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Controlled Wood Risk Assessment

Catalyst Paper Operations Inc. (Note: Remove any confidential information prior to public availability)

Purpose and Approach

The purpose of the Controlled Wood Risk Assessment is to assess the risk of sourcing wood and

fiber from any of the “Unacceptable” and “Controversial” sources as defined by the Forest

Stewardship Council® (FSC®) Chain of Custody and Controlled Wood Standards. This

assessment also meets the PEFC™ requirements under PEFC ST 2002:2013, Section 5.3 Risk

assessment, the SFI Fiber Sourcing Standard requirements contained in Section 3 and the SFI

Chain of Custody Standard requirements in Section 4.

Much of this Risk Assessment is constructed using the FSC framework and definitions, which

also cover the PEFC and SFI legality requirements. Additional analysis linking to the PEFC

requirements is provided at the end of the assessment and prior to the appendices.

The assessment of risk considers the entire breadth of Catalyst Paper Operations Inc.’s

management systems, forestry programs, and operations when developing conclusions regarding

the risk of sourcing unacceptable/controversial wood as defined by the FSC, SFI and PEFC

certification standards.

Catalyst Paper Operations Inc.’s forestry programs include significant efforts to promote and

support logger training and the use of BMPs, regular monitoring of harvests to assess

implementation of BMPs, outreach to promote the use of sustainable forestry practices, and

policies aligned with the controlled wood requirements. These mitigation measures and

programs are organized and managed within a robust management system that includes policies,

assignment of roles and responsibilities, detailed procedures, training, monitoring, and regular

management review. The company’s management system and its ongoing independently

certified SFI Fiber Sourcing and Chain of Custody programs help ensure consistency in

operations and support the findings of “Low/Negligible Risk” in the Controlled Wood Risk

Assessment reported below.

Executive Summary

Catalyst Paper Operations Inc.’s Procurement Staff is responsible for accessing the FSC websites

contained in Annex A of FSC-STD-40-005 (V3-1) and comparing Catalyst Paper Operations

Inc.’s wood and fiber supply areas and Eco-regions against any published and known areas of

concern. All wood fiber and market pulp for the Catalyst Paper manufacturing facilities located

in Biron, Wisconsin and Rumford, Maine currently originates from the Lake States, New

England region, Ontario, Quebec and the Canadian Maritime Provinces (New Brunswick, Nova

Scotia and Prince Edward Island.

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The specific U.S. States and Canadian Provinces where wood and fiber is sourced are

documented in Appendix A. More specifically, the U.S. Eco-regions as defined by the Nature

Conservancy include: (36) Central Tall Grass Prairie, (38) Ozarks, (42) Mississippi River

Alluvial Plain, (43) Upper East Gulf Coastal Plain, (44) Interior Low Plateau, (45) North Central

Tillplain, (46) Prairie Forest Border, (47) Superior Mixed Forest, (48) Great Lakes, (49) Western

Allegheny Plateau, (50) Cumberlands and Southern Ridge and Valley, (59) Central Appalachian

Forest, (60) High Allegheny Plateau, (61) Lower New England/Northern Piedmont, (62) North

Atlantic Coast, (63) Northern Appalachian/Boreal Forest, and (64) St. Laurence/Champlain

Valley. The Nature Conservancy map of Eco-regions in the U.S. is contained in Appendix B and

is available at the following website:

(http://gis.tnc.org/data/MapbookWebsite/map_page.php?map_id=9).

This risk assessment also includes a review of information available from the World Wildlife

Fund (WWF) regarding biophysical characteristics, existing biodiversity, and threats in each

relevant WWF Ecoregion (https://www.worldwildlife.org/science/wildfinder/). This information

was considered in the context of Catalyst Paper Operations Inc.’ forestry policies, programs,

systems, and operations.

Tree species that are sourced into the Catalyst Paper Operations Inc. facilities include a sub-

scope of the common species found across the wood and fiber supply area. A list of the species

that are sourced by Catalyst Paper Operations Inc. are identified by common names is contained

in the Tree Species Master List (CPOI-COC-14). None of the sourced species are CITES listed

as “Endangered.”

The relevant sections of the FSC Controlled Wood and PEFC/SFI Due Diligence System

Standards are assessed in detail in the enclosed Controlled Wood Risk Assessment. The

Assessment is also consistent with FSC Directives on Controlled Wood (FSC-DIR-40-005). All

areas of “unspecified risk" for High Conservation Values contained in a recent Draft #1 of the

FSC US/Canada National Risk Assessments are in fact "low risk" and “negligible risk”.

Based upon the various risk assessments that have been conducted involving a review of all

relevant websites, the sub-scope of species, assessment of the Eco-regions and the wood supply

areas “Districts of Origin” of Catalyst Paper Operations Inc. manufacturing facilities in Biron,

Wisconsin and Rumford, Maine, as well as the overall supply chain, all sources of non-certified

supply are considered “Low/Negligible Risk.” Therefore, no further verification monitoring or

review is necessary. All wood and fiber material coming into Catalyst Paper Operations Inc. is

considered either “certified forest content” or “controlled material” and can be mixed with

FSC/PEFC/SFI certified and non-controversial material.

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This assessment also demonstrates that all wood and fiber inputs are “Negligible Risk” of

coming from illegal sources under the European Union Timber Regulation (EUTR). This

Executive Summary can be provided to “Operators” in the EU as objective evidence of legality.

A finding that wood from the hardwood regions of the U.S. is “low risk” of originating from

FSC “Uncontrolled” sources or SFI Controversial sources is further reinforced by the report from

the American Hardwood Export Council (AHEC) entitled: “Assessment of Lawful Harvesting &

Sustainability of US Hardwood Exports” and available at: http://www.ahec-europe.org/. The

report addresses the hardwood Eco-regions and was co-authored by Dr. Gary Dodge, who was

recently employed by FSC US and is a national authority on FSC Controlled Wood. The AHEC

report found that:

“We can conclude that hardwood procured from anywhere in the Hardwood States could

be considered Low Risk in all five risk categories of the standard. Minor and occasional

instances contrary to this finding are present in one or more of the risk categories, and

where they do occur, they should be further evaluated by companies procuring wood in

those areas. However, we determine the level to be within the threshold for being low

risk through our interpretation of the FSC standard and its requirements.

A version of this Controlled Wood Risk Assessment, excluding confidential information, can be

prepared that meets the requirements of FSC-STD-40-004, V3-1 Controlled Wood, Section 6 for

“publicly available information”.

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Controlled Wood Risk Assessment

Catalyst Paper Operations Inc.

Background

The FSC Controlled Wood Standard (FSC-STD-40-005 V. 3-1), the PEFC Due Diligence

System (PEFC ST 2002:2013), the SFI Fiber Sourcing Section 3 and SFI Chain of Custody

Section 4 are designed to allow companies to avoid trading in illegally harvested wood, wood

harvested in violation of traditional and civil rights, wood harvested in forests where high

conservation values are threatened by management activities, wood harvested in forests

undergoing significant conversion to plantations or non-forest use, and wood from forests in

which genetically modified trees are planted.

Compliance with the standard allows companies to mix Certified and non-certified wood

together and to supply FSC Controlled Wood to FSC Certified chain of custody companies for

the purpose of mixing with FSC certified material, and to supply PEFC Controlled Sources to

any companies seeking such wood. It allows companies to demonstrate that they are

implementing “best efforts” to avoid the trade in illegally harvested timber, in support of the

international Forest Law Enforcement, Governance and Trade (FLEGT) program. It also

provides objective evidence of conformance to the EU Timber Regulations addressing legality.

The term “controlled wood” was created by FSC in 2004 to define the criteria of ‘unacceptable’

wood. The latest Version 3-1 of the FSC Controlled Wood Standard has an effective date of

December 31, 2017. Catalyst Paper Operations Inc. is implementing Version 3-1 prior to the end

of the transition period, consistent with FSC requirements.

The FSC Controlled Wood Standard requires companies to take a precautionary approach. Any

area is therefore considered high risk until low or negligible risk can be determined in line with

the requirements of Section 3 “Risk Assessment” of the FSC Controlled Wood Standard through

an acceptable risk assessment. Consistent with the precautionary approach, this risk assessment

identifies the specific States, Provinces and Eco-regions from which wood and fiber is sourced.

The States, Provinces and Eco-regions are sufficient delineations of districts of origin. The

States and Provinces are then over-laid with the Nature Conservancy Eco-regions for purposes of

conducting the Risk Assessment.

This Risk Assessment also accessed the FSC US website (www.fscus.org) for additional

guidance addressing the five categories of unacceptable sources of wood and fiber. The

conclusions of the FSC US guidance are highlighted in the indented text at the conclusion of

each of the section outlined below.

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For FSC purposes, this Risk Assessment meets the requirements for a “Company risk

assessment” and is consistent with Annex A of FSC-STD-40-005 V3-1 Requirements for FSC

Sourcing Controlled Wood. It also meets PEFC GD 2001:2014 (2014-06-19), SFI Fiber

Sourcing and SFI Chain of Custody requirements.

For each FSC Controlled Wood category, as outlined in Section A “Objective” of the Controlled

Wood Standard, this risk assessment also investigates all of the websites contained in Annex A

of FSC-STD-40-005 V3-1 addressing Company risk assessments including “Risk assessment

indicators” and relevant “Examples of sources of information”. Thus, this risk assessment

addresses all of the latest available information addressing the sources of origin at the level of the

eco-region, as outlined by The Nature Conservancy and, where relevant, as defined by the WWF.

1. Illegally Harvested Wood

(Note: Decisions about the revised FSC Controlled Wood Standard by FSC’s International

Board of Directors at their July 2016 meeting include: “where a national risk assessment

process is taking place, companies will be able to use part of the assessment that was agreed

through national consensus, even when only some, but not all, categories of the national risk

assessment are nationally concluded” (Source: FSC website “Newsroom” release Monday, 14

November 2016: “Controlled Wood Standard Amendments” https://ic.fsc.org/en/news/id/1703 ).

The US has a national risk assessment process which found “low risk” for FSC Categories 1 and

5. Determinations for Categories 2, 3, and 4 are still underway (Centralized National Risk

Assessment for The United States of America FSC-CNRA-USA V1-0 EN; Global Registry:

http://www.globalforestregistry.org/NEW/map/). As such, FSC Category 1, Illegally Harvested

Wood and FSC Category 5, GMOs, are both designated “Low Risk.”

The following information can be considered supplemental for purposes of the FSC risk

assessment regarding FSC Category 1, and for addressing the PEFC and SFI Legality

requirements.

The FSC Controlled Wood Standard states that illegal harvesting is a potentially broad term that

is difficult to define. For the purposes of evaluating risk in a given district, the term needs to be

interpreted in a way that is measurable and meaningful. An area shall be considered with

unspecified risk when illegal harvesting is a threat to the forest, people and communities. Minor

infractions and issues such as minor geographical deviations from the allotted area of harvesting,

filing of paperwork late or small infractions related to transport should not assign an operation or

district with unspecified risk.

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The FSC Standard further states that illegal harvesting is unlikely to occur systematically in areas

where there is good forest related governance. Governance-related criteria are therefore used to

assess risk for illegal harvesting for a given district. These criteria will initially include:

- Perceived level of corruption related to forest activities

- Degree of transparency about information that is likely to reveal or reduce illegal

harvesting if made public

- Degree to which key data and documents relevant to illegal harvesting exist and are of

satisfactory quality

- Independent reports about illegal harvesting.

The Requirements related to illegally harvested wood include the following sections 1.1 through

1.4.

1. The district of origin may be considered low risk in relation to illegal harvesting when

the following indicators related to forest governance are present:

1.1 Evidence of enforcement of logging related laws in the district.

All wood harvested within Catalyst Paper Operations Inc.’s wood and fiber supply areas are

legally harvested and there is negligible evidence of illegally obtained wood. Law enforcement

in Catalyst Paper Operations Inc. Districts of Origin is active, aggressive and precludes

widespread illegal logging.

www.illegal-logging.org: This website addresses worldwide illegal logging activities and efforts

underway to curtail it. There is nothing on the website affecting Catalyst Paper Operations Inc.’s

wood and fiber supply area. Illegal harvesting in the tropical regions of the world is the focus of

this website.

The website identifies the U.S. as a global leader in addressing the problem of deforestation.

The State Department is working with other Federal agencies, the states, and US business,

environmental and labor interests to promote this goal through global institutions and

international negotiations, agreements and initiatives. Among these are the United Nations

Forum on Forests (UNFF), International Tropical Timber Organization, Food and Agriculture

Organization of the United Nations, Montreal Process Working Group on Criteria and Indicators

for Sustainable Forest Management, and the Convention on Biological Diversity, as well as

through bilateral agreements under the Tropical Forest Conservation Act of 1998.

www.eia-international.org: The focus of this website is on the trading of illegal wood. Because

all Catalyst Paper Operations Inc. wood originates from the Eco-regions identified above and

many of the loggers are trained under the SFI Program, there is a “low risk” of illegal logging.

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In addition, there is strong evidence of law enforcement within the districts of origin. Law

enforcement in the U.S. is the most effective in the world.

www.ec.europa.eu/environment/forests/timber_regulation.htm: This site details the European

Union’s Timber Regulation in effect March 2013.

www.dfid.gov.uk: This site addresses efforts of the British Government to fight worldwide

poverty. Their efforts do not include the U.S. Information addressing applicable Federal laws

and regulations is available through appropriate Internet websites. Some of the websites that

company personnel have access to are outlined below.

1.2 There is evidence within the district that demonstrates the legality of harvests and wood

purchases that includes robust and effective systems for granting licenses and harvest

permits.

Catalyst Paper Operations Inc. is committed to legal compliance and does not procure wood

from any suspected areas. There is clear evidence that the U.S. States, Canadian Provinces and

the Eco-regions where Catalyst Paper Operations Inc. procures wood have effective systems for

granting licenses and harvesting contracts. Government enforcement of timber security and

enforcement is robust and effective.

Catalyst Paper Operations Inc. does not import tree species that are on the CITES list or that

comes from the regions of the world identified as having problems with illegal wood harvests.

Refer the list of species that are addressed in the Convention on the International Trade in

Endangered Species: http://www.cites.org/eng/disc/species.php

www.euflegt.efi.int/home: This site details the European Union’s Action Plan for Forest Law

Enforcement, Governance and Trade (FLEGT). The EU is developing a licensing scheme for

wood coming into the EU and proposes to cooperate with the U.S. to thwart the trade in illegally

harvested timber.

The U.S. States and Canadian Provinces have extensive laws and regulations addressing the legality of

timber harvesting and compliance with environmental rules. Those laws and regulations are accessible

through the state agency websites that can be found online

Catalyst Paper Operations Inc., through its membership in trade associations, helped to enact

amendments to the Lacey Act making it illegal to trade in wood products produced in violation

of foreign laws.

1.3 There is little or no evidence or reporting of illegal harvesting in the district of origin.

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Catalyst Paper Operations Inc. is not aware of any systematic illegal harvesting resulting in a

threat to forests, people or communities within its wood supply areas. Law enforcement officials

continually monitor the potential for and reports of illegal logging. No recent illegal harvesting

has been detected and none of Catalyst Paper Operations Inc.’s suppliers have been convicted of

illegal harvesting.

Catalyst Paper Operations Inc. takes precautions to ensure that delivered wood is not from illegal

source through its PCS track and trace system at the weigh bridge and contracting language

agreed to by all suppliers contained in the Wood Purchase Agreement and Purchase Orders.

www.eldis.org: This site lists regions of the world where illegal logging is occurring and

causing problems. The wood supply areas of Catalyst Paper Operations Inc. are not included.

www.globalwitness.org: This site addresses illegal logging in the developing nations of the

Pacific Rim, Africa, and South America. No issues were identified for Catalyst Paper

Operations Inc.’s wood supply areas.

www.panda.org: The World Wildlife Fund website addresses illegal logging and how

companies can legally procure wood. A WWF publication “Responsible Purchasing of Forest

Products, 2nd Edition,” is a guide that can be downloaded. Appendix 1, “Working with

Potentially Controversial Sources-Buyer Beware,” addresses High Conservation Value Forests

(HCVF), the Convention on International Trade in Endangered Species (CITES), conflict timber,

and conversion timber.

The website cites a study conducted by Seneca Creek Associates and Wood Resources

International which examined the flow of suspicious roundwood into lumber and plywood and

found that it depresses world wood prices by 7-16 per cent on average, depending on the product.

Were there no illegally harvested wood in the global market, the study estimates the value of

U.S. wood exports could increase by over US$460 million each year. Thus, illegal logging is

hurting the U.S. forest and paper industry, and no instances of illegal logging in the U.S. were

cited. Evidence of legal compliance is demonstrated by the lack of regulatory actions taken

against the Company over the past year since the last surveillance audit.

All States and Provinces from which Catalyst Paper Operations Inc. sources wood and fiber have

extensive laws and regulations addressing legality and legal compliance. Those State laws and

regulations are accessible through the state agency websites including: Federal laws and regulations, as

well as links to other legal requirements, are referenced in Section 3 of this Risk Assessment.

Catalyst Paper Operations Inc. believes that a strong system of forest protection is in place in the

U.S. All States have Best Management Practices for the protection of water quality and

beneficial uses as well as threatened and endangered species laws and protections to ensure that

conservation values are not threatened.

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Protection and reserve areas are in place to ensure the survival of any HCVs that may be

identified in the eco-regions. Therefore, none of the forests within the wood supply areas of

Catalyst Paper Operations Inc. are considered “threatened.”

The most common Federal Laws and Regulations can be found at one or more of the following

websites and associated links:

U.S. Fish & Wildlife Service -http://www.fws.gov/

U.S. F&WS Endangered Species – http://endangered.fws.gov/

National Wetlands Inventory Center – http://wetlands.fws.gov/

U.S. Environmental Protection Agency – http://www.epa.gov/

U.S. Environmental Protection Agency Region 4 - http://www.epa.gov/region10/

U.S. EPA/Wetlands – http://www.epa.gov/OWOW/wetlands/

U.S Army Corps of Engineers – http://www.usace.army.mil/

Federal Register – http://www.access.gpo.gov/nara/cfr/cfr-table-search.html

1.4 There is a low perception of corruption related to the granting or issuing of harvesting

permits and other areas of law enforcement related to harvesting and wood trade.

Catalyst Paper Operations Inc. is not aware of any corruption in the granting or issuing of

harvesting permits in the U.S. States where the organization procures wood. Law enforcement

of trespass and timber theft precludes illegal logging within the wood supply area. The

organization requires all wood suppliers to sign agreements containing requirements that they

will not knowingly supply wood from illegally harvested sites.

The U.S. has been recognized for good governance according to the World Bank indicators of

governance including: voice and accountability, political stability and absence of violence,

government effectiveness, regulatory control, rule of law, and control of corruption. The U.S.

and Canada are considered in the 90% percentile or higher in all categories (See Section 3.2

addressing High Conservation Value Forests). The U.S. and Canada are above 50 in all

categories according to the following website:

http://info.worldbank.org/governance/wgi/index.aspx#home

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Figure 1-1. World Bank Governance Indicators for the U.S.7

The U.S. has relatively strong law enforcement and low levels of corruption.

The World Bank has developed indicators for six dimensions of governance, of which the

following relates to effective implementation and compliance with laws and regulations:

Government Effectiveness

Regulatory Quality

Rule of Law

The following tables from the World Bank show a comparison of these indicators demonstrating

that the U.S.is recognized as having good governance. Colors are assigned according to the

following criteria: Dark Red: country is in the bottom 10th percentile rank (‘governance crisis’);

Light Red: between 10th and 25th percentile rank; Orange: between 25th and 50th percentile

rank; Yellow, between 50th and 75th; Light Green between 75th and 90th percentile rank; and

Dark Green: between 90th and 100th percentile (exemplary governance).

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www.transparency.org. Transparency International addresses corruption, bribery and other

illegal activities. No issues were identified addressing forestry and wood procurement in the

U.S. States where the organization procures wood. The United States has a Transparency

International Corruptions Perception Index (CPI) below 50 (United States scored 73).

Technical Bulletin 966 (September, 2009) issued by the National Council for Air and Stream

Improvement (NCASI) has reported high levels of compliance with water quality laws and BMP

requirements across the U.S: (http://www.ncasi.org/Publications/Detail.aspx?id=3204). The

report states that forest certification programs in North America recognize water resource

protection as an important aspect of sustainable forest management. As a result, certification

programs include requirements to implement BMPs and encourage their use.

The NCASI report addresses questions about forestry BMPs that have been raised by NCASI

members and other stakeholders in forest certification programs including: how and why do

BMPs vary among jurisdictions and how do states determine whether BMPs have been

implemented? To address these questions, NCASI reviewed BMPs that are recommended or

required by 44 U.S. states. NCASI also reviewed efforts by states to monitor BMP

implementation rates.

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A key finding is that BMPs throughout North America are based on a common set of science-

based principles. Variation in BMPs among jurisdictions is attributable to efforts by states to

apply general principles to their own circumstances.

High rates of BMP implementation have been documented in jurisdictions that have made

substantial investments in BMP education and monitoring. Some jurisdictions have determined

that forestry is a minor source of water quality problems and are reluctant to allocate scarce

resources to monitoring implementation of forestry BMPs.

High rates of BMP implementation have been documented in jurisdictions that have made

substantial investments in BMP education and monitoring. Some jurisdictions have determined

that forestry is a minor source of water quality problems and are reluctant to allocate scarce

resources to monitoring implementation of forestry BMPs.

The FSC US Draft Guidance document on Controlling Wood Sources concludes that:

“There have been international assessments of illegal logging from the World Wildlife

Fund (WWF), Seneca Creek Associates, and Wood Resources International. These

organizations have identified the areas where they have evidence of systematic illegal

logging. These areas do not include the U.S. In addition, the U.S. scores high in

measures of good governance such as offered by Transparency International and the

World Bank. See www.worldbank.org/wbi/governance/data for good governance data

compiled by the World Bank and

http://www.transparency.org/policy_research/surveys_indices/cpi for Transparency

International indices.

“It is arguable that illegal logging is a problem in the United States. However, when

compared to the global situation, relatively, illegal logging in this country is of such small

magnitude or frequency that it cannot be considered to be systematic in any areas of the

U.S. In addition, any illegal logging that does occur is often prosecuted or the rightful

owner has means to remedy the situation.”

The “Assessment of Lawful Harvesting & Sustainability of US Hardwood Exports” (AHEC

Legality Study) available at: http://www.ahec-europe.org/ and written by a team of collaborators

that included the same authors who prepared the Draft Guidance on Controlled Wood Sources

for FSC US, concluded that:

“We come to the conclusion that wood procured in the study area can be considered Low

Risk to threat to legality. This conclusion is based on the determination that there is no

reported systematic illegal logging, as we interpret the term, reported in the study area

and regulatory processes in the study area have been found to be highly effective.”

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CONCLUSION: The US and Canada have national risk assessment processes in place

which have found “low risk” for FSC Category 1. This is supported by the above

supplemental information including evaluation of the FSC websites and other sources of

relevant information. Therefore it has been determined that there is a “low risk” that any

wood or fiber sourced into Catalyst Paper Operations Inc.’s facility is illegally harvested.

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2. Wood harvested in violation of traditional and civil rights.

The FSC Controlled Wood Standard states that civil rights are the rights that every person in a

society has, for example to be treated equally, to be able to vote and work. These rights are

usually outlined in the country’s constitution.

Traditional rights result from a long series of habitual or customary actions, constantly repeated,

which have, by such repetition and by uninterrupted acquiescence, acquired the force of a law

within a geographical or sociological unit. An example of a traditional right related to forests is

access by local communities to forest areas to visit sacred and ritual sites.

There are 565 federally recognized Native American tribes in the U.S. Additional First Nation’s

Tribal Areas is Canada have been designated. There is, furthermore, a process by which native

groups that are not federally recognized as distinct tribes may seek that status. Federally

recognized Native American tribes with a land base constitute sovereign nations with the

authority to manage their own land.

There are several vehicles through which conflicts involving traditional or civil rights may be

addressed in the U.S. The most prominent mechanisms are the judicial and legislative system

(i.e., lawsuits, lobbying, and legislation). In cases involving federal forests, there are also

opportunities to resolve conflicts related to management decisions through the National

Environmental Policy Act (NEPA).

Although there are certainly instances of past traditional and civil rights violations in the U.S.,

there are also myriad examples in which groups and individuals claiming infringement of their

rights have won reparations. The relative impartiality of the U.S.’ justice system is widely

acknowledged, a fact that is underscored by the World Bank good governance indicators

presented in section 1.

Requirements related to wood harvested in violation of traditional and civil rights.

2. The district of origin may be considered low risk in relation to the violation of

traditional and civil rights when the following indicators are present.

2.1 There is no UN Security Council ban on timber exports from the country concerned.

There are no bans on timber exports from Catalyst Paper Operations Inc.’s wood supply areas. A

review of the following websites was conducted: http://www.un.org/en/index.html,

http://www.un.org/News/. The FSC National Initiatives and Regional Offices were reported by

FSC supporters as not being in a position to provide detailed assistance in this area.)

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2.2 The country or district is not designated a source of conflict timber (e.g. USAID Type 1

Conflict Timber). (Also PEFC 5.1.7: Conflict timber shall not be used by the organization.)

Catalyst Paper Operations Inc.’s wood and fiber supply areas are not designated within a country

or district that is a source of conflict timber. See the US AID website report on Conflict Timber:

Dimensions of the Problem in Asia and Africa Volume I Synthesis Report (available at

www.usaid.gov.

2.3 There is no evidence of child labor or violation of ILO Fundamental Principles and

Rights at work taking place in forest areas in the district concerned.

Catalyst Paper Operations Inc.’s wood and fiber supply areas do not experience child labor or

violation of ILO Principles and Rights. The jurisdictions where Catalyst Paper Operations Inc.

procures wood material have comprehensive laws prohibiting the use of child labor or violating

citizen’s rights.

2.4 There are recognized and equitable processes in place to resolve conflicts of substantial

magnitude pertaining to traditional rights including use rights, cultural interests or

traditional cultural identity in the district concerned

There is no objective evidence of violations of traditional rights within Catalyst Paper Operations

Inc.’s wood and fiber supply areas. U.S. and Canadian laws preclude such violations and there

are recognized processes in place to resolve conflicts over traditional rights and cultural interests.

The FSC US in its Draft Guidance on Controlled Wood Sources has concluded that:

“Within the U.S. there is no UN Security Council ban on timber exports, the areas are not

designated as a source of conflict timber, child labor does not occur systematically, and

ILO Fundamental Principles and rights at work are generally respected. In addition, the

U.S. has recognized and equitable processes in place to resolve conflicts of substantial

magnitude pertaining to traditional rights including use rights, cultural interests or

traditional cultural identity.”

“In the U.S., Native Americans with a land base are recognized as Sovereign Nations and

accorded rights to manage their land and affairs. In addition, Native Americans have an

equitable process to resolve conflicts over land management. Through the U.S. court

system, many Native American tribes have challenged, won decisions, and resolved

issues concerning land management and use rights. There are many examples within the

U.S. where tribes have successfully been able to exercise treaty rights through formal and

informal conflict resolutions systems.”

Document Name:

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The AHEC Legality Study, written by the same authors that prepared the Draft Guidance on

Controlled Wood Sources for FSC US, concluded that:

“We come to the conclusion that wood procured in the study area can be considered Low

Risk of violating traditional and civil rights. This conclusion is based on the

determination that there is no UN Security Council ban, there is no evidence of prolific

child labor, there is no evidence that ILO Fundamental Principles are not respected, and

there are recognized and equitable processes in place to resolve conflicts of substantial

magnitude.”

CONCLUSION: Based upon the risk assessment and evaluation of available information,

there is a “low risk” that any wood that is sourced into Catalyst Paper Operations Inc.’s

facilities is in violation of traditional and civil rights.

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3. Wood harvested from forests in which high conservation values are

threatened by management activities.

This risk assessment first assesses if there are any high conservation values threatened at the eco-

region level. FSC notes that threat in the context of the FSC Controlled Wood standard means

having an uncertain chance of continued survival or presence of High Conservation Values

(HCVs) at eco-region level. The FSC Controlled Wood Standard (FSC-STD-40-004, V3-1)

includes, immediately below the heading for Controlled Wood Category 3 the following note:

“NOTE 1: Threat in the context of this standard means having an uncertain chance of continued survival or presence of the HCVs at the ecoregion level. This standard requires the identification of threats to HCVs caused by forest management activities.”

The risk that forest management operations will threaten High Conservation Values (HCVs) in a

forest will be higher if:

a) there is an abundance of high conservation values (such as genetic diversity, species

diversity, intactness, endemism and habitat and ecosystem diversity) in the eco-region,

and/or

b) High Conservation Values (HCVs) in the eco-region are already under threat. Many

organizations have spent considerable efforts in identifying those areas of the planet (eco-

regions or complexes of eco-regions) that are a priority for conservation due to

abundance of the above mentioned High Conservation Values (HCVs) and the threats to

them.

These factors were considered in the risk assessment and the findings are reported below

following an overview of the requirements for Controlled Wood Category 3.

General requirements and two indicators in Annex A are used to determine the risk related to

High Conservation Values (HCVs). An overview of the requirements for Controlled Wood

Category 3 is provided immediately below and then the three requirements are treated in more

detail following the overview.

General requirement 3.8a states: “High Conservation Values (HCVs) that provide basic services

of nature in critical situations and those that are fundamental to meeting basic needs of local

communities can be considered Low/Negligible risk, if indicators 3.1 and/or 3.2 are met and

indicator 2.4 are met. That is, there are recognizable and equitable processes in place to resolve

conflicts of substantial magnitude pertaining to traditional rights including use rights, cultural

interests or traditional cultural identity in the district concerned.” Catalyst Paper Operations Inc.

has low risk for this general requirement.

3.9 Risk assessment indicators: Either FSC CW Indicator 3.1 or 3.2 must be met.

Catalyst Paper Operations Inc. meets indicator 3.1:

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3.1 Forest management activities in the relevant level (eco-region, sub-eco-region,

local) do not threaten eco-regionally significant HCVs. The organization shall

first assess whether any HCVs are threatened at the ecoregional level. If there are

any HCVs are threatened at the ecoregional level, the organization shall assess

how forest management activities relate to these HCVs at the supply area level.

For the risk assessment of this category the identification of ecoregionally

significant HCVs is required, which in practical terms implies that locally relevant

values are not in the focus of this step of the risk assessment. Threatened

ecoregions can be identified through the supporting information that references,

but is not limited to e.g. Biodiversity Hotspots, Global 200 Ecoregion, Frontier

Forest, Intact forest landscapes.

A major portion of this risk assessment describes how Catalyst Paper Operations Inc.

ensures that Indicator 3.1 is met in its procurement activities.

If FSC CW Indicator 3.1 is not met, then Indicator 3.2 must be met:

3.2 A strong system of protection (effective protected areas and legislation) is in

place that ensures survival of the HCVs in the ecoregion.

In the event that some issue arises regarding threats to eco-regionally significant HCVs

Catalyst Paper Operations Inc. would, consistent with Indicator 3.2, institute a program to

ensure the presence of a strong system of protection and would seek to demonstrate

significant support by relevant national/regional stakeholders. This indicator (the

presence of a strong system of protection), although not required, is included in this

review to identify areas that can be considered Low/Negligible risk because protection

schemes, such as protected areas, legal systems and enforcement which ensure the

continued presence of High Conservation Values (HCVs) in the eco-region.

Indicator 3.8a: HCVs that provide basic services of nature in critical situations and those

that are fundamental to meeting basic needs of local communities

High Conservation Values (HCVs) that provide basic services of nature in critical situations and

those that are fundamental to meeting basic needs of local communities can be considered

Low/Negligible risk, if indicators 3.1 and/or 3.2 are met and indicator 2.4 is also met.

There are no “HCVs that provide basic services of nature in critical situations” or “those that are

fundamental to meeting basic needs of local communities” within the supply areas of Catalyst

Paper Operations Inc.. Further, indicator 2.4 (under “2. Wood harvested in violation of

traditional and civil rights”) is met as is indicator 3.1 (below). That is, there are recognizable and

equitable processes in place to resolve conflicts of substantial magnitude pertaining to traditional

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rights including use rights, cultural interests or traditional cultural identity in the district

concerned. Therefore Catalyst Paper Operations Inc. has low risk for this general requirement.

The websites for of the WWF Ecoregions were reviewed as part of the risk assessment. The

entire span of the Catalyst Paper Operations Inc.’s forestry programs was considered when

assessing this information. Catalyst Paper Operations Inc.’s management systems such as its

sourcing from certified lands, tract approval process, verifiable monitoring program and the

company’s third-party audited core forestry programs such as outreach, logger training and an

emphasis on the correct use of BMPs; all help ensure that there is a low risk of sourcing

unacceptable sources involving threats to eco-regionally significant high conservation values

throughout the supply areas of the company.

The information from WWF does not identify at risk High Conservation Value Forests. The 9

identified Remaining Blocks of Intact Habitat are the most likely places where HCVFs might

exist. The largest of these are located within U.S. National Forests. Harvests in the U.S. National

Forests are subject to intensive pre-harvest reviews (documented in Environmental Assessments)

and detailed analysis of potential impacts, alternatives, and approaches to minimize impacts

(documented in Environmental Impact Statements). In recent years there have been harvests on

a small proportion of national forests in these ecoregions, and most harvests that do occur are

designed to restore forest vegetation to structures and processes within the natural range of

variability.

The entire breadth and extent of the Catalyst Paper Operations Inc. forestry programs (mitigation

measures) was considered when assessing this information from WWF. Catalyst Paper

Operations Inc.’s management systems such as its tract approval process, verifiable monitoring

program and the company’s third-party audited core forestry programs such as outreach, logger

training and an emphasis on the correct use of BMPs all help ensure that there is a low risk of

sourcing unacceptable sources involving threats to eco-regionally significant high conservation

values.

There is no information on this ecoregion indicating forestry is a threat to eco-regionally

significant high conservation values. Considering the entire extent of the Catalyst Paper

Operations Inc.’s forestry programs (logger training, use of BMPs, landowner outreach,

monitoring, harvests from semi-natural planted forests over the past several decades or longer)

the information from WWF on this site supports a finding of low risk for the Central U.S.

Hardwood Forests Ecoregion.

The Global Forest Registry http://www.globalforestregistry.org/NEW/map/ has been updated

and provides no assessment for HCVFs. As noted in this “new” version of the registry, the only

assessed categories are Legality and GMOs, and they are considered low risk. The categories of

traditional and civil rights, high conservation values, and conversion, are all unassessed.

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In the “old” version of the registry (http://www.globalforestregistry.org/map), the categories of

legality, traditional and civil rights, and GMOs are assessed as low risk. However, the categories

of high conservation values and conversion were, in this old version, assessed as unspecified

risk. The company has concluded that in spite of a designation of "Unspecified Risk" for the

entire U.S. in terms of High Conservation Values in this older version of the Global Risk

Registry map http://www.globalforestregistry.org/map (draft prepared by NEPCon, for guidance

only), all sources of wood and fiber are considered "low risk" of significant threat to High

Conservation Values.

The Director Fiber Supply or designee also assessed the updated websites as identified by

Greenpeace (www.intactforests.org) for any evidence of Intact Forests within Catalyst Paper

Operations Inc.'s districts of origin. The Company does not source any wood raw material from

any of the “Green Shaded” areas which depict Intact Forests. (The maps do show the company’s

procurement territory as “other forest areas”.)

The Director Fiber Supply or designee also assessed the updated FSC website for other evidence

of eco-regionally significant high conservation values. The National Geographic website did not

contain information on intact forests, Biodiversity Hotspots, Frontier Forests or any other

information on forests under threat within the districts of origin.

(http://www.nationalgeographic.com).

A review was made of the World Resources Institute’s Global Forest Watch, confirming that

forest cover in Catalyst Paper Operations Inc.’ supply areas is generally stable or increasing, with

no indication of impacts on Frontier Forests in the supply areas of the company. The Director

Fiber Supply or designee also assessed the Global Forest Watch Frontier Forest website and

found no Frontier Forests to be present within the company's districts of origin.

There are no Regions identified by Conservation International as a High Biodiversity

Wilderness Areas (defined as areas that contain contiguous forest ecosystems greater than 500

km2 based on the map of such areas prepared by Conservation International (CI).

A review was made of regions identified by the World Conservation Union (IUCN) as a Centre

of Plant Diversity available on maps on the following websites:

http://www.biodiversitya-z.org/content/centres-of-plant-diversity-cpd and

http://www.arcgis.com/home/webmap/viewer.html?useExisting=1&layers=29673486d08b41a2b

ea0a3e19d5c573e . All mapped CPD within Catalyst Paper Operations Inc.’s supply areas are

found within public lands and are protected by practices stemming from federal laws (NEPA,

National Forest Management Act) and forest plans that include the protection of biodiversity.

In addition, Catalyst Paper Operations Inc. believes that a strong system of forest protection is in

place in the U.S. and Canada. All States and Provinces have Best Management Practices for the

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protection of water quality and beneficial uses, as well as threatened and endangered species

laws and protections to ensure that conservation values are not threatened.

Protection and reserve areas are in place to ensure the survival of any HCVs that may be

identified in the eco-regions. Therefore, none of the forests within the wood supply areas of

Catalyst Paper Operations Inc. are considered “threatened.”

3.2: A strong system of protection (effective protected areas and legislation) is in place that

ensures survival of the HCV’s in the eco-region.

Indicator 3.2 is included in the controlled wood standard to recognize that in many regions,

strong systems are in place to protect global environmental conservation priorities. If Criteria

3.1 cannot be met, then compliance with Indicator 3.2 can demonstrate that the district or region

may be considered Low/Negligible risk for HCVF. Catalyst Paper Operations Inc.’ program has

a finding of low risk based on indicator 3.1 above, and the following information is considered

supplemental.

The intent of Indicator 3.2 is to ensure that a comprehensive legal and regulatory system is

present to regulate the survival of the globally significant concentrations of biodiversity values,

ecosystems, and services of nature. This includes the comprehensive legislation in the U.S.

covered by the Clean Water Act, Endangered Species Act, Clean Air Act, Federal Insecticide,

Rodenticide and Fungicide Act (FIFRA), and other Canadian laws. These laws provide

sufficient protection of biodiversity values, along with national, state, provincial and local

reserves, protected areas and recreation areas.

The U.S. States and Canadian Provinces where the organization procures wood have strong

regulations and systems for protection addressing threatened and endangered species and HCVs.

The states and provinces within the wood supply areas have extensive protected areas and

conservation reserves that serve to ensure the survival of HCVs across the eco-region.

The States and Provinces also have extensive laws and regulations to protect water quality and provide

natural areas for the protection of native biodiversity. Those State laws and regulations are accessible

through the state agency websites and through the National Association of State Foresters (NASF).

The U.S. has excellent data about protected open space that is critical for conservation and land

use planning, decisions about acquiring lands or easements, access to recreation opportunities,

program evaluation and much more.

While there has been significant progress inventorying federal, state, local and non-governmental

open lands, the US still needs improvements that will capture all protected areas and key data

about them, and do so reliably, year after year - an ongoing Protected Areas Database of the

United States (PAD-US). The US Protected Area Database contains information about protected

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lands that was published in April 2009: (http://protectedlands.net/padus/).

In addition to parks and reserve areas, other public lands provide considerable conservation

values. Federal agencies in the U.S. are required by Section 7 of the Endangered Species Act to

protect and recover listed species. Habitat Conservation Plans are required for any potential

“taking” of T&E species on public and private lands.

Private conservation efforts such as easements, private reserves and protected areas by the

Nature Conservancy, the Trust for Public Lands and other land trusts are active in identifying

HCVs and taking steps to purchase and/or protect them through easements.

(http://support.nature.org/site/PageServer?pagename=preserve_map&s_src=hpmap&s_subsrc=fi

ndmap) (http://www.tpl.org/).

The U.S. and Canada have also received a Global Governance Index rating that exceeds the

minimum of 75%. The Index addressing Regulatory Quality exceeds 90%. See the Global

Governance Index for the United States and Canada:

(http://info.worldbank.org/governance/wgi/sc_chart.asp)

The Director Fiber Supply has concluded that in spite of a Global Risk Registry (Draft prepared

by NEPCon, for guidance only) designation of "Unspecified Risk" for the entire U.S. in terms of

High Conservation Values, terms of High Conservation Values, the Eco-regions from which the

Company sources its wood are considered "low risk" of significant threat to High Conservation

Values. (http://www.globalforestregistry.org/map)

The U.S. and Canada have also received a Global Governance Index rating that exceeds the

minimum of 75%. The Index addressing Regulatory Quality exceeds 90%. This is confirmed

by the Statewide Forest Resource Assessments conducted in 2010 under requirements of the U.S.

Farm Bill. The Food, Conservation, and Energy Act of 2008, often referred to as the Farm Bill,

requires each State to complete a Statewide Forest Resource Assessment and Strategy to be

eligible to receive funds under the Cooperative Forestry Assistance Act. The Strategies ensure

that U.S. Forest Service and State programs focus on shared forest resource management

priorities to achieve meaningful outcomes.

Regional summaries of State Forest Resource Assessments and Strategies highlight the most

common forest and forestry-related issues and goals:

• Keeping forests as forests

• Forest ecosystem health and productivity

• Urban and community forest health and sustainability

• Water, biodiversity, recreation, and other ecosystem services

• Forest products industry and markets

• Sustainable forest management across all ownerships

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• Climate change

• Wildfire threats to forests, public safety, and property

• State and private capacity for forestry

• Awareness of and support for forests

All State forestry agencies completed their Statewide Forest Resource Assessment and Strategy

in 2010. As part of that process, States considered the U.S. Forest Service State and Private

Forestry National Priorities: (1) conserve and manage working forest landscapes for multiple

values and uses, (2) protect forests from threats, and (3) enhance public benefits from trees and

forests. States identified forest resource conditions and trends, key forest-related issues, and

priority landscape areas, then identified strategies and the resources necessary to implement

them.

The U.S. Forest Service, State and Private Forestry provided technical support to help States

meet the Federal requirements. The USFS State and Private Forestry and the Association of

State Foresters collaborated to provide regional guidance for the State Assessments and

Strategies, and all three branches of the Forest Service provided support and assistance.

State forestry agencies consulted a wide range of stakeholders to develop their Assessments and

Strategies, including the State Forest Stewardship committee, State wildlife agency, State

Natural Resource Conservation Service technical committee, State Urban and Community

Forestry council, universities, forest industry groups, environmental non-governmental

organizations and woodland owners. The full Statewide Forest Resource Assessments are

available at the appropriate websites.

Overall, Catalyst Paper Operations Inc.’s procurement areas trend toward a sustainable

condition, but with some areas of concern. The Assessments outline strategies for achieving

long-term forest sustainability and protection of key forest resources. Implementation of the

strategies will require continued partnerships among stakeholders and prioritization of available

resources. The authors conclude that ongoing demand for forest resources will provide an

incentive for forest landowners to maintain their lands in forest cover and sustainable important

forestry related values, as well as high conservation values.

The FSC US in its Draft Guidance on Controlled Wood Sources concluded that:

“Only in cases where an area is determined to be an HCVF, and threats to the area are

high (and protection low), would an on-the-ground assessment be in order to verify the

impact of the harvesting operation on the values that make conservation of the area

important. This is likely not to be needed for the majority of forests in the U.S.”

The AHEC Legality Study, written by the same authors that prepared the Draft Guidance on

Controlled Wood Sources for FSC US, concluded that:

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“We come to the conclusion that wood procured in the study area can be considered Low

Risk to threat to HCVs. This conclusion is based on the determination that areas

determined to be of highest biodiversity value according to WWF, CI, and

Smithsonian/IUCN are all relatively well protected. Additionally, those areas that were

determined to hold large, landscape-level forests were exceptionally well-protected. The

level of legislative protection, combined with the levels of compliance with regulations

(see the sections on regulatory compliance elsewhere in this study) provide strong

evidence that logging and the associated activities with logging pose a mitigated threat to

HCVF within the study area.”

CONCLUSION: Based upon the evaluation of the Eco-regions that are within the wood

supply area of the manufacturing facility, Catalyst Paper Operations Inc. has concluded

that there is “low risk” that forest management activities associated with supplying wood

and fiber to its facility threaten eco-regionally significant high conservation values. Where

any threats may occur, there are strong regulatory and private sector systems for the

protection of such areas. While some eco-regions may contain High Conservation Values

as interpreted by some, they are unlikely to be threatened by forest management activities

and protected areas ensure their long-term survival. This finding is consistent with the

requirements for Company risk assessments in Annex A of FSC-STD-40-004, V3-1 FSC

Controlled Wood.

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4. Wood harvested from areas being converted from forests and other

wooded ecosystems to plantations or non-forest uses

Catalyst Paper Operations Inc. believes that the intent of this category is to avoid wood coming

from regions of the world where there is a significant occurrence of deforestation of “natural and

semi-natural forests.” Based on direct knowledge of the wood supply areas, there are no portions

that are experiencing significant deforestation as defined by FSC (more than ½ of one percent

per year).

Likewise, the “Natural” and “Semi-Natural” Forests where Catalyst Paper Operations Inc.

procures its wood material are not being converted to other uses or plantations on a large scale.

Land use conversion that does occur is regulated and controlled through comprehensive plans.

The FSC Regional Standards define Natural and Semi-natural forests as:

Natural forest: A forest ecosystem with most of the principal characteristics and key

elements of native ecosystems, such as complexity, structure and diversity. Natural

forests may lack the abundance of mature trees and freedom from human disturbance that

characterize primary forests.

Semi-natural forest: A forest ecosystem with many of the characteristics of native

ecosystems present. Semi-natural forests exhibit a history of human disturbance (e.g.

harvesting or other silvicultural activities), are very common in the United States, and

include a considerable amount of unmanaged and most of the managed forest land other

than plantations.

Catalyst Paper Operations Inc. has concluded that it does not source wood from forests defined

by FSC as “Natural.” Thus, the organization cannot be contributing to the conversion of these

primary forests. It has also concluded that their primary source of wood comes from Semi-

natural forests. These semi-natural forests are maintained through natural regeneration and multi-

aged management regimes.

In addition, Forest Inventory and Analysis figures for the wood supply areas as a whole indicate

that the growth of the forest generally exceeds removals. A positive growth vs. drain ratio is a

good indication that forested areas are not being converted at a significant rate. Thus, there is no

risk of significant rate of loss across Catalyst Paper Operations Inc.’s wood supply areas.

Links to state forestry assessments and statistics are available through the National Association

of State Foresters (NASF) and are accessible from the following website: (National Association

of State Foresters).

Probably the greatest threat to Natural and Semi-Natural Forests is overly aggressive fire control

over the past century. This has caused forest health problems where insects and disease have

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expanded in over-mature trees. Forest health problems have then contributed to heavy fuel

loadings where catastrophic wildfire can cause the loss of the natural forests.

4.1: There is no net loss or no significant rate of loss (> 0.5% per year) of natural forests

and other natural wooded ecosystems such as savannahs taking place in the eco-regions

within the supply area.

Based upon a review of Forest Inventory and Analysis Reports produced by the U.S. Forest

Service, the growth of the forests in the States where Catalyst Paper Operations Inc. procures

wood generally exceeds withdrawals, thus indicating that there is “no net loss” and no significant

rate of loss of forests across the organization’s fiber supply area. However, the FIA data does

not distinguish between the loss of natural and semi-natural forests and other degraded forests.

Much of the forestland in the U.S. has been managed for over two hundred years and the

degraded forests are the ones being reforested to planted forests.

Few if any of the replanted forests within the districts of origin would be considered conversions

to plantations, as defined by the FSC. Plantations are interpreted by the FSC to be devoid of in-

growth and consist of mono-cultures of planted clones of conifers. All planted forests are native

species that regenerated in even-aged stands follow disturbance, such as fire. Thus, the planted

forests contain many of the attributes of a semi-natural forest.

The United Nations Food and Agriculture Organization's (FAO) State of the World's Forests

2001 reports that North American forest (U.S. and Canada) cover expanded nearly 10 million

acres (4 million hectares) over the last decade. Thus, there is low risk that forested ecosystems

in the U.S. and Canada are experiencing loss.

FIA data also shows increases in wood volumes (standing inventory) for both hardwood and

softwood. A positive growth vs. drain ratio is a good indication that forested areas are not being

converted at a significant rate. Thus, there is no risk of significant rate of loss across Catalyst

Paper Operations Inc.'s wood supply areas.

Links to state forestry assessments and statistics are available through the National Association

of State Foresters (NASF) and are accessible from the following website: (National Association

of State Foresters)

The FSC US in its Draft Guidance on Controlled Wood Sources has concluded that:

“The intent of the criterion in the Controlled Wood standard is to avoid wood harvested

from conversion where natural forest cover is threatened at an eco-region scale. Only

when this threshold is past does one need to avoid wood from particular harvests that

might lead to conversion.”

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The AHEC Legality Study, written by the same authors that prepared the Draft Guidance on

Controlled Wood Sources for FSC US, concluded that:

“Two of the eco-regions (at the province level) in the study area have negative trends in

natural forest cover that exceed 0.5%. The Pacific Lowland Mixed Forests and the

Everglades are determined to be NOT LOW RISK for conversion. The remainder of the

study area is determined to be LOW RISK for conversion.”

CONCLUSION: Based upon the analysis of all available information and the evaluation of

the Eco-regions from which its wood originates, Catalyst Paper Operations Inc. has

determined that there is “low risk” that the organization’s wood procurement contributes

to a significant rate of loss of “natural forests and other natural wooded ecosystems.”

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5. Wood from forests in which genetically modified trees are planted.

(Note: Decisions about the revised FSC Controlled Wood Standard by FSC’s International Board

of Directors at their July 2016 meeting include “where a national risk assessment process is

taking place, companies will be able to use part of the assessment that was agreed through

national consensus, even when only some, but not all, categories of the national risk assessment

are nationally concluded” (Source: FSC website “Newsroom” release Monday, 14 November

2016: “Controlled Wood Standard Amendments” https://ic.fsc.org/en/news/id/1703 ). The US

has a national risk assessment process which found “low risk” for FSC Categories 1 and 5.

Determinations for Categories 2, 3, and 4 are still underway (Centralized National Risk

Assessment for The United States of America FSC-CNRA-USA V1-0 EN; Global Registry:

http://www.globalforestregistry.org/NEW/map/). As such Category 5 Wood from forests in

which genetically modified trees are planted is designated “Low Risk” under FSC.

The following information can be considered supplemental regarding FSC Category 5 and the

PEFC definition of Controversial Sources, including GMOs.

The district of origin may be considered “low risk” in relation to wood from genetically modified

trees when either:

There is no commercial use of genetically modified trees of the species concerned taking

place in the country or district concerned. Or

Licenses are required for commercial use of genetically modified trees and there are no

licenses for commercial use. Or

It is forbidden to use genetically modified trees commercially in the country concerned.

International groups have general consistency regarding the term GMO to ensure that it is not

confused with hybrids, cultivars, and breeds, which are derived from traditional breeding

programs. A GMO is an organism that has been transformed by the insertion of one or more

genes (called transgenes). Often the inserted genes are from a different species than the recipient

organism. Genetic modification does not include traditional breeding or natural hybridization,

i.e. GM trees cannot be obtained through conventional tree breeding methods.

There is a single synthesis document that provides an up to date (as of 2004) evaluation of forest

GMO (Genetically Modified Organisms). Currently, the only commercial user of GMO trees is

China and only a single species, Populus nigra (Black Poplar, Lombardy Poplar).

The majority of GMO tree research takes place in the U.S. As of 2004, there were field trials of

multiple genera, but no commercial plantings.

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Catalyst Paper Operations Inc. did not find its wood supply areas on any lists contained in the

FAO preliminary review of biotechnology in forestry:

http://www.fao.org/docrep/008/ae574e/AE574E00.HTM.

There are no commercial uses of genetically modified trees taking place across the wood supply

area. Catalyst Paper Operations Inc. is therefore confident that its wood supply does not source

wood from forests in which genetically modified trees are planted.

The FSC U.S. in its Draft Guidance on Controlled Wood Sources has concluded that:

“At this time all wood sourced in the U.S. can be considered to not contain wood from

GMO trees.”

CONCLUSION: Based on an analysis of available information, there are no genetically

modified trees planted in Catalyst Paper Operations Inc.’s districts of origin. Further, the

U.S. has a national risk assessment process which found “low risk” for FSC Category 5.

Therefore, Catalyst Paper Operations Inc. has concluded that there is “no risk” that the

wood sourced into Catalyst Paper Operations Inc.’s facility comes from forests where

genetically modified trees have been planted.

PEFC Considerations

The previous sections of this Controlled Wood Risk Assessment explicitly assess the risk of

sourcing wood and fiber from any of the “Uncontrolled” and “Controversial” sources as defined

by the Forest Stewardship Council (FSC) Chain of Custody and Controlled Wood Standards.

The bulk of this risk assessment (previous to this section) is organized using the FSC framework

and definitions. As the FSC and PEFC requirements are similar in most aspects, the forgoing

portions of the assessment also meet most PEFC requirements under PEFC ST 2002:2013,

Section 5.3 Risk assessment. Additional analysis linking to and covering the PEFC requirements

is provided immediately below.

PEFC Requirements and Relevant Definitions

The relevant PEFC requirements are found in PEFC ST 2002:2013, Section 5.3 “Risk

assessment” and are listed here:

5.3.1 The organization shall carry out the risk assessment of procuring raw material from

controversial sources for all input forest based material covered by the organization’s PEFC

DDS, with the exception of:

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(a) certified material/products delivered with a claim by a supplier with PEFC recognized

certificate,

(b) other material/products delivered with a claim by a supplier with PEFC recognized

chain of custody certificate.

5.3.2 The organization’s risk assessment shall result in the classification of supplies into the

“negligible” or “significant” risk category.

5.3.3 The organization’s risk assessment shall be carried out based on an evaluation of:

(a) the likelihood that activities defined under the term controversial sources occur in the

country / region of the supply or for the tree species of the supply (hereinafter referred to

as the likelihood at the origin level) and;

(b) the likelihood that the supply chain has not been able to identify a potential

controversial source of supply (hereinafter referred to as the likelihood at the supply

chain level).

5.3.4 The organization shall determine the risk, based on the likelihood at the origin level and the

likelihood at the supply chain level and their combination, in order to classify all supplies as

“significant” risk where one or both levels are assessed as having high likelihood (see Figure 1).

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5.3.5 The following tables list indicators which shall be used for the classification of the risk of

supplies.

Note: The indicators for “low likelihood” on origin as well as on supply chain level (Table 1)

describe options for a first step of risk mitigation (e.g. provision of additional information)

before starting the formal risk mitigation process described in clause 5.5. Hence, if the supplies

can be characterized by indicators indicating “low likelihood” on the supply chain level or the

origin level this always overrules a high “likelihood” indicator on the same axis.

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Table 1: List of indicators for “low” likelihood on origin and supply chain level (negligible risk)

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Note: Requirements 5.3.6 and 5.3.7 are not listed because Catalyst Paper Operations Inc. has

chosen to operate under requirement 5.3.8.

5.3.8 An organization can conduct a risk assessment and identify negligible risk for deliveries

from a specific geographical area, subsequent to the following conditions:

(a) The organization shall keep updated

i. a clear definition of the particular area.

ii. a list with tree species delivered from the area.

iii. appropriate evidence to verify that its sources of supply are limited to the

identified geographic area and tree species.

(b) No indicator listed in Table 2 and Table 3 shall be applicable.

(c) The area specific risk assessment shall be carried out before the first delivery from the

area. It shall be revised at least once a year.

(d) The area specific risk assessment shall be reviewed and if necessary revised if (a) is

changed.

Controversial sources are defined in Section 3.9 as “Forest activities which are:

(a) not complying with local, national or international legislation, applying to forest

related activities, in particular in the following areas:

- forestry operations and harvesting, including biodiversity conservation and

conversion of forest to other use

- management of areas with designated high environmental and cultural values,

- protected and endangered species, including requirements of CITES,

- health and labor issues relating to forest workers,

- indigenous peoples’ property, tenure and use rights,

- third parties’ property, tenure and use rights,

- payment of taxes and royalties,

(b) not complying with legislation of the country of harvest relating to trade and customs,

in so far as the forest sector is concerned,

(c) utilizing genetically modified forest based organisms,

(d) converting forest to other vegetation type, including conversion of primary forests to

forest plantations.

Note: The policy on the exclusion of material from genetically modified forest based

organisms remains in force until 31 December 2015.

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Crosswalk of PEFC definition 3.9 Controversial sources with FSC Requirements covered

in this Risk Assessment

PEFC Definition of

“Controversial Sources”

* FSC Risk

Assessment

Comments

3.9 (a) Legal compliance 1 Scope of FSC requirements similar

3.9 (b) Trade compliance 1 Scope of PEFC has narrower context but

covered

3.9 (c) Use of GMOs 5 Scopes are nearly identical

3.9 (d) Conversion 4 Scopes are nearly identical

* FSC Risk Assessment Categories

1. Illegally Harvested Wood

2. Wood harvested in violation of traditional and civil rights.

3. Wood harvested from forests in which high conservation values are threatened by

management activities.

4. Wood harvested from areas being converted from forests and other wooded ecosystems to

plantations or non-forest uses

5. Wood from forests in which genetically modified trees are planted.

PEFC Risk Assessment Conclusions

Catalyst Paper Operations Inc. operates a program that meets the requirements for deliveries

from a specific geographical area under 5.3.8. The list of tree species is provided in Appendix C.

The risk assessment shows that all supplies are classified in the negligible risk category.

SFI Risk Assessment Conclusions

The SFI Fiber Sourcing and Chain of Custody Standard rely on a definition of Controversial

Sources that is aligned with compliance to applicable laws and regulations. Because of the Low

Risk rating for Illegal logging and Illegal activities, the Director Fiber Supply has concluded that

the requirements in the SFI Standards have been met.

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Appendix A

States & Provinces Included in the Districts of Origin

U.S. States:

Maine

Massachusetts

Connecticut

New Hampshire

Vermont

Rhode Island

New York

Pennsylvania

Michigan

Wisconsin

Minnesota

Canadian Provinces:

Ontario

Quebec

New Brunswick

Nova Scotia

Prince Edward Island

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Appendix B

The Nature Conservancy Eco-regions of the U.S.

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Appendix C

Tree Species Sourced by Catalyst Paper Operations Inc.

(See Master Tree Species List CPOI-COC-14)

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Appendix D FSC-US – Minimum List of Applicable Laws for Use with Controlled Wood Risk Assessments This list was developed by FSC-US in coordination with other FSC stakeholders in the United States. It is a minimum list of applicable laws at the national level in the US, and is not intended to be a comprehensive list of all laws pertaining to forest management in the United States. This list may be used in order to satisfy the requirements of ADVICE-40-005-19 until a more complete list is posted on the Global Forest Registry.

1. Legal rights to harvest

1.1 Land tenure and management rights

Legislation covering land tenure rights, including customary rights as well as management rights that includes the use of legal methods to obtain tenure rights and management rights. It also covers legal business registration and tax registration, including relevant legal required licenses.

Land use laws (state & local level)

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1.2 Concession licenses

Legislation regulating procedures for the issuing of forest concession licenses, including use of legal methods to obtain concession license. Especially bribery, corruption and nepotism are well-known issues in connection with concession licenses.

State Forest Practice Acts (state level) For US Forest Service: FSH 2409.18, Ch. 50 § 53 State lands have similar regulations to the USFS law (above) based at the state level

1.3 Management and harvesting planning

Any legal requirements for management planning, including conducting forest inventories, having a forest management plan and related planning and monitoring, as well as approval of these by competent authorities.

National Forest Management Policy Act of 1976 (US Forest Service lands) Federal business practices law Business & forest practices laws (state level)

1.4 Harvesting permits

Legislation regulating the issuing of harvesting permits, licenses or other legal document required for specific harvesting operations. It includes the use of legal methods to obtain the permit. Corruption is a well-known issue in connection with the issuing of harvesting permits.

For US Forest Service: FSH 2409.18, Ch. 50 § 53 Harvest permits for private land regulated at the state level

2. Taxes and fees

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2.1 Payment of royalties and harvesting fees

Legislation covering payment of all legally required forest harvesting specific fees such as royalties, stumpage fees and other volume based fees. It also includes payments of the fees based on correct classification of quantities, qualities and species. Incorrect classification of forest products is a well-known issue often combined with bribery of officials in charge of controlling the classification.

Federal and state tax policies

2.2 Value added taxes and other sales taxes

Legislation covering different types of sales taxes which apply to the material being sold, including selling material as growing forest (standing stock sales).

Sales taxes administered at the State level. Most US states leverage sales taxes

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2.3 Income and profit taxes

Legislation covering income and profit taxes related to the profit derived from sale of forest products and harvesting activities. This category is also related to income from the sale of timber and does not include other taxes generally applicable for companies or related to salary payments.

Internal Revenue Code: federal policy on income taxes, capital gains taxes, inheritance taxes, reforestation tax credits, and other relevant taxes

3. Timber harvesting activities

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3.1 Timber harvesting regulations

Any legal requirements for harvesting techniques and technology including selective cutting, shelter wood regenerations, clear felling, transport of timber from felling site and seasonal limitations etc. Typically this includes regulations on the size of felling areas, minimum age and/or diameter for felling activities and elements that shall be preserved during felling etc. Establishment of skidding or hauling trails, road construction, drainage systems and bridges etc. shall also be considered as well as planning and monitoring of harvesting activities. Any legally binding codes for harvesting practices shall be considered.

Forest Principles (UNCED) (Rio de Janeiro, Brazil, June 1992) International Tropical Timber Agreement (Geneva, Switzerland, 1994) Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)/Federal Environmental Pesticide Control Act (FEPCA) (1947, 1972) Federal Plant Pest Act (1957) Forest practices acts (state level) based on Clean Water Act (1964) Pollution Prevention Act (1990) Federal Insecticide Act (1910) Plant Quarantine Act (1912) Clean Water Act (Section 404 wetland protection) Fire practices laws (state level)

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3.2 Protected sites and species

Covers legislation related to protected areas as well as protected, rare or endangered species, including their habitats and potential habitats.

Convention on Nature Protection and Wild Life Preservation in the Western Hemisphere (Washington, DC, 1940) Convention on Wetlands of International Importance Especially as Waterfowl Habitat (Ramsar, Iran, 2 Feb 1971) Convention Concerning the Protection of the World Cultural and Natural Heritage; (Paris, France, 16 Nov 1972) International Plant Protection Convention (IPPC) (1979 Revised Text) (Rome, Italy, 1979) Endangered Species Act (1973, 1978, 1979, 1982) Clean Water Act (CWA) of 1972 Clean Air Act (CAA) of 1963 Resource Conservation & Recovery Act (RCRA) (1976, 1984). Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, commonly known as "Superfund") (1980, 1986) Convention on Biological Diversity (UNCED) (Rio de Janeiro, Brazil, 5 Jun 1992) Framework Convention on Climate Change, (UNCED) (Rio de Janeiro, Brazil, 1992)

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Rio Declaration on Environment and Development (UNCED) (Rio de Janeiro, Brazil, 1992) Convention on the Conservation of Migratory Species of Wild Animals (Bonn, Germany, 23 Jun 1979) Migratory Bird Treaty Act (1918, 2006) Endangered species acts (state level) Wildlife laws (state level)

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3.3 Environmental requirements

Covers legislation related to environmental impact assessment in connection with harvesting, acceptable level for soil damage, establishment of buffer zones (e.g. along water courses, open areas, breeding sites), maintenance of retention trees on felling site, sessional limitation of harvesting time, and environmental requirements for forest machineries.

Convention on Environmental Impact Assessment in a Transboundary Context (Espoo, Finland, 1991) National Environmental Policy Act (1969, 1975, 1982) Environmental quality acts (for all states) Water quality protection laws (for all states) Water resources laws (for all states)

3.4 Health and safety

Legally required personal protection equipment for persons involved in harvesting activities, use of safe felling and transport practice, establishment of protection zones around harvesting sites, and safety requirements to machinery used. Legally required safety requirements in relation to chemical usage. The health and safety requirements that shall be considered relate to operations in the forest (not office work, or other activities less related to actual forest operations).

National Environmental Policy Act (1969, 1975, 1982) Occupational Safety & Health Act (OSHA) (1970) OSHA 1910.266: Logging-specific regulations Federal Water Pollution Control Act/Clean Water Act (1972, 1977)

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3.5 Legal employment

Legal requirements for employment of personnel involved in harvesting activities including requirement for contracts and working permits, requirements for obligatory insurances, requirements for competence certificates and other training requirements, and payment of social and income taxes withhold by employer. Furthermore, the points cover observance of minimum working age and minimum age for personal involved in hazardous work, legislation against forced and compulsory labour, and discrimination and freedom of association.

Fair Labor Standards Act (1938, 1946, 1961) Equal Pay Act of 1963 (amended the Fair Labor Standards Act) Civil Rights Act of 1964 Occupational Safety & Health Act (OSHA) (1970) Americans with Disabilities Act (ADA)

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3.6 Conversion Legislation related to permission to convert natural forest to other land used. This may include identification of the laws regulating conversion in different land classification types and/or different permit types. This analysis will identify under which land types and permit types conversion can be legally carried out and the scale of any illegal conversion.

Where regulated, regulated at the state level

4. Third parties’ rights

4.1 Customary rights

Legislation covering customary rights relevant to forest harvesting activities including requirements covering sharing of benefits and indigenous rights.

Various treaties with American Indian Nations, Tribes, and Bands in the United States

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4.2 Free prior and informed consent

Legislation covering “free prior and informed consent” in connection with transfer of forest management rights and customary rights to the organization in charge of the harvesting operation.

Executive Order (EO) 12898 - Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations (1994)

National Indian Forest Resources Management Act

American Indian Religious Freedom Act

Indian Self Determination and Education Assistance Act of 1975

Indian Civil Rights Act of 1968

4.3 Indigenous peoples rights

Legislation that regulates the rights of indigenous people as far as it’s related to forestry activities. Possible aspects to consider are land tenure, right to use certain forest related resources or practice traditional activities, which may involve forest lands.

Indian Self Determination and Education Assistance Act of 1975 Native American Grave Protection and Repatriation Act Varied treaties with American Indian Nations, Tribes, and Bands in the United States. National Historic Preservation Act, including in relation to American Indian sites (1966) Tribes are considered Sovereign Nations (a rough legal equivalent to a US State) and have their own judicial systems

5. Trade and transport

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5.1 Classification of species, quantities, qualities

Legislation regulating how harvested material is classified in terms of species, volumes and qualities in connection with trade and transport. Incorrect classification of harvested material is a well-known method to reduce/avoid payment of legality prescribed taxes and fees.

Where regulated, regulated at the state and local level

5.2 Trade and transport

All required trading permits shall exist as well as legally required transport document which accompany transport of wood from forest operation.

The Lacey Act of 1900

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5.3 Offshore trading and transfer pricing

Legislation regulating offshore trading. Offshore trading with related companies placed in tax havens combined with artificial transfer prices is a well-known way to avoid payment of legally prescribed taxes and fees to the country of harvest and considered as an important generator of funds that can be used for payment of bribery and black money to the forest operation and personal involved in the harvesting operation. Many countries have established legislation covering transfer pricing and offshore trading. It should be noted that only transfer pricing and offshore trading as far as it is legally prohibited in the country, can be included here.

Transfer pricing regulated by the Internal Revenue Code

5.4 Custom regulations

Custom legislation covering areas such as export/import licenses, product classification (codes, quantities, qualities and species).

Lacey Act of 1900

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5.5 CITES CITES permits (the Convention on International Trade in Endangered Species of Wild Fauna and Flora, also known as the Washington Convention).

Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) (Washington DC, 1973) Amendment to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (Art.XI) (Bonn, Germany, 23 Jun 1979)

6. Diligence/due care procedures

6.1 Legislation requiring due diligence/due care procedures.

Legislation covering due diligence/due care procedures, including e.g. due diligence/due care systems, declaration obligations, and /or the keeping of trade related documents, legislation establishing procedures to prevent trade in illegally harvested timber and products derived from such timber, etc.

The Lacey Act amendment 2008, (the Food, Conservation, and Energy Act of 2008 expanded its protection to a broader range of plants and plant products (Section 8204. Prevention of Illegal Logging Practices)