of	
  $100	
  was	
  chosen	
  for	
  site	
  prep,	
  as	
  trails	
  will	
  need	
  to	
  be	
   assessed,	
  and	
  soil	
  pits	
  dug	
  to	
  determine	
  if	
  rehabilitation	
  would	
  be	
  required	
  post-­‐harvest.	
  This	
   silviculture	
  cost	
  would	
  increase	
  if	
  it	
  was	
  determined	
  that	
  site	
  rehabilitation	
  would	
  be	
  needed.	
   Free	
  growing	
  surveys	
  that	
  are	
  required	
  after	
  two	
  years	
  would	
  ideally	
  be	
  done	
  in-­‐house	
  and	
   would	
  bare	
  insignificant	
  costs.	
  The	
  only	
  real	
  cost	
  that	
  applies	
  to	
  some	
  of	
  the	
  models	
  is	
  fertilizing.	
   For	
  the	
  coast	
  region	
  each	
  treatment	
  for	
  fertilizing	
  costs	
  approximately	
  $222,	
  this	
  is	
  the	
  default	
   value	
  given	
  by	
  TIPSY	
  and	
  is	
  based	
  on	
  average	
  costs	
  during	
  2006.	
    ROAD	
  DEVELOPMENT	
   Second	
  growth	
  blocks	
  already	
  tend	
  to	
  have	
  some	
  remnants	
  of	
  an	
  existing	
  road	
  network	
  that	
   were	
  used	
  during	
  the	
  first	
  harvest.	
  In	
  most	
  cases	
  these	
  roads	
  can	
  be	
  re-­‐activated,	
  saving	
  costs	
   from	
  having	
  to	
  rebuild	
  a	
  whole	
  new	
  road.	
  However,	
  these	
  existing	
  roads	
  can	
  be	
  troublesome	
   and	
  certain	
  sections	
  of	
  re-­‐activation	
  may	
  be	
  more	
  expensive	
  than	
  others.	
   	
   Based	
  on	
  approximations	
  given	
  by	
  the	
  head	
  engineer	
  at	
  the	
  WFP	
  Gold	
  River	
  operation,	
  the	
   average	
  cost	
  to	
  re-­‐activate	
  roads	
  in	
  second	
  growth	
  is	
  around	
  12.50	
  per	
  linear	
  meter	
   (Sommerfeld,	
  2011-­‐2012).	
  There	
  is	
  approximately	
  0.05	
  km	
  of	
  road	
  per	
  ha	
  in	
  cutting	
  permit	
  E	
  and	
   at	
  a	
  rate	
  of	
  approximately	
  $12.50	
  per	
  meter,	
  the	
  average	
  cost	
  per	
  ha	
  for	
  road	
  construction	
  is	
   $625.	
  	
    TREE	
  TO	
  TRUCK	
    	
    16	
    The	
  cost	
  for	
  the	
  harvesting	
  phase	
  of	
  the	
  commercial	
  thinning	
  operation	
  was	
  derived	
  from	
  data	
   from	
  the	
  UBC	
  Malcolm	
  Knapp	
  Research	
  Forest	
  (MKRF)	
  in	
  Maple	
  Ridge,	
  BC,	
  where	
  an	
  extensive	
   commercial	
  thinning	
  operation	
  is	
  performed	
  yearly.	
  Delivered	
  wood	
  costs	
  from	
  these	
  thinnings	
   range	
  from	
  about	
  $30-­‐35/m3	
  for	
  ground	
  based	
  short	
  haul	
  distance,	
  up	
  to	
  $55-­‐60/m3	
  for	
  cable	
   thinning	
  and	
  longer	
  haul	
  distances	
  (Lawson,	
  2011).	
  Since	
  the	
  terrain	
  where	
  the	
  second	
  growth	
   forests	
  are	
  located	
  in	
  Gold	
  River,	
  is	
  similar	
  to	
  that	
  at	
  MKRF,	
  and	
  assuming	
  cable	
  and	
  ground	
   based	
  logging	
  are	
  used	
  in	
  a	
  50-­‐50	
  split,	
  then	
  the	
  average	
  cost	
  would	
  be	
  around	
  $45/	
  m3.	
  The	
   goal	
  though	
  at	
  WFP	
  is	
  to	
  minimize	
  costs,	
  so	
  the	
  models	
  will	
  be	
  run	
  with	
  a	
  lower	
  cost.	
  The	
   overhead	
  cable	
  yarding	
  option	
  will	
  be	
  used	
  at	
  approximately	
  $30/m3	
  and	
  the	
  addition	
  of	
  the	
   default	
  commercial	
  thinning	
  add-­‐on	
  amount	
  of	
  $7.81/m3	
  will	
  be	
  used	
  in	
  the	
  runs	
  with	
  a	
  thinning	
   treatment.	
  	
    HAUL	
  COSTS	
   The	
  average	
  haul	
  distance	
  from	
  the	
  second	
  growth	
  blocks	
  in	
  Gold	
  River	
  is	
  between	
  10-­‐20	
  km.	
   This	
  commercial	
  thinning	
  operation	
  would	
  be	
  on	
  such	
  a	
  small	
  scale	
  that	
  towing	
  and	
  barging	
   costs	
  would	
  be	
  lumped	
  in	
  with	
  other	
  harvested	
  logs	
  from	
  the	
  regular	
  clearcutting	
  operation.	
  For	
   final	
  harvests,	
  the	
  default	
  value	
  of	
  $2.80/m3	
  will	
  be	
  used	
  for	
  towing	
  and	
  barging.	
    OTHER	
  COSTS	
   Overhead	
  costs	
  cover	
  the	
  administration	
  and	
  supervisory	
  activities	
  for	
  the	
  operation	
  as	
  a	
  whole.	
   Though	
  commercial	
  thinning	
  doesn’t	
  remove	
  as	
  many	
  trees	
  as	
  a	
  clearcut	
  operation,	
  certain	
  rules	
   and	
  regulations	
  still	
  need	
  to	
  be	
  followed	
  and	
  therefore	
  scaling,	
  engineering,	
  cruising,	
   environmental	
  protection,	
  consulting	
  fees	
  and	
  residue	
  surveys	
  still	
  need	
  to	
  be	
  performed.	
  These	
   are	
  default	
  values	
  in	
  TIPSY	
  and	
  were	
  originally	
  drawn	
  from	
  section	
  5.2	
  of	
  the	
  Coast	
  Appraisal	
   Manual.	
  A	
  stumpage	
  rate	
  of	
  $0.25/m3	
  was	
  used	
  for	
  the	
  Douglas-­‐fir	
  in	
  the	
  Campbell	
  River	
  district	
   (Province	
  of	
  British	
  Columbia,	
  2007).	
    MARKET	
  ANALYSIS	
   Log	
  prices	
  from	
  the	
  log	
  market	
  report	
  (Figure	
  1)	
  put	
  out	
  by	
  the	
  ministry	
  of	
  forests,	
  lands,	
  and	
   natural	
  resource	
  operations	
  were	
  used	
  to	
  calculate	
  revenues	
  (Timber	
  Pricing	
  Branch,	
  1990-­‐ 2011).	
   	
   	
    	
    17	
    Grade	
   C	
   H	
   I	
   J	
   U	
  	
   Y	
    Fd	
   Hembal	
   	
  $135.34	
  	
   	
  	
   	
  $128.30	
  	
   	
  $70.80	
  	
   	
  $72.41	
  	
   	
  $57.05	
  	
   	
  $58.15	
  	
   	
  $53.89	
  	
   	
  $44.75	
  	
   	
  $48.29	
  	
   	
  $28.54	
  	
   	
  $45.76	
  	
    3  Figure	
  1	
  -­‐	
  3	
  Month	
  Log	
  Prices	
  as	
  of	
  November	
  30,2011	
  (per	
  m )	
    DISCOUNT	
  ASSUMPTIONS	
   A	
  discount	
  rate	
  was	
  used	
  to	
  convert	
  future	
  values	
  into	
  equivalent	
  present	
  values.	
  As	
  of	
  January	
   12,	
  2012	
  the	
  discount	
  bank	
  rate	
  was	
  1.25	
  (Bank	
  of	
  Canada,	
  2012).	
  This	
  rate	
  is	
  pretty	
  low	
  and	
  is	
   expected	
  to	
  rise	
  in	
  the	
  future.	
  The	
  volatility	
  of	
  this	
  rate	
  will	
  effect	
  results	
  in	
  terms	
  of	
  the	
   economic	
  benefits	
  or	
  shortfalls	
  of	
  a	
  commercial	
  thinning	
  treatment.	
   	
   The	
  real	
  price	
  increase	
  extrapolates	
  what	
  the	
  future	
  price	
  of	
  a	
  product	
  will	
  be.	
  The	
  rate	
  used	
  for	
   this	
  input	
  was	
  the	
  GDP	
  growth	
  rate	
  from	
  the	
  World	
  Factbook	
  from	
  the	
  American	
  Central	
   Intelligence	
  Agency	
  (CIA)	
  (2010)	
  and	
  is	
  3.10%.	
  It	
  is	
  tough	
  to	
  put	
  a	
  real	
  growth	
  rate	
  on	
  Lumber	
   prices,	
  although	
  based	
  on	
  the	
  trend	
  in	
  log	
  prices	
  from	
  1990-­‐2007	
  the	
  percent	
  increase	
  per	
  year	
   on	
  average	
  is	
  3.10%	
  (Timber	
  Pricing	
  Branch,	
  1990-­‐2011).	
  To	
  demonstrate	
  the	
  variability	
  in	
   prices,	
  Fir	
  H-­‐grade	
  log	
  prices	
  was	
  plotted	
  (Figure	
  2).	
   	
    Fir	
  H-­‐grade	
  Log	
  Prices	
  from	
  1990-­‐2007	
   	
  $300.00	
  	
   $/m3	
    	
  $250.00	
  	
   	
  $200.00	
  	
   	
  $150.00	
  	
   	
  $100.00	
  	
   	
  $50.00	
  	
   	
  $-­‐	
  	
  	
  	
   1988	
   1990	
   1992	
   1994	
   1996	
   1998	
   2000	
   2002	
   2004	
   2006	
   2008	
   Year	
    	
    Figure	
  2-­‐Fir	
  H-­‐grade	
  Log	
  Prices	
  from	
  1990-­‐2007	
    	
   The	
  anomaly	
  here	
  is	
  that	
  in	
  1997	
  prices	
  shot	
  right	
  up	
  and	
  then	
  back	
  down	
  again.	
  Determining	
   the	
  real	
  cost	
  within	
  the	
  forest	
  sector	
  is	
  difficult,	
  due	
  to	
  variability	
  of	
  costs	
  from	
  year	
  to	
  year.	
  For	
    	
    18	
    example,	
  different	
  types	
  of	
  harvesting,	
  such	
  as	
  helicopter	
  logging,	
  can	
  vary	
  in	
  price	
  due	
  to	
   demand	
  and	
  such	
  external	
  factors	
  as	
  fuel	
  prices.	
  A	
  simple	
  indicator	
  of	
  cost	
  change	
  is	
  to	
  take	
  the	
   annual	
  labor	
  rate	
  from	
  the	
  MOF	
  Coastal	
  Appraisal	
  Manuals	
  (2007)	
  and	
  get	
  a	
  percent	
  change	
  in	
   the	
  labor	
  rate.	
  This	
  was	
  calculated	
  to	
  be	
  approximately	
  0.56%	
  per	
  year.	
  	
   	
   The	
  analysis	
  base	
  year	
  is	
  the	
  year	
  that	
  the	
  commercial	
  thinning	
  takes	
  place.	
  From	
  that	
  point	
  out	
   net	
  present	
  value	
  can	
  be	
  determined	
  through	
  the	
  models.	
  By	
  doing	
  this,	
  the	
  efficiency	
  of	
  the	
   treatment	
  can	
  be	
  analyzed	
  to	
  whether	
  it	
  is	
  worth	
  pursuing.	
    	
   SCENARIOS	
   Each	
  of	
  the	
  different	
  scenarios	
  (Table	
  3)	
  was	
  then	
  run	
  with	
  each	
  scenario’s	
  individual	
  variables.	
   Once	
  these	
  scenarios	
  were	
  run,	
  different	
  tables	
  from	
  TIPSY	
  were	
  created	
  to	
  show	
  output	
  data.	
   For	
  the	
  purpose	
  of	
  this	
  report	
  two	
  specific	
  tables	
  are	
  used.	
  The	
  first	
  is	
  the	
  stand	
  yield	
  table	
   which	
  displays	
  the	
  change	
  in	
  yield	
  of	
  the	
  stand	
  over	
  time.	
  This	
  table	
  will	
  be	
  used	
  minimally,	
  as	
   the	
  more	
  relevant	
  one	
  is	
  the	
  economic	
  analysis	
  table,	
  which	
  shows	
  the	
  economic	
  viability	
  of	
   each	
  of	
  the	
  scenarios.	
  	
  	
   Table	
  3	
  -­‐	
  Description	
  of	
  Scenarios	
  and	
  tree	
  to	
  truck	
  costs	
    Scenario	
  1	
   Scenario	
  2	
   Scenario	
  3	
   Scenario	
  4	
   Scenario	
  5	
   Scenario	
  6	
    Base	
  Case	
  80%	
  Fd	
  20%	
  Hw	
  	
   Thinning	
  at	
  age	
  43	
  of	
  current	
  stand	
  at	
  rate	
  of	
  	
   Fertilizing	
  After	
  Commercial	
  Thinning	
  at	
  age	
  43	
  	
   Thinning	
  on	
  Private	
  Land	
  at	
  age	
  43	
   Thinning	
  with	
  a	
  reduced	
  tree-­‐to-­‐truck	
  cost	
  	
   Thinning	
  with	
  an	
  increased	
  tree-­‐to-­‐truck	
  	
    $30.00/m3	
   $37.81/m3	
   $37.81/m3	
   $37.81/m3	
   $36.81/m3	
   $45.00/m3	
    	
    SCENARIO	
  1:	
  BASE	
  CASE	
  80%	
  FD	
  20%	
  HW 	
   20%	
  western	
  hemlock	
  80%	
  Douglas-­‐fir;	
  Site	
  index	
  Fd	
  33	
  Hw	
  31	
   	
   This	
  is	
  a	
  run	
  based	
  on	
  what	
  the	
  existing	
  stand	
  should	
  look	
  like	
  if	
  it	
  was	
  started	
  from	
  year	
  zero.	
   Meaning	
  that	
  the	
  rest	
  of	
  the	
  scenarios	
  are	
  based	
  on	
  this	
  one	
  to	
  see	
  what	
  the	
  effects	
  of	
   commercial	
  thinning	
  will	
  have	
  in	
  comparison	
  to	
  the	
  existing	
  stand.	
  	
    SCENARIO	
  2:	
  THINNING	
  AT	
  AGE	
  43	
  OF	
  CURRENT	
  STAND	
   100%	
  Douglas-­‐fir;	
  Site	
  index	
  33;	
  Commercial	
  thinning	
  to	
  400	
  sph	
  at	
  average	
  stand	
  height	
  of	
  27m	
   	
    	
    19	
    This	
  was	
  the	
  model	
  that	
  would	
  get	
  the	
  closest	
  to	
  43	
  years	
  of	
  age	
  for	
  a	
  thinning	
  (the	
  model	
  shows	
   40.7	
  years).	
  This	
  would	
  imitate	
  what	
  would	
  happen	
  if	
  WFP	
  decided	
  to	
  thin	
  instead	
  of	
  harvest	
  at	
   this	
  point	
  in	
  time.	
  The	
  point	
  at	
  which	
  this	
  becomes	
  beneficial	
  to	
  perform	
  (in	
  an	
  economic	
  sense)	
   is	
  when	
  the	
  net	
  present	
  value	
  of	
  the	
  thinned	
  stand	
  exceeds	
  the	
  unthinned	
  stand.	
  	
    SCENARIO	
  3:	
  FERTILIZING	
  AFTER	
  COMMERCIAL	
  THINNING	
   Fertilization	
  at	
  41	
  and	
  51	
  years	
  and	
  have	
  80%	
  effectiveness	
   	
   These	
  fertilization	
  treatments	
  would	
  provide	
  added	
  growth	
  potential	
  to	
  the	
  thinned	
  stand.	
  	
  The	
   first	
  treatment	
  would	
  be	
  done	
  immediately	
  after	
  the	
  commercial	
  thinning,	
  and	
  the	
  second	
  10	
   years	
  later	
  in	
  the	
  same	
  stand.	
  The	
  goal	
  of	
  these	
  treatments	
  is	
  to	
  see	
  how	
  the	
  stand	
  will	
  incur	
   increased	
  value	
  over	
  time,	
  even	
  with	
  the	
  relatively	
  high	
  cost	
  of	
  thinning	
  at	
  $222	
  per	
  hectare.	
  	
   	
   Fertilization	
  in	
  TIPSY	
  is	
  based	
  on	
  research	
  plots	
  from	
  around	
  BC.	
  The	
  plots	
  were	
  hand	
  fertilized	
   and	
  claimed	
  to	
  have	
  had	
  a	
  100%	
  effectiveness	
  rate,	
  but	
  because	
  most	
  operations	
  would	
  choose	
   to	
  use	
  an	
  aerial	
  application,	
  an	
  80%	
  effectiveness	
  is	
  recommended	
  and	
  was	
  used	
  for	
  this	
   scenario.	
  Stands	
  that	
  have	
  been	
  recently	
  thinned	
  are	
  good	
  for	
  fertilization	
  treatments	
  (Forest	
   Practices	
  Code,	
  1995),	
  and	
  therefore	
  the	
  timing	
  of	
  fertilization	
  treatment	
  was	
  at	
  age	
  41,	
   immediately	
  after	
  the	
  thinning.	
  A	
  second	
  fertilizer	
  application	
  was	
  scheduled	
  at	
  51	
  years	
  since	
  it	
   has	
  been	
  found	
  that	
  an	
  optimal	
  time	
  to	
  fertilize	
  a	
  stand	
  is	
  10-­‐15	
  years	
  before	
  harvest	
  (Forest	
   Practices	
  Code,	
  1995),	
  and	
  this	
  report	
  is	
  assuming	
  a	
  final	
  harvest	
  at	
  61	
  years	
  of	
  age.	
    SCENARIO	
  4:	
  THINNING	
  ON	
  PRIVATE	
  LAND	
   This	
  scenario	
  will	
  be	
  run	
  with	
  the	
  same	
  inputs	
  except	
  for	
  stumpage	
  which	
  is	
  non-­‐existent	
  on	
   private	
  land.	
  Taxes	
  are	
  not	
  taken	
  into	
  account	
  in	
  this	
  report.	
  WFP	
  Gold	
  River	
  has	
  a	
  significant	
   amount	
  of	
  private	
  land	
  in	
  and	
  around	
  the	
  area,	
  a	
  total	
  of	
  741.6	
  ha	
  (Nielsen,	
  2011-­‐2012).	
  Of	
  that	
   total,	
  149	
  ha	
  are	
  in	
  the	
  age	
  class	
  between	
  41-­‐60	
  years,	
  an	
  age	
  class	
  that	
  is	
  appropriate	
  for	
   commercial	
  thinning	
  (Nielsen,	
  2011-­‐2012).	
    SCENARIO	
  5:	
  THINNING	
  W ITH	
  A	
  REDUCED	
  TREE-­‐TO-­‐TRUCK	
  COST	
  OF	
  29.00/M 3	
   This	
  is	
  the	
  low	
  cost	
  option.	
  This	
  scenario	
  shows	
  the	
  implications	
  of	
  reducing	
  the	
  tree	
  to	
  truck	
   cost	
  to	
  29.00/m3,	
  (plus	
  $7.81	
  commercial	
  thinning	
  cost)	
  which	
  is	
  quite	
  low	
  for	
  industry	
   standards.	
  In	
  most	
  cases	
  this	
  may	
  be	
  unrealistic	
  but	
  can	
  show	
  what	
  can	
  be	
  attained	
  if	
  a	
  lower	
    	
    20	
    cost	
  can	
  be	
  acquired.	
  It	
  is	
  only	
  $1	
  less	
  than	
  the	
  tree-­‐to-­‐truck	
  costs	
  of	
  scenario	
  3	
  and	
  4,	
  but	
  this	
   small	
  adjustment	
  was	
  made	
  to	
  find	
  the	
  quickest	
  point	
  to	
  reach	
  a	
  positive	
  NPV	
  after	
  the	
  thinning	
   treatment.	
    SCENARIO	
  6:	
  THINNING	
  W ITH	
  A	
  TREE-­‐TO-­‐TRUCK	
  OF	
  45.00/M 3	
   This	
  is	
  based	
  on	
  what	
  the	
  cost	
  associated	
  with	
  the	
  Malcolm	
  Knapp	
  Research	
  Forest	
  in	
  Maple	
   Ridge	
  estimates	
  their	
  commercial	
  thinning	
  to	
  be	
  around	
  45.00/m3.	
  This	
  is	
  a	
  high	
  estimate	
   because	
  most	
  of	
  the	
  work	
  at	
  the	
  research	
  forest	
  is	
  contracted	
  out,	
  causing	
  higher	
  prices.	
  WFP	
   has	
  the	
  advantage	
  of	
  having	
  some	
  equipment	
  and	
  long	
  standing	
  relationships	
  with	
  logging	
   contractors,	
  hence	
  can	
  most	
  likely	
  incur	
  a	
  lower	
  cost.	
   	
   Due	
  to	
  the	
  inability	
  of	
  TIPSY	
  to	
  run	
  multi-­‐species	
  commercial	
  thinning	
  treatments,	
  the	
  thinning	
   treatments	
  are	
  not	
  exactly	
  comparable	
  to	
  the	
  base	
  case	
  which	
  was	
  run	
  with	
  an	
  80%	
  Douglas-­‐fir	
   and	
  20%	
  Western	
  Hemlock	
  mix.	
  Therefore	
  an	
  alternate	
  base	
  case	
  of	
  100%	
  Douglas-­‐fir	
  was	
  run	
  to	
   see	
  how	
  much	
  of	
  a	
  difference	
  there	
  is	
  between	
  the	
  two	
  base	
  cases	
  (Scenario	
  1b).	
    iv.  RESULTS	
    READING	
  TIPSY	
  OUTPUT	
  TABLES	
   The	
  following	
  column	
  headers	
  from	
  the	
  TIPSY	
  tables	
  are	
  described	
  and	
  defined	
  below:	
   TIPSY	
  Age-­‐	
  Refers	
  to	
  the	
  age	
  since	
  the	
  stand	
  initiating	
  disturbance	
  occurred,	
  which	
  in	
  these	
   second	
  growth	
  forests	
  is	
  the	
  initial	
  harvesting.	
  	
   Top	
  Height	
  (m)-­‐	
  The	
  average	
  height	
  of	
  the	
  100	
  trees/ha	
  of	
  largest	
  diameter	
  at	
  breast	
  height.	
  	
   Merchantable	
  volume	
  (Merch	
  Vol.)-­‐	
  Total	
  stand	
  volume	
  greater	
  than	
  12.5cm	
  DBH,	
  measured	
  in	
   m3/ha.	
  	
   Harvest	
  Revenue-­‐All	
  revenue	
  accumulated	
  to	
  the	
  final	
  harvest	
  age,	
  this	
  includes	
  all	
  commercial	
   thinning	
  treatments.	
  This	
  revenue	
  will	
  change	
  if	
  general	
  real	
  price	
  increases	
  change.	
  This	
  is	
   measured	
  in	
  $/ha.	
   Tree-­‐to-­‐Truck-­‐	
  These	
  costs	
  cover	
  landing	
  and	
  skid	
  trail	
  construction,	
  felling,	
  bucking,	
  skidding,	
   and	
  loading	
  of	
  truck,	
  plus	
  any	
  contractor	
  overhead	
  or	
  profit.	
  All	
  costs	
  are	
  accumulated	
  to	
  this	
   point,	
  including	
  commercial	
  thinning.	
  Measured	
  in	
  $/ha.	
    	
    21	
    Haul	
  Costs-­‐	
  Log	
  transport	
  from	
  landing	
  to	
  the	
  log	
  dump.	
  All	
  costs	
  including	
  commercial	
  thinning	
   are	
  accumulated	
  and	
  is	
  measured	
  in	
  $/ha.	
   Average	
  Revenue-­‐	
  Harvest	
  revenue	
  divided	
  by	
  the	
  total	
  merchantable	
  volume	
  12.5+	
  cm	
  at	
  a	
   selected	
  harvest	
  age.	
  Measured	
  in	
  $/m3.	
   Conversion	
  Cost-­‐	
  The	
  sum	
  of	
  road	
  development,	
  tree-­‐to-­‐truck,	
  haul,	
  milling,	
  overhead	
  and	
  other	
   harvest	
  costs	
  divided	
  by	
  the	
  merchantable	
  volume	
  12.5+	
  cm	
  at	
  a	
  selected	
  harvest	
  age.	
   Silviculture	
  and	
  annual	
  costs	
  are	
  not	
  included.	
  Measured	
  in	
  $/m3.	
   Net	
  Present	
  Value	
  (NPV)-­‐	
  The	
  sum	
  of	
  discounted	
  revenues	
  and	
  costs	
  (including	
  silviculture	
  and	
   annual	
  costs)	
  incurred	
  over	
  a	
  single	
  rotation.	
  Measured	
  in	
  $/ha.	
   Site	
  Value-­‐The	
  sum	
  of	
  discounted	
  revenues	
  and	
  costs	
  (including	
  silviculture	
  and	
  annual	
  costs)	
   from	
  an	
  infinite	
  series	
  of	
  rotations	
  of	
  the	
  same	
  length.	
  Also	
  known	
  as	
  soil	
  rent,	
  bare	
  land	
  value	
   and	
  soil	
  expectation	
  values.	
  Measured	
  in	
  $/ha.	
    	
   SCENARIOS	
   Scenario	
  1:	
  Base	
  Case	
  80%	
  Fd	
  20%	
  Hw	
   The	
  base	
  case	
  shows	
  what	
  would	
  happen	
  in	
  the	
  future	
  if	
  the	
  stand	
  stayed	
  the	
  same	
  (Table	
  4).	
   The	
  inputs	
  into	
  TIPSY	
  most	
  likely	
  vary	
  from	
  what	
  WFP	
  has	
  calculated	
  through	
  their	
  operational	
   planning	
  and	
  financial	
  assessments	
  to	
  determine	
  the	
  current	
  value	
  of	
  the	
  stand.	
  Exact	
  costs	
  and	
   log	
  values	
  from	
  WFP	
  were	
  unavailable	
  due	
  to	
  confidentiality	
  agreements.	
  Because	
  of	
  this,	
  the	
   analysis	
  will	
  be	
  based	
  on	
  stand	
  condition	
  at	
  year	
  41,	
  which	
  is	
  when	
  the	
  commercial	
  thinning	
   treatment	
  would	
  theoretically	
  be	
  performed	
  based	
  on	
  TIPSY.	
  	
   	
   Table	
  4	
  -­‐	
  Scenario	
  1	
  TIPSY	
  Table	
    TIPSY	
   Age	
   (yr)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   41	
   51	
   61	
   103	
   	
    Top|	
   Ht|	
   (m)|	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   26.9	
   31.5	
   35.5	
   46.7	
    Merch	
   Vol.	
   (m3/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   399	
   550	
   682	
   1046	
    Harvest	
   Revenue	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   20480	
   39952	
   69385	
   160303	
    Tree-­‐to-­‐	
   Truck	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   12814	
   18468	
   23874	
   35490	
    Haul	
   Costs	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   2314	
   3387	
   4455	
   7043	
    Average	
   Revenue	
   ($/m3)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   51.33	
   72.63	
   101.81	
   153.31	
    Conversion	
   Cost	
   NPV	
   ($/m3)	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   49.31	
   806	
   48.12	
   11848	
   47.56	
   28557	
   45.57	
   50623	
    Site	
   Value	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   1718	
   24374	
   52238	
   68756	
    At	
  age	
  41,	
  the	
  NPV	
  of	
  the	
  cutting	
  permit	
  is	
  $806/ha.	
  The	
  age	
  in	
  which	
  the	
  NPV	
  is	
  maximized	
  is	
   103	
  years	
  at	
  a	
  value	
  of	
  $50,623/ha.	
  	
    	
    22	
    	
   Scenario	
  2:	
  Thinning	
  at	
  age	
  41	
  of	
  current	
  stand	
   After	
  the	
  commercial	
  thinning	
  at	
  age	
  40.7,	
  the	
  NPV	
  is	
  -­‐$94/ha	
  (Table	
  5).	
  This	
  negative	
  NPV	
   demonstrates	
  that	
  the	
  commercial	
  thinning	
  did	
  not	
  produce	
  a	
  positive	
  margin.	
  At	
  age	
  41,	
  the	
   NPV	
  of	
  the	
  stand	
  is	
  $75/ha.	
  The	
  age	
  in	
  which	
  the	
  NPV	
  is	
  maximized	
  is	
  109	
  years	
  and	
  has	
  a	
  value	
   of	
  $50,860/ha.	
  	
   	
   Table	
  5	
  -­‐	
  Scenario	
  2	
  TIPSY	
  Table	
    TIPSY	
   Age	
   (yr)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   41	
   51	
   61	
   109	
   	
    Top|	
   Ht|	
   (m)|	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   27.2	
   31.9	
   35.8	
   48.0	
    Merch	
   Vol.	
   (m3/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   382	
   512	
   641	
   1103	
    Harvest	
   Revenue	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   19687	
   34703	
   59568	
   175263	
    Commercial	
  Thinning	
   	
   40.7	
   27	
   	
   	
   	
  	
  	
  	
  	
  	
  	
  	
  40.7	
   27	
   378	
    	
   19302	
   	
    	
   	
   	
   	
   	
   Commercial	
   Thinning	
   Harvest	
   	
  7394	
   	
   40.7	
   27	
   165	
   	
    Tree-­‐ to-­‐	
   Truck	
  	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   13505	
   17936	
   22707	
   39239	
    Haul	
   Costs	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   2220	
   3099	
   4073	
   7277	
    Average	
   Revenue	
   ($/m3)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   51.48	
   67.76	
   92.96	
   158.85	
    	
   	
   	
   13360	
   2192	
   	
   	
   6671	
   	
    	
   957	
   	
    Conversion	
   Cost	
   NPV	
   ($/m3)	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   51.28	
   75	
   50.25	
   7742	
   49.65	
   21147	
   46.34	
   50860	
    Site	
   Value	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐60	
   15864	
   38646	
   67280	
    	
   51.07	
   	
    	
   51.32	
   	
    	
   -­‐94	
   	
    	
   44.81	
   	
   	
    	
   	
   	
    	
   	
   	
    -­‐474	
    When	
  reading	
  the	
  above	
  TIPSY	
  output	
  tables,	
  the	
  three	
  commercial	
  thinning	
  lines	
  show	
  different	
   results.	
  The	
  first	
  set	
  of	
  lines	
  is	
  the	
  stand	
  immediately	
  after	
  it	
  is	
  thinned.	
  The	
  third	
  line	
  below	
  the	
   heading	
  “Commercial	
  Thinning	
  Harvest”	
  is	
  what	
  was	
  taken	
  out	
  of	
  the	
  thinning	
  treatment.	
  	
   	
   Scenario	
  3:	
  Fertilizing	
  After	
  Commercial	
  Thinning	
  and	
  at	
  51	
  years	
   The	
  fertilization	
  treatments	
  proved	
  to	
  be	
  somewhat	
  effective	
  (Table	
  6).	
  It	
  was	
  effective	
  in	
  the	
   sense	
  that	
  it	
  adds	
  about	
  10m3	
  per	
  year	
  to	
  the	
  stand	
  more	
  than	
  if	
  unthinned.	
  Economically	
  the	
   fertilization	
  treatment	
  caused	
  the	
  stand	
  to	
  have	
  a	
  NPV	
  of	
  -­‐$925/ha	
  immediately	
  after	
  the	
   commercial	
  thinning	
  and	
  -­‐$986/ha	
  at	
  41	
  years.	
  Although	
  this	
  is	
  significantly	
  lower	
  than	
  scenario	
   1	
  or	
  scenario	
  2,	
  it	
  does	
  reach	
  its	
  maximum	
  NPV	
  of	
  all	
  the	
  treatments	
  at	
  106	
  years	
  at	
  a	
  value	
   of$50,714/ha.	
  The	
  fertilization	
  treatment	
  increased	
  the	
  m3/ha	
  by	
  about	
  10	
  each	
  year.	
    	
    23	
    	
   Table	
  6	
  -­‐	
  Scenario	
  3	
  TIPSY	
  Table	
    TIPSY	
   Age	
   (yr)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   41	
   51	
   61	
   106	
   	
    Top|	
   Ht|	
   (m)|	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   27.2	
   32.2	
   36.3	
   47.9	
    Merch	
   Vol.	
   (m3/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   382	
   522	
   660	
   1100	
    Harvest	
   Revenue	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   19688	
   35580	
   62134	
   174261	
    Commercial	
  Thinning	
   	
   40.7	
   27	
   	
  	
  	
  	
  	
  	
  	
  	
  40.7	
   27	
   	
   378	
   	
    Tree-­‐to-­‐	
   Truck	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   13506	
   18249	
   23323	
   39085	
    Haul	
   Costs	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   3063	
   4362	
   5796	
   10006	
    Average	
   Revenue	
   ($/m3)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   51.48	
   68.1	
   94.08	
   158.43	
    Conversion	
   Cost	
   NPV	
   ($/m3)	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   53.48	
   -­‐986	
   52.32	
   6647	
   51.66	
   20851	
   48.81	
   50747	
    	
   19302	
   	
    	
   	
   13360	
   	
   3024	
   	
    	
   51.07	
   	
    	
   	
   	
   	
   	
   Commercial	
   Thinning	
   Harvest	
   	
   	
   40.7	
   27	
   165	
   7394	
   	
    	
   	
   6671	
   	
   1320	
   	
    	
   44.81	
   	
   	
    Site	
   Value	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐2641	
   13595	
   38104	
   67998	
    	
   	
   53.52	
   	
   -­‐925	
   	
   -­‐2508	
   	
   	
   	
    	
   	
   	
    Scenario	
  4:	
  Thinning	
  on	
  Private	
  Land	
   Private	
  land	
  proved	
  to	
  bring	
  a	
  higher	
  NPV	
  at	
  41	
  years	
  of	
  age	
  of	
  $129/ha	
  (Table	
  7).	
  Still,	
  the	
  NPV	
   after	
  the	
  commercial	
  thinning	
  was	
  negative	
  at	
  -­‐$40/ha.	
  Just	
  like	
  scenario	
  2	
  (the	
  base	
  case	
   commercial	
  thinning),	
  the	
  maximum	
  NPV	
  is	
  at	
  year	
  109	
  but	
  has	
  a	
  higher	
  value	
  of	
  $50,973/ha.	
  It	
   mirrors	
  scenario	
  2	
  with	
  the	
  same	
  rate	
  of	
  change	
  in	
  all	
  aspects	
  of	
  the	
  stand	
  economically,	
  but	
  has	
   a	
  bit	
  higher	
  of	
  a	
  value	
  due	
  to	
  the	
  elimination	
  of	
  the	
  stumpage	
  fee	
  that	
  is	
  attributed	
  to	
  stands	
  on	
   crown	
  land.	
  	
   Table	
  7	
  -­‐	
  Scenario	
  4	
  TIPSY	
  Table	
    TIPSY	
   Age	
   (yr)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   41	
   51	
   61	
   109	
    Top|	
   Ht|	
   (m)|	
   -­‐-­‐-­‐-­‐-­‐-­‐	
   27.2	
   31.9	
   35.8	
   48	
    Merch	
   Vol.	
   (m3/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   382	
   512	
   641	
   1103	
    Harvest	
   Revenue	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   19687	
   34703	
   59568	
   175263	
    Tree-­‐to-­‐	
   Truck	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   13505	
   17936	
   22707	
   39239	
    Haul	
   Costs	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   2220	
   3099	
   4073	
   7277	
    	
   	
   	
   40.7	
   27	
   40.7	
   27	
   	
   378	
   	
   19302	
   Commercial	
  Thinning	
  Harvest	
   40.7	
   27	
   165	
   	
   7394	
    	
   	
   	
   	
   13360	
    	
   	
   	
   	
    	
   	
   	
   2192	
   	
    	
   	
   	
   51.07	
   	
    	
   	
   	
   51.18	
   	
    	
   	
   	
   -­‐40	
   	
    6671	
   	
    957	
   	
    44.81	
   	
    	
   	
   	
    	
   	
    	
   	
   	
   	
  Commercial	
   	
   Thinning	
  	
    	
    	
    Average	
   Revenue	
   ($/m3)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   51.48	
   67.76	
   92.96	
   158.85	
    Conversion	
   Cost	
   NPV	
   ($/m3)	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   51.13	
   129	
   50.07	
   7823	
   49.44	
   21250	
   46.09	
   50973	
    Site	
   Value	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   72	
   16032	
   38835	
   67429	
    24	
    -­‐343	
    	
   Scenario	
  	
  5:	
  Thinning	
   	
   with	
  a	
  reduced	
   	
   tree-­‐to-­‐truck	
   	
   of	
   	
   36.81/m3	
  	
    	
    	
    	
    If	
  thinning	
  costs	
  can	
  be	
  reduced	
  to	
  $36.81/m3	
  an	
  even	
  higher	
  NPV	
  can	
  be	
  developed	
  at	
  $461/ha	
   at	
  age	
  41	
  (Table	
  8).	
  The	
  NPV	
  after	
  commercial	
  thinning	
  was	
  also	
  positive	
  at	
  $288/ha.	
  At	
  year	
  109	
   the	
  maximum	
  NPV	
  is	
  $51,483/ha.	
   Table	
  8	
  -­‐	
  Scenario	
  5	
  TIPSY	
  Table	
    TIPSY	
   Age	
   (yr)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   41	
   51	
   61	
   109	
    	
    Harvest	
   Revenue	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   19687	
   34703	
   59568	
   175263	
    Tree-­‐to-­‐	
   Truck	
  	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   13119	
   17396	
   21997	
   37971	
    Haul	
   Costs	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   2220	
   3099	
   4073	
   7277	
    Average	
   Revenue	
   ($/m3)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   51.48	
   67.76	
   92.96	
   158.85	
    	
  Commercial	
   	
   Thinning	
   	
   	
   	
   40.7	
   27	
   40.7	
   27	
   	
   378	
   	
   19302	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   Commercial	
  Thinning	
  Harvest	
   	
   40.7	
   27	
   165	
   7394	
    	
   	
   	
   12978	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    	
   	
   	
   2192	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    	
   	
   	
    -­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    Top|	
   Ht|	
   (m)|	
   -­‐-­‐-­‐-­‐-­‐-­‐	
   27.2	
   31.9	
   35.8	
   48	
    -­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    Merch	
   Vol.	
   (m3/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   382	
   512	
   641	
   1103	
    -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    	
    Conversion	
   Cost	
   NPV	
   ($/m3)	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   50.26	
   461	
   49.19	
   8235	
   48.54	
   21731	
   45.19	
   51483	
    	
   	
   51.07	
   	
   50.31	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    Site	
   Value	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   879	
   16887	
   39718	
   68104	
    	
   	
   	
    	
   	
   288	
   	
   461	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    	
   6504	
   	
   957	
   	
   44.81	
   	
   	
   	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    	
   	
  -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
    	
    25	
    	
   	
    Scenario	
  6:	
  Thinning	
  with	
  a	
  tree-­‐to-­‐truck	
  of	
  45.00/m3	
   The	
  NPV	
  after	
  the	
  commercial	
  thinning	
  is	
  quite	
  low	
  as	
  expected	
  at	
  -­‐$2402/ha,	
  while	
  the	
  NPV	
  increases	
   just	
  a	
  little	
  at	
  age	
  41	
  to	
  an	
  NPV	
  of	
  -­‐$2267/ha	
  (Table	
  9).	
  Maximum	
  NPV	
  is	
  again	
  attained	
  at	
  year	
  109	
  and	
   has	
  a	
  value	
  of	
  $46,298/ha.	
   	
    	
   Table	
  9	
  -­‐	
  Scenario	
  6	
  TIPSY	
  Table	
    TIPSY	
   Age	
   (yr)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   41	
   51	
   61	
   109	
    	
    Top|	
   Ht|	
   (m)|	
   -­‐-­‐-­‐-­‐-­‐-­‐	
   27.2	
   31.9	
   35.8	
   48	
    Merch	
   Vol.	
   (m3/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   382	
   512	
   641	
   1103	
    Harvest	
   Revenue	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   19687	
   34703	
   59568	
   175263	
    Tree-­‐to-­‐	
   Truck	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   15853	
   21607	
   27994	
   48983	
    Haul	
   Costs	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   2220	
   3099	
   4073	
   7277	
    Average	
   Revenue	
   ($/m3)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   51.48	
   67.76	
   92.96	
   158.85	
    	
   	
   Thinning	
   	
   	
   Commercial	
   	
   40.7	
   27	
   40.7	
   27	
   	
   378	
   	
   19302	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   Commercial	
  Thinning	
  Harvest	
   	
   40.7	
   27	
   165	
   7394	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    	
   	
   	
   15668	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    	
   	
   	
   2192	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    	
   	
   	
    Conversion	
   Cost	
   NPV	
   ($/m3)	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   57.42	
   -­‐2267	
   57.42	
   4416	
   57.9	
   16871	
   55.17	
   46298	
    	
   	
   51.07	
   	
   57.43	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    	
   	
   	
   -­‐2402	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    	
    	
   7576	
   	
   957	
   	
   44.81	
   	
   	
   	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
    Site	
   Value	
   ($/ha)	
   -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   -­‐5756	
   8971	
   30804	
   61239	
   	
   	
   	
   -­‐6122	
    	
   	
   	
   	
   	
   	
    -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   	
   	
  -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐	
   	
    	
    26	
    	
    Table	
  10	
  -­‐	
  NPV	
  and	
  volumes	
  of	
  each	
  Scenario	
  at	
  current,	
  10,	
  and	
  20	
  years	
    	
   Scenario	
   1	
   Scenario	
  2	
   Scenario	
  3	
   Scenario	
  4	
   Scenario	
  5	
   Scenario	
  6	
   	
    Merch.	
   NPV	
   Volume	
   Immediately	
   Immediately	
   After	
  CT	
  at	
   After	
  CT	
  at	
   year	
  40.7	
   Year	
  40.7	
   ($/ha)	
   (m3/ha)	
   NPV	
  Year	
  51	
   $806	
   399	
   $11848	
   $-­‐94	
   378	
   $7742	
   $-­‐925	
   378	
   $6647	
   $-­‐40	
   378	
   $7823	
   $288	
   378	
   $8235	
   $-­‐2402	
   378	
   $4416	
    Merch.	
   Volume	
   Year	
  51	
   550	
   512	
   522	
   512	
   512	
   512	
    NPV	
  Year	
  61	
   $28557	
   $21147	
   $20851	
   $21250	
   $21731	
   $16871	
    Merch.	
   Volume	
   Year	
  61	
   682	
   641	
   660	
   641	
   641	
   641	
    Table	
  10	
  above	
  compares	
  the	
  different	
  scenarios	
  based	
  on	
  NPV	
  and	
  merchantable	
  volume	
  in	
  the	
  first	
  20	
   years.	
  The	
  NPV	
  includes	
  the	
  value	
  of	
  the	
  commercial	
  thinning.	
  The	
  Merchantable	
  volume	
  does	
  not.	
   	
   Scenario	
  1b	
  –	
  100%	
  Douglas-­‐fir	
  Base	
  Case	
   	
   This	
  is	
  not	
  considered	
  a	
  scenario,	
  but	
  was	
  used	
  to	
  show	
  the	
  difference	
  between	
  100%	
  Douglas-­‐fir	
  and	
  a	
   80-­‐20	
  fir-­‐hemlock	
  mix	
  and	
  whether	
  the	
  commercial	
  thinning	
  is	
  overestimating	
  or	
  underestimating	
   volumes.	
  The	
  following	
  table	
  (11)	
  shows	
  the	
  comparison	
  between	
  Scenario	
  1	
  and	
  the	
  100%	
  Douglas-­‐fir	
   base	
  case:	
   Table	
  11	
  -­‐	
  Comparison	
  between	
  Scenario	
  1	
  and	
  100%	
  Douglas-­‐fir	
  base	
  case	
    	
   Age	
   41	
   51	
   61	
    NPV	
   80-­‐20	
  Base	
  Case	
   806	
   11848	
   28557	
    100%	
  Fd	
   501	
   11065	
   27038	
    	
   	
   As	
  seen	
  above,	
  the	
  100%	
  Douglas-­‐fir	
  run	
  has	
  lower	
  NPV	
  at	
  all	
  ages.	
  This	
  means	
  that	
  all	
  the	
  thinning	
   scenarios	
  are	
  undervalued	
  based	
  on	
  the	
  original	
  stand	
  conditions	
  of	
  80%	
  Douglas-­‐fir	
  and	
  20%	
  Western	
   Hemlock.	
   	
    GRAPHS	
   The	
  following	
  graphs	
  show	
  the	
  comparison	
  of	
  NPV	
  over	
  time	
  between	
  the	
  six	
  different	
  scenarios	
   (figures	
  3	
  and	
  4).	
  	
    	
    	
   27	
    $/ha	
    45000	
   40000	
   35000	
   30000	
   25000	
   20000	
   15000	
   10000	
   5000	
   0	
   -­‐5000	
   40	
    Base	
  Case	
   Base	
  Case	
   Thinning	
   Basecase	
   fert	
   Private	
   Thinning	
   45	
    50	
    55	
   Years	
    60	
    65	
    70	
    	
    Figure	
  3	
  -­‐	
  Net	
  Present	
  Value	
  from	
  Years	
  40-­‐70	
    $/ha	
    	
  	
    55000	
    Base	
  Case	
    50000	
    Base	
  Case	
   Thinning	
   Basecase	
  fert	
    45000	
   40000	
    Private	
   Thinning	
   T-­‐2-­‐T	
  $29.00	
    35000	
    T-­‐2-­‐T	
  $45.00	
    30000	
   70	
    80	
    90	
    100	
    110	
    120	
    Year	
    	
    Figure	
  4	
  -­‐	
  NPV	
  from	
  years	
  70	
  to	
  125	
    	
   Figure	
  5	
  shows	
  the	
  site	
  value	
  of	
  the	
  stand	
  and	
  how	
  it	
  changes	
  from	
  year	
  40	
  to	
  125.	
  What	
  is	
   interesting	
  is	
  the	
  spike	
  and	
  high	
  rate	
  of	
  increase	
  to	
  about	
  year	
  65	
  in	
  each	
  scenario,	
  then	
  the	
  rate	
   abruptly	
  begins	
  to	
  increase	
  at	
  a	
  decreasing	
  rate	
  then	
  it	
  spikes	
  again	
  at	
  around	
  year	
  70.	
  This	
   occurs	
  in	
  most	
  all	
  the	
  scenarios,	
  and	
  was	
  beyond	
  the	
  scope	
  of	
  the	
  report	
  to	
  determine	
  the	
   cause.	
  	
   	
    	
    28	
    80000	
   70000	
   60000	
    Scenario	
  1	
    $/ha	
    50000	
    Scenario	
  2	
    40000	
    Scenario	
  3	
    30000	
    Scenario	
  4	
    20000	
    Scenario	
  5	
    10000	
    Scenario	
  6	
    0	
   -­‐10000	
    40	
    60	
    80	
    100	
    120	
    140	
    Years	
    	
    Figure	
  5	
  -­‐	
  Site	
  Value	
  from	
  years	
  40-­‐125	
    	
    v.  DISCUSSION	
    COMPARING	
  SCENARIOS	
   In	
  order	
  for	
  a	
  commercial	
  thinning	
  treatment	
  to	
  be	
  a	
  viable	
  option,	
  the	
  NPV	
  needs	
  to	
  be	
  higher	
   than	
  what	
  the	
  original	
  stands	
  NPV	
  would	
  be	
  at	
  any	
  given	
  year.	
  This	
  means	
  that	
  if	
  you	
   commercially	
  thinned	
  today	
  would	
  that	
  increase	
  the	
  value	
  of	
  the	
  stand	
  into	
  the	
  future,	
   compared	
  to	
  if	
  it	
  had	
  not	
  been	
  commercially	
  thinned.	
  As	
  seen	
  in	
  Table	
  12	
  the	
  highest	
  NPV	
  in	
  20	
   years	
  is	
  from	
  Scenario	
  1,	
  which	
  is	
  to	
  clearcut	
  all	
  of	
  cutting	
  permit	
  E	
  right	
  now.	
  This	
  proves,	
  based	
   on	
  all	
  the	
  scenarios,	
  that	
  commercial	
  thinning	
  would	
  not	
  be	
  a	
  viable	
  option.	
  This	
  of	
  course	
  is	
   based	
  on	
  the	
  variables	
  that	
  were	
  used	
  to	
  enter	
  into	
  TIPSY	
  and	
  are	
  only	
  as	
  accurate	
  as	
  they	
  are	
   portrayed	
  in	
  the	
  model	
  and	
  are	
  only	
  an	
  approximation	
  of	
  what	
  actually	
  occurs.	
   	
   *Values	
  in	
  the	
  following	
  tables	
  are	
  calculated	
  based	
  on	
  the	
  per	
  ha	
  value	
  in	
  the	
  table	
  multiplied	
   by	
  the	
  area	
  of	
  cutting	
  permit	
  E	
  of	
  108.4ha.	
  This	
  gives	
  an	
  approximation	
  of	
  the	
  total	
  value	
  of	
  the	
   stand	
  at	
  a	
  given	
  time.	
  	
   	
   Table	
  12	
  -­‐	
  NPV	
  of	
  each	
  Scenario	
  at	
  current,	
  10,	
  and	
  20	
  years	
    	
  Scenario	
  1	
    	
    Immediately	
  After	
  CT	
  at	
   year	
  40.7	
   $87,370.40	
    Year	
  51	
   $1,284,323.20	
    Year	
  61	
   $3,095,578.80	
    29	
    Scenario	
  2	
   Scenario	
  3	
   Scenario	
  4	
   Scenario	
  5	
   Scenario	
  6	
   	
    -­‐$8,130.00	
   -­‐$106,882.40	
   $13,983.60	
   $49,972.40	
   -­‐$245,742.80	
    $839,232.80	
   $720,534.80	
   $848,013.20	
   $892,674.00	
   $478,694.40	
    $2,292,334.80	
   $2,260,248.40	
   $2,303,500.00	
   $2,355,640.40	
   $1,828,816.40	
    	
   Scenario	
  1	
  may	
  show	
  the	
  highest	
  NPV	
  in	
  20	
  years	
  but	
  when	
  looking	
  at	
  the	
  maximum	
  NPV	
  of	
  the	
   stand,	
  Scenarios	
  4	
  (private	
  land)	
  and	
  5	
  (low-­‐cost	
  harvesting)	
  are	
  the	
  highest	
  (Table	
  13).	
   Although,	
  these	
  scenarios	
  reach	
  maximum	
  NPV	
  at	
  year	
  109	
  rather	
  than	
  103,	
  meaning	
  a	
  wait	
  of	
   an	
  extra	
  six	
  years	
  would	
  be	
  required.	
  In	
  reality,	
  not	
  many	
  operations	
  would	
  wait	
  that	
  long	
  to	
   harvest	
  a	
  stand	
  that	
  they	
  had	
  already	
  assessed	
  for	
  harvest	
  at	
  around	
  40-­‐45	
  years	
  of	
  age.	
   	
   	
   Table	
  13	
  -­‐	
  Year	
  of	
  and	
  Value	
  of	
  Maximum	
  NPV	
    	
  Scenario	
  1	
   Scenario	
  2	
   Scenario	
  3	
   Scenario	
  4	
   Scenario	
  5	
   Scenario	
  6	
    Year	
  of	
  Max	
  NPV	
   103	
   109	
   106	
   109	
   109	
   109	
    Maximum	
  NPV	
   $5,487,533	
   $5,513,224.00	
   $5,500,974.80	
   $5,525,473	
   $5,580,757.20	
   $5,018,703.20	
    	
   	
   The	
  site	
  value	
  of	
  each	
  of	
  the	
  scenarios	
  (Table	
  14)	
  shows	
  much	
  the	
  same	
  results,	
  except	
  that	
  the	
   maximum	
  site	
  value	
  is	
  reached	
  earlier	
  for	
  most	
  scenarios	
  and	
  occurs	
  between	
  years	
  91-­‐101.	
   TIPSY	
  doesn’t	
  go	
  into	
  great	
  detail	
  about	
  what	
  site	
  value	
  means	
  other	
  than	
  its	
  definition	
  that	
  it	
  is	
   the	
  sum	
  of	
  discounted	
  revenues	
  and	
  costs	
  (including	
  silviculture	
  and	
  annual	
  costs)	
  from	
  an	
   infinite	
  series	
  of	
  rotations	
  of	
  the	
  same	
  length.	
  Also	
  known	
  as	
  soil	
  rent,	
  bare	
  land	
  value	
  and	
  soil	
   expectation	
  values.	
   	
   Table	
  14	
  -­‐	
  Maximum	
  Site	
  Values	
    Year	
  of	
  Max	
  Site	
   Value	
   	
   Scenario	
   1	
   Scenario	
  2	
   Scenario	
  3	
   Scenario	
  4	
   	
    91	
   99	
   98	
   99	
    Maximum	
  Site	
  Value	
   	
  $	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  7,660,411.20	
  	
   	
  $	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  7,447,513.60	
  	
   	
  $	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  7,477,323.60	
  	
   	
  $	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  7,465,182.80	
  	
   30	
    Scenario	
  5	
   Scenario	
  6	
    99	
   	
  $	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  7,543,881.20	
  	
   101	
   	
  $	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  6,716,464.00	
  	
   	
   	
   There	
  is	
  another	
  way	
  to	
  look	
  at	
  commercial	
  thinning	
  from	
  an	
  economic	
  stand	
  point,	
  and	
  this	
   may	
  be	
  what	
  is	
  of	
  interest	
  to	
  a	
  company	
  such	
  as	
  WFP.	
  If	
  there	
  is	
  somehow	
  a	
  way	
  to	
  attain	
  a	
   profit	
  from	
  a	
  commercial	
  thinning	
  to	
  gain	
  some	
  revenue,	
  then	
  you	
  will	
  be	
  getting	
  more	
  value	
   from	
  your	
  stand	
  later	
  on	
  in	
  the	
  future	
  as	
  well.	
  For	
  example	
  in	
  Scenario	
  1	
  (Base	
  case-­‐	
  no	
   thinning),	
  If	
  WFP	
  were	
  to	
  clearcut	
  all	
  108.4	
  ha	
  of	
  cutting	
  permit	
  E	
  they	
  would	
  attain	
  a	
  NPV	
  of	
   $87,370.40.	
  Then,	
  if	
  a	
  net	
  revenue	
  of	
  say	
  $10,000	
  were	
  to	
  be	
  obtained	
  from	
  a	
  commercial	
   thinning	
  treatment	
  instead	
  of	
  logging	
  the	
  area,	
  you	
  would	
  be	
  getting	
  $10,000	
  (This	
  is	
  a	
  random	
   value	
  used	
  for	
  demonstration	
  purposes	
  and	
  does	
  not	
  reflect	
  a	
  TIPSY	
  output)	
  plus	
  the	
  NPV	
  of	
  the	
   stand	
  when	
  its	
  final	
  clearcut	
  harvest	
  20	
  years	
  down	
  the	
  road	
  is	
  $2,303,500.00	
  (See	
  table	
  8,	
   Scenario	
  4,	
  for	
  best	
  approximation).	
  That	
  is	
  a	
  total	
  NPV	
  of	
  $2,313,500.00,	
  which	
  is	
  $2,226,129.60	
   more	
  than	
  if	
  the	
  whole	
  stand	
  had	
  been	
  clearcut	
  at	
  age	
  41.	
  Most	
  companies	
  would	
  look	
  at	
  these	
   numbers	
  and	
  downplay	
  them,	
  as	
  it	
  would	
  involve	
  waiting	
  20	
  years	
  down	
  the	
  road	
  for	
  a	
  final	
   harvest.	
  With	
  the	
  current	
  tenure	
  system	
  renewal	
  at	
  20	
  years	
  for	
  Timber	
  Supply	
  Areas	
  (TSAs)	
  and	
   25	
  years	
  for	
  Tree	
  Farm	
  Licenses,	
  (TFLs)	
  (Ministry	
  of	
  Forests,	
  lands	
  and	
  Natural	
  Resource	
   Operations,	
  2012)	
  some	
  companies	
  may	
  not	
  have	
  the	
  land	
  they	
  are	
  currently	
  operable	
  on,	
  into	
   the	
  future.	
  This	
  makes	
  investing	
  in	
  a	
  commercial	
  thinning	
  treatment	
  a	
  bit	
  of	
  a	
  risk.	
  Without	
  a	
   government	
  incentive	
  to	
  do	
  so,	
  it	
  is	
  a	
  tough	
  sell.	
   	
   Private	
  land	
  does	
  provide	
  a	
  different	
  perspective	
  when	
  looking	
  at	
  commercial	
  thinning.	
  With	
   private	
  land,	
  there	
  is	
  incentive	
  to	
  invest	
  in	
  your	
  land,	
  and	
  commercial	
  thinning	
  can	
  create	
  that	
   investment	
  if	
  proven	
  economical.	
  Commercial	
  thinning	
  also	
  allows	
  you	
  to	
  respond	
  to	
  niche	
   markets	
  or	
  changes	
  in	
  market	
  trends.	
  This	
  is	
  made	
  even	
  increasingly	
  easier	
  on	
  Private	
  land	
  as	
   permits	
  and	
  other	
  administrative	
  aspects	
  are	
  not	
  as	
  strict	
  or	
  as	
  intensive	
  as	
  on	
  public	
  lands,	
   allowing	
  land	
  owners	
  to	
  respond	
  quicker.	
  The	
  Malcolm	
  Knapp	
  Research	
  forest	
  is	
  a	
  prime	
   example	
  of	
  this	
  as	
  they	
  use	
  commercial	
  thinning	
  to	
  respond	
  to	
  market	
  conditions.	
  Many	
  forestry	
   companies	
  in	
  the	
  Pacific	
  Northwestern	
  States	
  like	
  Oregon	
  and	
  Washington	
  have	
  also	
  used	
   commercial	
  thinning	
  in	
  the	
  past	
  as	
  a	
  means	
  to	
  meet	
  such	
  economic	
  goals.	
   	
  	
    	
    31	
    These	
  scenarios	
  are	
  only	
  a	
  select	
  few,	
  and	
  there	
  are	
  many	
  other	
  scenarios	
  that	
  could	
  be	
   modeled.	
  For	
  example,	
  changes	
  in	
  variables	
  like	
  log	
  prices	
  or	
  real	
  costs	
  could	
  alter	
  results	
  either	
   favorably	
  or	
  unfavorably.	
  These	
  changes	
  would	
  only	
  be	
  assumptions	
  and	
  uncalculated	
  and	
   would	
  only	
  provide	
  a	
  scenario	
  that	
  risks	
  whether	
  or	
  not	
  that	
  change	
  will	
  actually	
  occur.	
  There	
  is	
   a	
  place	
  for	
  these	
  types	
  of	
  assumptions	
  though	
  in	
  forest	
  level	
  planning,	
  and	
  should	
  be	
  included.	
   	
  	
   It	
  should	
  be	
  noted	
  that	
  there	
  is	
  more	
  to	
  commercial	
  thinning	
  than	
  just	
  economics;	
  it	
  can	
  also	
   have	
  non-­‐timber	
  values	
  and	
  social	
  implications	
  as	
  well.	
  By	
  implementing	
  a	
  thinning,	
  a	
  stand	
  may	
   develop	
  higher	
  levels	
  of	
  biodiversity	
  leading	
  to	
  a	
  stand	
  that	
  resembles	
  the	
  preceding	
  old	
  growth.	
   This	
  creates	
  not	
  only	
  a	
  healthier	
  forest	
  but	
  can	
  also	
  provide	
  value	
  to	
  members	
  of	
  society	
  who	
   put	
  importance	
  on	
  those	
  characteristics.	
  Commercial	
  thinning	
  is	
  also	
  more	
  labor	
  intensive	
  and	
   thus	
  requires	
  more	
  jobs,	
  this	
  could	
  benefit	
  a	
  small	
  community	
  that	
  has	
  been	
  hit	
  hard	
  by	
  the	
   recent	
  downturns	
  in	
  the	
  industry.	
  It	
  can	
  help	
  in	
  terms	
  of	
  visual	
  objectives	
  or	
  even	
  recreation.	
   Commercial	
  thinning	
  is	
  similar	
  to	
  a	
  partial	
  cut	
  in	
  that	
  trees	
  still	
  remain	
  standing	
  within	
  the	
  forest,	
   rather	
  than	
  a	
  large	
  clearcut.	
  This	
  allows	
  for	
  a	
  more	
  visually	
  appealing	
  appearance	
  to	
  most	
   members	
  of	
  the	
  general	
  public,	
  and	
  makes	
  commercial	
  thinning	
  an	
  attractive	
  option	
  to	
  use	
  near	
   urban	
  areas.	
  	
    	
   KNOWLEDGE	
  GAPS	
   The	
  most	
  obvious	
  knowledge	
  gap	
  in	
  this	
  report,	
  and	
  its	
  attempt	
  to	
  determine	
  the	
  effects	
  of	
  a	
   commercial	
  thinning	
  treatment,	
  is	
  the	
  TIPSY	
  software.	
  Since	
  the	
  software	
  is	
  only	
  updated	
  every	
   few	
  years	
  it	
  can’t	
  always	
  be	
  consistently	
  accurate.	
  It	
  is	
  also	
  software,	
  meaning	
  that	
  it	
  is	
  only	
  as	
   good	
  as	
  the	
  programming	
  that	
  has	
  been	
  put	
  into	
  it	
  and	
  does	
  not	
  account	
  for	
  every	
  aspect	
  of	
  a	
   managed	
  stand.	
  Again,	
  the	
  biggest	
  shortfall	
  of	
  TIPSY	
  is	
  its	
  inability	
  to	
  perform	
  a	
  commercial	
   thinning	
  treatment	
  on	
  a	
  mixed	
  species	
  stand.	
  This	
  hindered	
  results	
  for	
  this	
  report,	
  as	
  the	
  existing	
   stands	
  are	
  not	
  100%	
  pure	
  stands.	
  By	
  being	
  able	
  to	
  input	
  commercial	
  thinning	
  treatments	
  into	
   mixed	
  species	
  stands,	
  these	
  stands	
  could	
  be	
  more	
  accurately	
  modeled.	
  TIPSY	
  is	
  also	
  using	
   default	
  values	
  from	
  2006	
  and	
  may	
  need	
  to	
  be	
  updated	
  to	
  current	
  data,	
  especially	
  on	
  costs	
  and	
   revenues	
  variables.	
  	
   	
    	
    32	
    There	
  also	
  exists	
  a	
  knowledge	
  gap	
  between	
  researchers,	
  government,	
  and	
  industry.	
  This	
  is	
   evident	
  in	
  many	
  aspects	
  of	
  forestry,	
  but	
  could	
  be	
  especially	
  true	
  in	
  regards	
  to	
  commercial	
   thinning.	
  A	
  lot	
  of	
  work	
  was	
  done	
  in	
  the	
  late	
  1990’s	
  to	
  try	
  and	
  promote	
  commercial	
  thinning	
  and	
   its	
  benefits.	
  Most	
  of	
  this	
  work	
  was	
  government	
  led,	
  but	
  yet	
  still	
  no	
  legislation	
  was	
  made,	
  nor	
  did	
   any	
  companies	
  in	
  the	
  industry	
  take	
  action.	
  By	
  narrowing	
  this	
  knowledge	
  gap,	
  once	
  again,	
   commercial	
  thinning	
  may	
  be	
  able	
  to	
  be	
  a	
  viable	
  option	
  for	
  landowners	
  or	
  licensees	
  on	
  their	
   lands.	
  	
   	
    RISKS	
  AND	
  ASSUMPTIONS	
   Due	
  to	
  the	
  nature	
  of	
  the	
  report,	
  and	
  some	
  confidentiality	
  from	
  WFP,	
  there	
  were	
  some	
   limitations,	
  risks	
  and	
  assumptions	
  that	
  were.	
  	
    RISKS	
   •  Limited	
  by	
  the	
  notion	
  that	
  not	
  all	
  costs	
  are	
  necessarily	
  accurate.	
  Some	
  are	
  an	
   approximation	
  based	
  on	
  data	
  attained	
  from	
  resources	
  from	
  WFP.	
    •  Had	
  to	
  extrapolate	
  cruise	
  data	
  from	
  cutting	
  permit	
  E	
  into	
  TIPSY,	
  which	
  may	
  not	
  have	
   created	
  the	
  exact	
  same	
  stand	
  conditions.	
  Therefore,	
  resulting	
  data	
  will	
  not	
  be	
   completely	
  accurate	
  but	
  rather	
  an	
  approximation	
  of	
  the	
  stand	
  in	
  question.	
  	
  	
    •  TIPSY	
  cannot	
  perform	
  mixed	
  species	
  commercial	
  thinnings,	
  therefore	
  a	
  100%	
  Douglas-­‐fir	
   stand	
  was	
  used	
  for	
  the	
  scenarios	
  requiring	
  a	
  thinning.	
  Since	
  the	
  original	
  stands	
  on	
   cutting	
  permit	
  E	
  are	
  an	
  Douglas-­‐fir	
  and	
  western	
  hemlock	
  mix,	
  the	
  actual	
  values	
  may	
  be	
   skewed	
  due	
  to	
  the	
  fact	
  that	
  the	
  20%	
  of	
  hemlock	
  was	
  considered	
  as	
  Douglas-­‐fir.	
  	
    •  TIPSY	
  grades	
  some	
  H	
  logs	
  as	
  I	
  logs.	
  The	
  H	
  grade	
  requires	
  a	
  minimum	
  5	
  annual	
  growth	
   rings	
  per	
  cm.	
  This	
  creates	
  problems	
  within	
  TIPSY.	
  TIPSY	
  can't	
  translate	
  this	
  information	
   across	
  the	
  range	
  of	
  site	
  indexes	
  and	
  thus	
  the	
  distribution	
  of	
  volume	
  between	
  grades	
  H	
   and	
  I	
  may	
  be	
  incorrect.	
    •  General	
  price	
  increases	
  and	
  cost	
  increases	
  were	
  very	
  general	
  due	
  to	
  lack	
  of	
  conclusive	
   numbers	
  found	
  through	
  research.	
  Therefore,	
  may	
  not	
  show	
  the	
  most	
  accurate	
  portrayal.	
   Especially	
  since	
  they	
  are	
  never	
  constant	
  numbers	
  and	
  change	
  over	
  time.	
  	
    •  Models	
  are	
  models,	
  and	
  by	
  no	
  mean	
  can	
  extrapolate	
  exactly	
  what	
  is	
  going	
  to	
  happen	
   into	
  the	
  future,	
  but	
  only	
  can	
  give	
  a	
  glimpse	
  into	
  the	
  future	
  of	
  what	
  may	
  happen	
  based	
   on	
  previous	
  findings.	
  	
    	
    33	
    ASSUMPTIONS	
   •  Kept	
  a	
  baseline	
  of	
  no	
  silviculture	
  costs	
  to	
  keep	
  costs	
  constant.	
  Since	
  this	
  wasn’t	
  a	
   changing	
  variable	
  it	
  didn’t	
  make	
  a	
  difference	
  in	
  final	
  results.	
    •  Variables	
  used	
  in	
  TIPSY	
  are	
  only	
  either	
  approximations	
  or	
  defaults	
  used	
  by	
  the	
  TIPSY	
   software.	
  	
    •  Tree-­‐to-­‐Truck	
  costs	
  are	
  based	
  on	
  a	
  rough	
  estimate	
  provided	
  by	
  Paul	
  Lawson	
  from	
  the	
   Malcolm	
  Knapp	
  Research	
  Forest	
    •  Overhead	
  costs	
  were	
  based	
  on	
  TIPSY	
  defaults	
  as	
  the	
  true	
  cost	
  was	
  not	
  available	
  from	
   WFP	
    •  It	
  was	
  assumed	
  that	
  in	
  some	
  cases,	
  because	
  commercial	
  thinning	
  would	
  be	
  on	
  a	
  small	
   scale,	
  that	
  logs	
  would	
  be	
  lumped	
  in	
  with	
  the	
  barging	
  costs	
  with	
  other	
  logs	
  from	
  across	
   the	
  operation.	
    •  Overhead	
  cable	
  yarding	
  was	
  used	
  as	
  the	
  default	
  harvesting	
  type	
  in	
  TIPSY,	
  but	
  may	
  not	
   be	
  the	
  actual	
  method	
  used.	
    	
    DECISION	
  MAKING	
  FOR	
  IMPLEMENTING	
  A	
  COMMERCIAL	
  THINNING	
  TREATMENT	
   If	
  a	
  commercial	
  thinning	
  treatment	
  is	
  calculated	
  to	
  be	
  a	
  valuable	
  asset	
  to	
  the	
  company,	
  there	
  is	
   a	
  series	
  of	
  steps	
  that	
  need	
  to	
  be	
  taken	
  in	
  order	
  to	
  implement	
  a	
  program.	
  In	
  the	
  case	
  of	
  WFP,	
   their	
  biggest	
  concern	
  is	
  to	
  determine	
  whether	
  the	
  volume	
  would	
  come	
  from	
  “bonus”	
  or	
   “normal”	
  AAC.	
  Once	
  that	
  is	
  determined,	
  is	
  the	
  return	
  on	
  capital	
  employed	
  margin	
  worth	
  it,	
  and	
   is	
  the	
  project	
  going	
  to	
  be	
  margin	
  positive?	
  Also,	
  considering	
  the	
  idea	
  that	
  the	
  thinnings	
  may	
   provide	
  access	
  to	
  otherwise	
  constrained	
  volumes	
  (example:	
  visuals	
  or	
  biodiversity	
  objectives)	
   needs	
  to	
  be	
  addressed	
  to	
  see	
  if	
  there	
  is	
  added	
  value	
  elsewhere.	
  Lastly,	
  someone	
  would	
  have	
  to	
   present	
  an	
  economic	
  and	
  financial	
  analysis	
  to	
  prove	
  to	
  upper-­‐level	
  management,	
  that	
  the	
   project	
  would	
  be	
  viable	
  (McGourlick,	
  2011).	
  A	
  good	
  example	
  of	
  a	
  project	
  that	
  was	
  brought	
   forward	
  for	
  implementation	
  was	
  a	
  poling	
  program	
  developed	
  from	
  within	
  the	
  WFP	
  Gold	
  River	
   operation.	
    vi.  CONCLUSIONS	
    Ultimately	
  the	
  goal	
  is	
  to	
  minimize	
  costs	
  and	
  maximize	
  net	
  revenue	
  when	
  looking	
  at	
   implementing	
  a	
  commercial	
  thinning	
  treatment,	
  but	
  can	
  also	
  be	
  to	
  protect	
  stand	
  value	
  and	
    	
    34	
    biodiversity.	
  This	
  presents	
  a	
  challenge	
  due	
  to	
  the	
  complexity	
  of	
  such	
  a	
  program,	
  and	
  would	
   require	
  significant	
  resources	
  in	
  research,	
  labour,	
  equipment,	
  management,	
  and	
  training.	
  There	
   just	
  has	
  not	
  been	
  enough	
  focus	
  on	
  the	
  subject	
  in	
  the	
  recent	
  past	
  to	
  really	
  be	
  able	
  to	
  draw	
  any	
   conclusions	
  on	
  whether	
  or	
  not	
  it	
  is	
  economically	
  viable	
  or	
  not.	
  Currently,	
  according	
  to	
  the	
  results	
   of	
  this	
  report,	
  it	
  is	
  not	
  viable.	
  This	
  is	
  not	
  to	
  say	
  that	
  in	
  the	
  future	
  this	
  will	
  be	
  the	
  case,	
  and	
  that	
   eventually	
  commercial	
  thinning	
  may	
  find	
  its	
  way	
  into	
  forest	
  management	
  on	
  the	
  BC	
  coast.	
    	
   RECOMMENDATIONS	
   The	
  BC	
  government	
  and	
  forest	
  service	
  should	
  look	
  into	
  how	
  commercial	
  thinning	
  could	
  fit	
  into	
   forest	
  management	
  plans.	
  This	
  would	
  most	
  likely	
  require	
  legislation	
  that	
  would	
  promote	
   commercial	
  thinning,	
  much	
  like	
  the	
  forest	
  service	
  has	
  used	
  for	
  fertilization	
  in	
  the	
  past	
  (Nielsen,	
   2011-­‐2012).	
  A	
  program	
  like	
  Forest	
  Renewal	
  BC	
  may	
  be	
  a	
  good	
  idea	
  in	
  generating	
  further	
  analysis	
   on	
  this	
  complex	
  subject.	
  There	
  is	
  a	
  knowledge	
  gap	
  on	
  the	
  subject	
  of	
  commercial	
  thinning,	
  mostly	
   spanning	
  from	
  the	
  late	
  90’s	
  to	
  the	
  present.	
  A	
  new	
  government	
  or	
  industry	
  initiative	
  should	
  be	
   made	
  to	
  re-­‐evaluate	
  commercial	
  thinning	
  as	
  a	
  viable	
  option	
  on	
  the	
  landbase.	
  	
   	
   This	
  was	
  a	
  general	
  report	
  that	
  made	
  some	
  assumptions	
  that	
  may	
  not	
  have	
  been	
  as	
  accurate	
  as	
   they	
  could	
  have	
  been.	
  Though	
  it	
  does	
  give	
  a	
  good	
  understanding	
  of	
  the	
  challenges	
  presented	
   with	
  a	
  commercial	
  thinning	
  treatment,	
  and	
  gives	
  a	
  general	
  idea	
  of	
  what	
  would	
  happen	
  given	
   rough	
  current	
  inputs	
  and	
  predicted	
  futures.	
  The	
  topic	
  of	
  commercial	
  thinning	
  hasn’t	
  really	
  been	
   addressed	
  since	
  the	
  late	
  1990’s,	
  and	
  it	
  may	
  be	
  time	
  to	
  consider	
  looking	
  into	
  re-­‐addressing	
  its	
   advantages	
  and	
  uses	
  in	
  a	
  sustainable	
  forest	
  management	
  plan.	
  	
   	
    	
   	
   	
   	
   	
   	
   	
   	
    	
    35	
    WORKS	
  CITED	
   Bank	
  of	
  Canada.	
  (2012).	
  Canadian	
  interest	
  rates	
  and	
  monetary	
  policy	
  variables:	
  10-­‐year	
  lookup.	
   Retrieved	
  January	
  27,	
  2012,	
  from	
  Bank	
  of	
  Canada:	
  http://www.bankofcanada.ca/rates/interest-­‐ rates/canadian-­‐interest-­‐rates/	
   	
   BC	
  Ministry	
  of	
  Forests.	
  (1999).	
  Guidelines	
  for	
  Commercial	
  Thinning.	
  Province	
  of	
  British	
  Columbia.	
   	
   BC	
  Ministry	
  of	
  Forests.	
  (1997,	
  October	
  15).	
  Ministry	
  Policy	
  Manual.	
  Retrieved	
  February	
  10,	
  2012,	
   from	
  Ministry	
  of	
  Forests	
  and	
  Range:	
   http://www.for.gov.bc.ca/tasb/manuals/policy/resmngmt/rm2-­‐13.htm	
   	
   BC	
  Ministry	
  of	
  Forests,	
  L.	
  a.	
  (2010).	
  State	
  of	
  the	
  Forests.	
  	
   	
   Central	
  Intelligence	
  Agency.	
  (2012).	
  The	
  World	
  Factobook.	
  Retrieved	
  February	
  2,	
  2012,	
  from	
   Central	
  Intelligence	
  Agency:	
  https://www.cia.gov/library/publications/the-­‐world-­‐ factbook/geos/ca.html	
   	
   Clark,	
  M.	
  (1998).	
  Commercial	
  Thinning	
  with	
  Cable	
  Systems	
  in	
  Coastal	
  Second-­‐Growth	
  Western	
   Hemlock	
  Stands.	
  Forest	
  Engineering	
  Research	
  Institue	
  of	
  Canada,	
  Forest	
  Renewal	
  BC.	
   	
   Collins,	
  S.	
  R.	
  (1996).	
  A	
  Review	
  of	
  the	
  Economics	
  of	
  Commercial	
  Thinning	
  in	
  British	
  Columbia.	
   Vancouver,	
  B.C.	
   	
   Di	
  Lucca,	
  M.	
  (2002,	
  October	
  25).	
  TIPSY	
  Intro.	
  Retrieved	
  December	
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    37	
    APPENDICES	
   APPENDIX	
  I:	
  CRUISE	
  REPORT	
  E500-­‐E505	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
   	
    	
    38	
    APPENDIX	
  I:	
  CRUISE	
  REPORT	
  E500-­‐E505	
   	
    	
    	
    39	
    	
    	
    40	
    	
    	
    	
    41	
    	
    	
    42	
    

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