Under California cap-and-trade program, North Coast forests turn carbon uptake into cash

They say money doesn't grow on trees, but a nearly 75,000-acre swath of redwood and fir forests blanketing the wildlands of Sonoma and Mendocino counties is generating millions of dollars as it contributes to California's ambitious campaign to curb greenhouse gas emissions.

In a reversal of forest profiteering that dates back to the mid-1800s, the trees are making landowners money by staying upright and growing fast on damp coastal hills where vegetation thrives and few humans set foot.

The Conservation Fund, a Virginia-based nonprofit, has since 2008 sold more than $36 million worth of a new forest commodity called carbon credits, also known as carbon offsets, which represent 4 million metric tons of greenhouse gases sequestered, or stored, by forests that in turn must be sustained for 100 years.

The Conservation Fund's forests are among the top two or three producers of forest-based carbon offsets in California's carbon cap-and-trade program, said Chris Kelly, California program director for the group.

More than $2 million in credits have already sold for the former Preservation Ranch, a 19,645-acre property in northwestern Sonoma County that once was the focus of an intense environmental controversy.

Purchased by the fund for $24.5 million in public and private funding in 2013 — in the largest conservation deal by acreage in county history — the ranch, renamed Buckeye Forest, is forever protected against a future that once included a proposed 1,800 acre forest-to-vineyard conversion. Those plans aroused environmentalists' anger and would have eliminated more than 300,000 trees.

Now the redwoods in the remote Buckeye tract, which lies east of Annapolis and stretches from Skaggs Springs Road to the Mendocino County line, are doing what comes naturally by absorbing carbon dioxide, the primary contributor to global warming.

'They are majestic beings,' said Kelly, standing in a redwood grove in the heart of the Buckeye Forest.

Sunlight filtered through the towering trunks on a clear winter day, the redwood duff- carpeted soil still damp and rutted nearby by the foraging marks of wild pigs, which live in these woods along with bears, deer, mountain lions and rare spotted owls.

The grove perfectly illustrated the forest's history, with a few massive, mossy redwood stumps remaining from logging over the second half of the 20th century, when lumber barons took down trees en masse then left the land behind, Kelly said. Ringing each stump were slender redwoods, the progeny of the old-growth giants, standing over 100 feet tall at 45 to 60 years old. They are pre-adolescents of a species that lives 1,000 years or more.

Like the young of most living things, the redwoods are voracious, absorbing carbon and growing at a rate expected to increase the forest's biomass by 3 to 6 percent a year, Kelly said.

According to the fund's calculations — done exactly the same way as timber operators estimating output in board feet of lumber — Buckeye and the organization's other three sprawling North Coast forest tracts will absorb an additional roughly 175,000 metric tons of sequestered carbon a year.

(For an explanation of how cap-and-trade works in California, click here.)

Under California's cap-and-trade program, that results in 175,000 fresh carbon credits, ready for sale to major polluters required by law to offset their greenhouse gas emissions, translating into money in the bank for The Conservation Fund and its partners, including the taxpayer-funded state Coastal Conservancy.

'A young redwood forest is just about the best place on Earth to sequester carbon,' Kelly said.

Carbon credits are not assigned to specific trees or portions of a forest, but rather to the forest as a whole. The protocol set by the state for establishing credits is 'fiendishly complicated,' Kelly acknowledged.

But the Natural Resources Defense Council, a tough-minded environmental group with more than 2 million members and a cadre of hundreds of scientists and lawyers, gives California's program a thumbs up. 'We feel confident it's generating offsets that represent real reductions in greenhouse gas,' said Alex Jackson, an NRDC attorney based in San Francisco.

The effort is important because 15 percent of global emissions are due to deforestation, he said. 'We have to find ways to value carbon sequestration that forests provide to counteract the economic value of cutting forests down.'

With the heyday of timber cutting well past, the Buckeye Forest still faced the latter prospect just three years ago.

CalPERS, the giant state workers pension fund that controlled the property, planned to convert up to 1,769 acres of forest and grassland to premium wine grape production and possibly subdivide the ranch in 60 estate parcels. Opponents vowed to fight the proposal, emblematic of Wine Country's encroachment into North Coast forests.

Pressure was mounting on the Sonoma County Board of Supervisors over the hot-button project, but it was suddenly relieved by The Conservation Fund, which spearheaded the high-profile purchase of Preservation Ranch, aided by $14 million in state and county open space funds and permanently barring development.

As a measure of the wine industry's economic clout, a 17-acre pinot noir vineyard planted on the property in 2005 accounted for $2 million of the ranch's price, Kelly said. The Walala Vineyard was sold to Kosta Browne and its fruit went into a three-vineyard blend for the winery's 2009 Sonoma Coast Pinot Noir, named Wine Spectator's 2011 wine of the year that now sells for an average of $218 a bottle.

The state Coastal Conservancy, a public agency, put $10 million into the ranch purchase, entitling it to a share of net revenue from future timber harvests and carbon offset sales.

Doug Bosco, the former North Coast congressman and Santa Rosa attorney who serves as chairman of the conservancy board, hailed the sale of $2.1 million in carbon offsets for Buckeye Forest completed in September as a 'great success.'

The conservancy's investment keyed a deal that turned 'a very contentious and difficult project into something that benefits the environment and the public,' Bosco said. The conservancy is now looking for other forest projects as a source of income, he said.

Bosco is an investor in Sonoma Media Investments, which owns The Press Democrat.

The Sonoma County Agricultural Preservation and Open Space District put $4 million into the ranch purchase in exchange for an easement that erased development rights and restricted use of the property to sustainable forestry, grazing and public recreation.

The district doesn't get a share of the carbon credit sales, but the prospect of that revenue stream dramatically cut the cost of the easement, said Misti Arias, acquisition program manager for the district. Under regular circumstances, the district would likely have paid $8 million to $10 million for an acquisition of that size, she said.

Carbon credits 'took pressure off our local sales tax dollars and allowed the district to protect even more land,' Arias said.

The easement carried an obligation to establish public access to Buckeye Ranch, a woodland spread of incomparable beauty with dark green trees blanketing untrammeled ridges and watersheds stretching north from the middle of the property as far as the eye can see.

To the west, beyond the ranch's border, open plots of land show the encroachment of coastal vineyards, where pinot noir grapes thrive in the cool climate. Toward the east, the forest breaks into grassy expanses, reflecting the drier climate and loss of moisture as storms rolling off the ocean drench the front line of the coastal hills. Annapolis averages 42 inches of rain a year.

Kelly said the fund considers public access important, but a major obstacle is that sole access to Buckeye Forest is over privately owned Kelly Road, which has no connection to Chris Kelly. The road is blocked by a black iron gate at the entrance to the Kosta Browne vineyard.

California's cap-and-trade program did not exist in 2004 when The Conservation Fund launched its North Coast forest acquisition effort, buying the 23,780-acre Garcia River Forest east of Point Arena in Mendocino County in 2004, followed by the 15,950-acre Big River and Salmon Creek forests east of the town of Mendocino in 2006.

The fund's aim was to prevent the forest tracts from being broken apart, and it expected to support maintenance of the forests through selective harvesting of redwood and Douglas fir trees. The U.S. Department of Agriculture, in a 2011 report on the fund's handling of the Big River and Salmon Creek forests, said that 'light-touch harvests and restoration activities provide timber revenues, improve stand conditions and generate employment for local foresters, loggers and equipment operators.'

But timber proceeds alone made the enterprise an economic struggle, Kelly said, and that situation worsened with the 2008 recession. California's establishment of a carbon credits market in 2008 was 'a game-changer,' he said.

The fund went on to buy the 13,913-acre Gualala River Forest in 2011 and the adjacent Buckeye Forest in 2013, reestablishing a contiguous 57,000-acre parcel known as the Longview Tract. The fund continues to manage a sustainable harvest that has taken about 3 million board feet of lumber a year out of all its holdings, except for Buckeye Ranch.

Logging, along with harvest planning, road maintenance and restoration work, contributes about $4.5 million a year to the forest communities, Kelly said. Every tree to be felled is marked before logging crews move in, and selective cutting is needed to thin and promote growth in the crowded forests that sprouted on clear-cut land.

The fund's goal is to triple or quadruple the volume of timber, he said.

David Katz, a veteran Sonoma County land manager and conservationist, said carbon sequestration in redwood forests is a sound investment, given the expectation of a 2 percent to 3 percent annual gain. 'That's a great yield in today's market,' he said, likening it to money in a bank.

Katz, a former director with the nonprofit Sonoma Land Trust and conservation group Trout Unlimited, is managing a smaller carbon credit project on a 1,620-acre ranch near Stewarts Point owned by Rip Goelet, a Marin County real estate investor. The ranch, which has about three miles of frontage on the Gualala River, has more than 22 million board feet of redwood and millions more of fir, Katz said.

Goelet wants to restore the forest to old-growth conditions and maintain it with limited timber harvesting and the sale of an estimated 100,000 carbon offsets over the first 10 years of the project.

Banking, so to speak, on redwoods is a pretty safe venture since the trees 'grow like crazy,' Katz said, and also are naturally resistant to insects, fungi and fire, sheathed in thick, reddish bark.

Coast redwoods, dependent on summer fog, winter rain and moderate temperatures, grow exclusively in a belt from southern Oregon to Central California, extending not more than 50 miles inland.

The Conservation Fund's project recently made news when Statkraft, a Norwegian government-run power company, purchased an undisclosed number of carbon credits from the Big River and Salmon Creek forests. It was the first investment by a foreign company, and Kelly said it was 'further evidence that California is on the right track' with the cap-and-trade program.

Kelly said he thinks Statkraft bought the credits with the intent of reselling them to California entities that have obligations to fulfill under cap-and-trade. The end result, once a credit has been certified by the state and then sold, regardless of the buyer, is that some California forestland must be preserved for a century, he said.

You can reach Staff Writer Guy Kovner at 521-5457 or guy.kovner@pressdemocrat.com. On Twitter @guykovner.