Carbon Conundrum

A Native Alaskan company’s promise to save its forests benefits local ecosystems, but given the zero-sum game that’s carbon offsets, it delays meaningful action on climate change.

AS THE SKY CLEARED over rain-swept Southeast Alaska one August afternoon in 2019, we flew over Prince of Wales Island to take in its lush forests. Numerous fresh clearcuts interrupted the deep green cover on the United States’ fourth largest island located at the southern end of Alaska’s massive Tongass National Forest. In some spots, stands of younger trees stretched their canopies across older, logged areas. On the whole, though, the forest here looked rich and vast.

But looks can be deceiving. During the twentieth century, loggers cut down a hefty slice of old-growth forest blanketing this island. Old-growth forests throughout Tongass — the nation’s largest national forest that covers most of the southeastern panhandle of Alaska — have been battered over the years by clearcutting. And, no place in Tongass has been hit as hard as Prince of Wales Island, most of which lies within the national forest. The northern half of the island has had the highest rate of logging anywhere in Southeast Alaska, according to a 2016 state report.

Logging slowed down dramatically in the 1990s due to market fluctuations, litigation, and other factors. Still, by 2013, researchers estimated that 94 percent of Prince of Wales Islands’ contiguous high-volume old-growth forests had been logged, coinciding with a 75 percent decline in the island’s wolf population. The forests got a reprieve in 2001, when President Clinton approved a “roadless rule” banning the Forest Service from building new roads into undeveloped forests. The rule essentially placed 9 million of the 16.7-million-acre Tongass off limits to logging. But this past October, President Donald Trump made good on his 2019 promise to the timber industry and rescinded the roadless rule, reopening its 9 million protected acres, including 225,000 acres of old-growth on Prince of Wales Island, to logging yet again.

Our investigation revealed the ease with which players in California’s carbon offset program can game its accounting system.

Amid this backdrop, Sealaska Corporation, a Native Alaskan-owned company that happens to be a major player in the global log trade, is promising to preserve 165,000 acres of forestland it owns in the Alaska panhandle, mostly on this island, as a carbon sequestration bank. This seems like welcome news on all fronts — until you start digging, as we did, into the broader, global climate implications of the move.

Our investigation found that, while preserving this land provides clear benefits for the island’s wide diversity of flora and fauna, it is doubtful the climate will actually benefit. Moreover, it revealed the ease with which players in California’s carbon offset program can game its accounting system to make it seem like they are easing the climate crisis when they actually are not.

SEALASKA — WHICH IS COLLECTIVELY owned by more than 23,000 Native Alaskans from the Haida, Tlingit, and Tsimshian tribes — was one of 13 for-profit corporations formed in 1971 under the Alaska Native Claims Act that sought to resolve century-old land-claims disputes between Alaska Natives and the state and federal governments. (Native leaders say the act helped them “retain” only a portion of their ancestral lands that were stolen by European settlers.)

Today, the company has a $700 million business portfolio that includes seafood processing, natural resources and land management, and logging. The corporation’s subsidiary, Sealaska Timber Company (STC), manages around 360,000 acres in Southeast Alaska, and primarily sells western hemlock, Sitka spruce, western red cedar, and Alaska yellow cedar logs. Over the last four decades STC has accounted for a sizeable portion of the company’s revenue, almost exclusively from the sale of raw logs to China, Canada, and elsewhere. Its log exports are expected to continue unaffected by the carbon-offset program.

In January 2018, BP Alaska, an American subsidiary of the London-based oil company formerly known as British Petroleum, announced that it had agreed to pay Sealaska $100 million to keep nearly half of this forestland — 165,000 acres — standing and thus storing the carbon trees absorb from the air in their living tissue. The deal, verified through California’s cap-and-trade program, was one of two carbon offsets projects with Native Alaskan corporations that the oil giant invested in. It means the company will not commercially log these acres for the next 100 years. There are, however, exceptions allowing for trees to be cut for customary tribal activities such as making totems and canoes. Some amount of logging might also be possible, provided it does not reduce the total carbon sequestered on the project below the initial baseline level. The baseline level is an estimate for how much of the forest would have been cut down in the absence of the carbon credit certification. Sealaska received the last payment installment from BP this past March.

​Sealaska manages around 360,000 acres in Southeast Alaska, and primarily sells western hemlock, Sitka spruce, western red cedar, and Alaska yellow cedar logs. Photos by Jessica Applegate

In January 2018, BP Alaska, an American subsidiary of the London-based oil company formerly known as British Petroleum, announced that it had agreed to pay Sealaska $100 million to keep nearly half of this forestland — 165,000 acres — standing.

In exchange for the money, BP will receive carbon offset credits allowing it to emit CO2 pollution in California, one of two carbon markets in North America along with the province of Quebec. BP is no longer involved in the oil refining business in California, but the company is a major transportation fuel importer to the state and has to account for the emissions produced by the fuel it sells there.

“We will use offsets as one of the tools to underpin our low-carbon ambitions,” BP Alaska president Janet Weiss said, while making the announcement at an industry conference in Anchorage in December 2018.

The Golden State’s cap-and-trade program, which kicked off in 2013, is part of California’s efforts to cut greenhouse gas emissions by 40 percent by 2030, a legal requirement set by the state’s Global Warming Solutions Act of 2006. This market-based mechanism is aimed at giving companies a financial incentive to reduce their emissions by setting a carbon emissions limit, or a “cap,” for the biggest polluting industries in the state. The cap, which is set to reduce over time, comes in the form of a certain number of state-issued “free” emissions “allowances” for each company. Each allowance represents one metric ton of carbon dioxide equivalent.

On the “trade” end, companies that exceed that cap, i.e., use up their allowances, can buy allowances from other companies that might have reduced emissions below their required cap and therefore have extra allowances in hand. Currently, the allowances are priced at $17. Alternatively, they can also cover up to 8 percent of their total emissions by purchasing carbon offsets — basically by paying a project, either in California or elsewhere — that removes carbon from the air. Like allowances, each offset too represents one metric ton of carbon dioxide equivalent, but costs less, usually around $10-$12 per credit. (BP paid Sealaska $10 per carbon credit.)

The idea behind including offsets in the cap-and-trade program is that it helps ease the financial burden on industries that need to reduce their emissions. At the same time, they help industries not regulated under the program to reduce their carbon output. For fuel importers like BP, the burden can be steep, since they don’t get any free allowances.

Carbon offsets are beset with myriad uncertainties over measurement and verification of emissions reductions and have been subject of environmental justice concerns.

The Sealaska forest carbon project was calculated to add up to 11.4 million offsets credits, which means BP can offset nearly 11.4 million metric tons of its carbon emissions — the amount that 2.36 million cars emit in a year — through the project. The offsets are sold through third-party markets but have to be certified by the California Air Resources Board (CARB), which manages the cap-and-trade program. Offsets pre-approved for the program are so far restricted to US-based carbon sequestration projects in six sectors — US forests, urban forestry, livestock, mine methane capture, rice cultivation, and destruction of ozone-depleting substances. Of these, US forestry projects are by far the largest sector: To date, forestry projects — which so far have been restricted to privately-owned forest lands — have received more than 167.77 million credits, worth more than $2 billion.

That’s the market Sealaska has tapped into, joining several other tribes (and Native-owned companies) in Alaska and across the country, including the Yurok in California, the Nez Perce in Idaho, and the White Mountain Apache in Arizona.

But here’s the rub. Carbon offsets, in general, are beset with myriad uncertainties over measurement and verification of emissions reductions. They have also been the subject of environmental justice concerns, since they do not mitigate the toxic burden faced by communities living near polluting industries or freeways, communities that often tend to be low-income and non-White. And forest offsets in particular have been fraught with problems when it comes to quantifying the carbon sequestration.

A 2019 study by Barbara Haya, a research fellow at the University of California, Berkeley found that 82 percent of all California forest offset deals failed to deliver promised benefits to the climate. Many offset projects reduce logging at one location, only to see harvest increases elsewhere to meet timber demand — a phenomenon known as “leakage.”

“This over-crediting allows emitters in California to emit more than the state’s emissions cap today,” Haya wrote. “Emissions today are not equivalent to reductions decades from now given the urgency of climate mitigation to avoid tipping points.”

GIVEN THESE UNCERTAINTIES and given that the Sealaska Native Alaskan Forestry Project is one of the largest carbon offset transactions ever completed for a single company in North America, we decided to take a closer look at it. We sifted through 2,001 project-related documents obtained from CARB via the state’s Public Records Act, and conducted dozens of telephone, Zoom, and in-person interviews in California, Oregon, Alaska, and Massachusetts. The documents gave us some insight into how the transaction came about.

Sealaska had been mulling joining the offsets market since around 2010, but things actually got rolling on June 6, 2016, when the company filed its application to participate in California’s forest offset program.

“The Project Area is comprised of several large blocks of contiguous old-growth in Alaska providing critical habitat for native flora and fauna,” the application says. Interestingly, it also says: “Currently, there are no management activities scheduled within the Project Area [emphasis added],” and adds that “this will result in greater retention and will gradually increase forest-wide stocking relative to a common practice baseline.” (See page 5 of pdf.)

The term “management activities” is code for logging in timber industry vernacular, explains Dominick DellaSala, a forest ecologist with the Geos Institute, an Oregon-based climate think tank. In other words, at the time of filing its initial application, it appears that Sealaska had no ready logging plans in the area under consideration for the offset program.

A supplemental “Baseline and Project Harvest Volumes” document the company sent CARB in 2018 provides a different scenario. That document (see pdf) lays out a counterfactual (i.e., alternative) timeline for logging activities within the project area that Sealaska would undertake if its offsets project didn’t get approval. It states that Sealaska logged 63 million board feet in 2016, even though the 2016 application said no management activities were planned for that year. It also projects that the company planned to do heavy logging within the project area for the first 30 years of the project period, followed by a long period of light harvests and regrowth through the remaining 70. It projects that over these 100 years (2016 to 2115), the company would have cut more than 4.2 billion board feet of timber from the project area.

Something about the counterfactual harvest timeline looks off to Danny Cullenward, a lecturer at Stanford Law School and a member of CARB’s Independent Emissions Market Advisory Committee, which monitors California’s cap-and-trade program. (In interviews with us, Cullenward said he was expressing his personal views and was not speaking for the committee.)

‘You might step back and call this the most sophisticated system for managing forest carbon offsets in the world. You might also call it an invitation for fraud.’

“There’s something strange about a project that says it has no land management plans, but in the course of applying for offset credits develops a management plan for the counterfactual scenario that involves harvesting,” Cullenward says. “You could imagine a situation in which a landowner decides to explore harvesting and says, Well, before we act let’s see if we can get a better deal from keeping the forest intact instead. You can also imagine a situation in which someone with no plans to actively manage asks if there’s a way to earn money for doing nothing. Which is it here?”

What Cullenward is alluding to here has to do with a concept in the offsets world called “additionality”: whether emissions reductions in the project area would have been made anyway, i.e., even in the absence of the offsets project. In this case, if Sealaska wasn’t planning to cut down trees in this area, then BP’s carbon emissions would not actually be offset. However, it is difficult to ascertain a company’s intentions beyond doubt, and that’s what makes accurate carbon offsets accounting so difficult.

“If CARB determines that an offset was not real or otherwise doesn’t meet its legal standards, they can invalidate the credit,” Cullenward says. But, he adds, “so long as CARB says that all is well, whoever is holding these offset credits — whether or not they are real — can rest easy.”

Cullenward also points out that the 4.2 billion board feet figure equals almost exactly the maximum amount of timber Sealaska could get paid for under the offset program, which seems a bit too much of a coincidence.

Sealaska’s offset project will protect local ecosystems of high importance to Native Alaskans, including salmon spawning streams like this on Prince of Wales Island. But it is likely that the company wouldn’t have logged in some of these areas anyway. Photos by Erika Nortemann/TNC.

Under California’s cap-and-trade law, there is a lid on the number of offsets a given forest project can qualify for. A landowner can’t get credit for all the carbon stored in trees on their property. The credit can only be equal to what’s called “Common Practice/Minimum Baseline Level,” which is an estimate for how much of the forest within the project area might be cut down in the absence of the carbon credit certification. That estimate is based on a measurement of the size and number of trees in a project area as well as land use history on forest land adjacent to the project area. The baseline calculation is another controversial aspect of forestry offset programs, since it is hard to measure reliably and can be gamed to bring in maximum revenue. Sealaska’s projected 100-year harvest level aligns almost exactly with the region’s estimated baseline level.

“You might step back and call this the most sophisticated system for managing forest carbon offsets in the world. You might also call it an invitation for fraud. It could easily be both,” Cullenward says. “We’ll never be able to monitor program outcomes to determine the objective truth of the matter and can only argue about what seems most likely given the context. That’s what’s so frustrating about carbon offsets.”

We asked Catherine Mater, a former Sealaska forest consultant and an expert in forest carbon offsets, what she thought. (Mater was the chair of an Oregon state forest carbon policy group in 2018.)

“Technically,” Mater told us, the trees “could have been harvested by Sealaska, but that would likely not have happened due to historic native cultural aspects of the acres. I know this because I was under contract with Sealaska at the time and worked directly with their then-tribal forester.”

Mater says she was surprised CARB approved the deal. “The acres in all likelihood were protected from harvest anyway,” she says. “If those lands got accepted for offsets by California that’s a problem.”

When we asked CARB if it had any reservations about the Sealaska offsets, the agency’s Public Information Officer Dave Clegern emailed us this statement: “Compliance offset credits are issued to projects that meet the stringent requirements of the applicable Compliance Offset Protocol adopted by CARB…. Offset credits issued to the Sealaska project meet these requirements.”

Sealaska did not respond to requests for comment.

THE 165,000-ACRE SEALASKA offset project will protect local ecosystems of high importance to Native Alaskans, including Nutkwa Inlet on Prince of Wales Island and Sea Otter Harbor, Devil Cove, Welcome Cove, and Waterfall Bay on nearby Dall Island. Nutkwa Inlet, near Hydaburg on the south side of Prince of Wales Island, is of special interest to the four tribes on the island. The 13 streams entering the inlet support subsistence harvests of salmon, bottom fish, shrimp, abalone, and crab, according to the Alaska Department of Fish and Game. More than 350,000 pink salmon spawn annually in one of those streams, Nutkwa Creek, one of the most important salmon streams in the state. Alaska Audubon and other conservation groups have listed Nutkwa Inlet as one of 77 salmon-bearing watersheds in Southeast Alaska needing permanent protection.

Native Alaskan tribes not formally affiliated with Sealaska support the company’s plan to protect these ecosystems, though they do not necessarily support the increase in pollution elsewhere created by the carbon offset project.

As a Native-owned and run company, Sealaska says it is mindful of the importance of preserving habitats. The company website notes that it “takes great pride in responsible forest management” and is “committed to finding the best methods to responsibly manage our forest, fish, and wildlife habitats to ensure future generations the benefit of a productive timber environment.”

‘They can log all of their land, and have pretty much done that, except where it was too expensive to build roads into.’

But Clinton Cook Sr., president of the Craig Tribal Association, a Tlingit village on the west side of Prince of Wales Island and a Sealaska shareholder, is not so sanguine about the condition of the company’s cut-over land. “It looks like a moonscape. Nothing left,” he told us. “They don’t leave any wildlife corridors. Most of their shareholders actually reside out of the state of Alaska. I don’t think they are aware of what is happening here. I doubt if even all the board members have looked at the land that they have logged.”

Cook thinks Sealaska decided to protect the carbon offset lands because of the high cost of logging them. “They can log all of their land, and have pretty much done that, except where it was too expensive to build roads into,” he said.

Sealaska’s President and CEO Anthony Mallott admitted as much in a 2018 interview with KTOO Public Media where he said the company had already cut close to a third of the trees on its 360,000 forest acres, and not all of the sites left were ideal for logging, including old-growth stands next to salmon streams. He indicated that the offsets program offered the company a way forward to protect those sensitive areas and still make money for its Alaskan Native shareholders.

Carbon credits from the Sealaska project are supposed to offset BP’s emissions from its drilling in Alaska’s Purdhoe Bay oilfields (pictured). Photo Peter Mather/Alamy.

BOTH SIDES OF THE DEAL

In Sealaska’s case, the carbon credits from its project could be used to offset pollution from drilling in the ecologically fragile Arctic National Wildlife Refuge (ANWR), should oil and gas leases go on sale there in 2021, as required by a 2017 Trump administration legislation. Though if the refuge is indeed opened up for exploration, BP most likely won’t be among the companies drilling there.

After 60 years of operating in the state, in 2019, BP announced it was selling all the oil assets it owns in the Alaska Arctic. Pending approval by state and federal regulators, the new owner will be Hilcorp, a Houston-based conglomerate which paid $5.6 billion for BP’s assets in Alaska, including a 26 percent interest in the Prudhoe Bay complex, an interest in the Trans-Alaska Pipeline, the right to drill in ANWR, and the forest carbon offset credits BP has purchased from Sealaska and other Native Alaskan companies.

Hilcorp, which has been operating in Alaska since 2012, has one of the worst safety and environmental records of any oil company working in the state. So much so that after it was cited for 25 violations between 2012 and 2015, the chair of Alaska Oil and Gas Commission noted in a severe reprimand to the company that “the disregard for regulatory compliance is endemic to Hilcorp’s approach to its Alaska operations.” Hilcorp will most certainly want to sell its gasoline in California, much like BP, since the state is the region’s most lucrative market.

Meanwhile, even more money will flow Sealaska’s way once oil is extracted from ANWR. Since the 1980s, Sealaska has been demanding a portion of revenue should drilling occur there. In 2018, Congress passed a law granting the company, and other Alaskan Native corporations, a small cut. This arrangement puts Sealaska on both sides of the carbon offset deal.

Sealaska seems to have an added financial incentive to protect these habitats given its business interest in seafood. It owns several food companies, including Seattle-based Orca Bay Foods, and New England Seafood International Limited, a London-based supplier of fresh and frozen seafood. It’s logging, seafood, and other businesses generated $77.8 million in net income and $700 million in total revenues in 2019, the largest in Sealaska history, according to its annual financial statement.

Marina Anderson, administrator of Kasaan tribal village on the eastern shore of the island, declined to discuss the Sealaska offsets project but said clear-cut logging harmed old-growth forests and created a “boom or bust” economy that tribes in the area were looking for ways to steer away from. Anderson, who is also a Sealaska shareholder, said local tribes want to embrace an alternative economy based on protecting the environment and emphasizing cultural, traditional, and subsistence uses of the forest. To that effect, the Central Council of the Tlingit and Haida Indian Tribes of Alaska has petitioned the federal government for a greater degree of control over local forests. They have not brought the petition to Sealaska “because those lands are already under Indigenous stewardship.”

DEMAND FOR OFFSETS from California is expected to drop steeply in 2021, when the state’s cap-and-trade program goes into its second phase. Next year on, California will allow only 4 percent of a company’s total emissions to be covered by carbon credits and only 2 percent by out-of-state offsets. Despite the expected drop in demand from California, carbon markets are likely to be around for a while, especially as other states in the US begin implementing similar cap -and-trade initiatives.

But as climate scientists point out, offsets, at best, are what can be described as “carbon neutral” — when they work, they cancel out emissions in one place by drawing down emissions in another. If we hope to solve the climate crisis, carbon neutral won’t be good enough. To avoid runaway climate chaos we need to keep global warming below 1.5 °C, and in order to do that we have to both drastically cut back our emissions and suck out some 730 billion tons of CO2 from the air by the end of this century, according to the Intergovernmental Panel on Climate Change.

“That is equivalent to all the CO2 emitted by the United States, the United Kingdom, Germany, and China since the Industrial Revolution,” UK climate scientist Simon Lewis writes in a 2019 Nature article. “No one knows how to capture so much CO2.”

Other than oceans, trees are the only known mechanism capable of drawing down excess carbon from the air on that kind of a scale and storing it for centuries. But trees assigned the task of offsetting an industry’s carbon emissions cannot also take part in the great atmospheric carbon drawdown. They can only maintain the status quo. Simply put, the use of forest carbon offsets paralyzes the far more vital task of stabilizing the climate. They give polluting industries a loophole to continue with business as usual.

For Sealaska, the offsets program is a clear financial win. One could argue it’s a win for local biodiversity and Native communities in the region as well. But ultimately, this program, as well as other offset programs like it, will be judged by whether it is actually helping roll back climate change, which as we know, is affecting every part of the planet, Southeastern Alaska included.

This article was supported by a grant from the Society of Environmental Journalists.

An earlier version of this article incorrectly said California’s cap and trade program allows companies to cover 8 precent of their “excess” emissions (instead of “total” emissions) by purchasing carbon offsets and that figure would go down by 4 percent in 2021.

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