WSR 26-03-095

PROPOSED RULES

DEPARTMENT OF ECOLOGY

[Order 25-01—Filed January 21, 2026, 8:16 a.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 23-19-027.

Title of Rule and Other Identifying Information: Chapter 173-446 WAC, cap and invest offsets rule making, United States (US) forest protocol.

For additional information on this rule making, visit https://ecology.wa.gov/regulations-permits/laws-rules-rulemaking/rulemaking/wac-173-446-offsets-us-forest-protocol.

Hearing Location(s): On February 26, 2026, at 9:00 a.m., via webinar. Join and see instructions at https://waecy-wa-gov.zoom.us/meeting/register/SwztXUmZQ0OlEZOcsjdrQw; and on March 3, 2026, at 5:00 p.m., via webinar. Join and see instructions at https://waecy-wa-gov.zoom.us/meeting/register/SIzlpLUGTry6Gv3l-xq_mw. Presentation and question and answer sessions, followed by the hearings. These are online meetings that you can attend from any computer with internet access.

Date of Intended Adoption: June 10, 2026.

Submit Written Comments to: Kayla Stevenson, Department of Ecology (Ecology), Climate Pollution Reduction Program, P.O. Box 47600, Olympia, WA 98504-760[0], email kayla.stevenson@ecy.wa.gov, website https://ecology.commentinput.com?id=Bb78d4UCx2, beginning January 21, 2026, at 12:00 a.m., by March 13, 2026, at 11:59 p.m.

Assistance for Persons with Disabilities: Contact Kayla Stevenson, phone 360-972-0313, email kayla.stevenson@ecy.wa.gov, Accessibility & ADA - Washington State Department of Ecology [contact agency for link], by February 5, 2026.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: These amendments will increase the potential variety of forestry offset projects that can be developed within the cap and invest program, as directed by RCW 70A.65.170 (4)(b). This statute directs ecology to conduct rule making that ensures that any updates or additions to the offset program are both based in the best available science and support the needs of landowners and communities in Washington. The proposed rule-making amendments adopt a new US forest protocol. The proposed new protocol is a revision to the protocol that ecology previously adopted from the California air resources board (CARB) (Compliance Offsets Protocol US Forest Projects (June 25, 2015)). The proposed protocol utilizes a combination of approaches from more recent protocols, such as the Climate Action Reserve Forest Protocol (Version 5.1), alongside research and analysis done by ecology. The proposed protocol revises offset project baselines to increase environmental benefits, provide new ways for tribal nations and small landowners to participate by removing barriers that existed in the previous protocol, and updates fire and disease risk estimates to better reflect actual conditions. The proposed amendments will also improve the clarity and readability of the offset program rules and correct errors identified during the rule-making process.

Anticipated effects include improved technical standards and decreased obstacles to project development, and greater flexibility around allowable forest management practices. These rule changes work in tandem with additional rules under the Climate Commitment Act to achieve the state's mandate of net-zero greenhouse gas emissions by 2050.

Reasons Supporting Proposal: The Climate Commitment Act states that ecology shall consider adopting offset protocols that make use of aggregation (the grouping of multiple small projects into a single, larger offset project) and cost-effective provisions for monitoring, reporting, and verification (RCW 70A.65.170). During the public comment period on our initial adoption of chapter 173-446 WAC, ecology received 28 comments from organizations, tribal governments, and individuals recommending offset protocol revisions and additions. Ecology's response to those comments stated its intent to consider new and revised offset protocols in a subsequent rule making. The purpose of this rule making is to broaden the scope of offset protocols available in the cap and invest program. This rule making will increase the diversity of offset projects available to cap and invest program participants, broadening the scope of potential greenhouse gas reductions in our state.

Statutory Authority for Adoption: Chapter 70A.65 RCW, Greenhouse gas emissions—Cap and invest program.

Statute Being Implemented: Chapter 70A.65 RCW, Greenhouse gas emissions—Cap and invest program.

Rule is not necessitated by federal law, federal or state court decision.

Name of Proponent: Department of ecology, governmental.

Name of Agency Personnel Responsible for Drafting, Implementation, and Enforcement: Jordan Wildish, ecology headquarters, 360-280-6488.

A school district fiscal impact statement is not required under RCW 28A.305.135.

A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Kayla Stevenson, Department of Ecology, Climate Pollution Reduction Program, P.O. Box 47600, Olympia, WA 98504-760[0], phone 360-972-0313, speech disability TTY at 877-833-6341, impaired hearing Washington relay service at 711, email kayla.stevenson@ecy.wa.gov.

This rule proposal, or portions of the proposal, is exempt from requirements of the Regulatory Fairness Act because the proposal:

Is exempt under RCW 19.85.025(3) as the rule content is explicitly and specifically dictated by statute.

Scope of exemption for rule proposal:

Is partially exempt:

Explanation of partial exemptions: Ecology baselines are typically complex, consisting of multiple requirements fully or partially specified by existing rules, statutes, or federal laws. Where the proposed rule differs from this baseline of existing requirements, it is typically subject to (i.e., not exempt from) analysis required under the Regulatory Fairness Act (RFA; chapter 19.85 RCW) based on meeting criteria referenced in RCW 19.85.025(3), as defined by the Administrative Procedure Act in RCW 34.05.310. The small business economic impact statement (SBEIS) below includes a summary of the baseline for this rule making, and whether or how the proposed rule differs from the baseline.

The proposed rule does impose more-than-minor costs on businesses.

This SBEIS presents the:

A small business is defined by RFA as having 50 or fewer employees. Estimated costs are determined as compared to the existing regulatory environment, the regulations in the absence of the rule. The SBEIS only considers costs to "businesses in an industry" in Washington state. This means that impacts, for this document, are not evaluated for government agencies.

The existing regulatory environment is called the "baseline" in this document. It includes only existing laws and rules at federal and state levels.

This information is excerpted from ecology's complete set of regulatory analyses for this rule making. For complete discussion of the likely costs, benefits, minimum compliance burden, and relative burden on small businesses, see the associated regulatory analyses document (ecology publication no. 26-14-002, January 2026).

COMPLIANCE REQUIREMENTS OF THE PROPOSED RULE, INCLUDING PROFESSIONAL SERVICES: The baseline for our analyses generally consists of existing laws and rules. This is what allows us to make a consistent comparison between the state of the world with and without the proposed rule amendments.

For this rule making, the baseline includes: The currently adopted forestry protocol, California's "Compliance Offset Protocol U.S. Forest Projects Adopted: June 25, 2015" and WAC 173-446-500 through 173-446-595.

The proposed rule amendments and protocol changes fall into two broad categories:

The first would ensure consistency of ecology issued offset credits with the legislature's mandate that they be: "Real, permanent, quantifiable, verifiable, and enforceable; and … are in addition to greenhouse gas emission reductions … that would otherwise occur";

Within this first category, we propose the following changes:

For improved forest management (IFM) projects on private land, limiting the project's baseline carbon stock for the relevant forest type to 20 percent below that of the project's carbon stock.

Changing the crediting period, the timespan over which the project is first evaluated, from 25 years to 10 years.

Issuing credits for avoided harvest in IFM projects on private lands over the course of 10 years.

Establishing buffer pool contribution amounts based on fire and disease risk metrics at a localized scale, and increasing buffer pool contribution amounts in the highest risk areas.

Increasing the credit deduction for carbon emissions assumed to be induced (leaked) outside the project area from 20 percent to 40 percent, of the carbon sequestered within the project area due to reduced timber harvest. This applies to IFM projects, compared with the project's baseline harvest scenario.

Updating the standardized method, including a new spreadsheet template, for calculating project carbon stored in wood products and landfills relative to common practice (project baseline).

Requiring a second independent appraisal of best alternative use value for avoided conversion forestry projects.

Changes aimed at making it easier and less costly to develop and maintain forestry offset projects, particularly for smaller landowners.

The proposed changes in this second category include:

Allowing for easier project aggregation by specifying sampling requirements for the project in aggregate rather than at the plot or parcel level.

Reducing third-party verification frequency required for smaller projects from six years to 12 years and allowing "desk" verifications for long-term project monitoring when credits are not being sought.

Allowing for minor boundary and credit adjustments without invalidating the entire project and also allowing for previously "listed," but not "registered," projects to participate.

Allowing larger clearcut sizes, with restrictions, and loosening species requirements to better align with northwest (NW) forests.

Creating a "computational reversal" provision to address revised project data indicating lesser carbon sequestration than initially estimated.

Baseline: Under the current protocol there are no restrictions regarding how far an IFM offset project's carbon stocks can be above the carbon stocks of "common practice" for a particular forest type.

The common practice assessment area dataset currently provided by CARB indicates the live standing carbon for the relevant forest type. This data provides the initial step in calculating the total carbon stock.

Proposed: If an IFM project's initial carbon stock is estimated at more than 20 percent above common practice, its baseline carbon stock is set at 20 percent below its estimated initial carbon stock. Plus or minus 20 percent coincides with the 90 percent confidence interval for carbon stocks of forest types in ecology's proposed common practice dataset, which the proposed protocol utilizes.

The assessment of "common practice" would be revised as well. In the revised approach, common practice values would be published by ecology utilizing the US Forest Service EVALIDator Tool. New tables would be provided to more accurately and precisely establish baseline carbon stocks (common practice) for a given forest type.

Expected impact: We use the credits awarded by California to IFM projects in Washington, Oregon, and Montana as a proxy for what issuance of offset credits might look like for Washington's forests. By this estimated rule baseline, it appears this change would, on average, markedly reduce the number of credits issued in the first annual reporting period. Nine of the 12 projects currently in these states listed an initial carbon stock 20 percent or more above common practice for their local relevant forest type. The overall average was 69 percent higher.

The new method for determining common practice carbon stocks is expected to raise that value in many cases, making the gap between it and a project's carbon stocks narrower in many instances.

These combined changes address critiques regarding whether issued credits under California's protocols meet the criteria mandated by the legislature. Specifically, this addresses the peer reviewed studies questioning how credible some currently issued forestry offset credits might be. It is argued in one study, for example, that the current averages for certain forest types allow for projects to select particularly carbon dense stands of timber, which are not of the average type for the reference area. This adverse selection makes some of the claimed carbon offsets of questionable credibility. We discuss this further in Chapter 4, Benefits.

Baseline: An IFM project is currently credited for 25 years. The crediting process entails assessing other legal harvest constraints on the property, determining carbon inventories relative to common practice, as well as the amount of carbon in wood products relative to common practice.

Proposed: Under the proposed rule the crediting period for an IFM project would be reduced to 10 years.

Expected impact: A reassessment of common practice carbon stocks, legal restrictions, regional market demand and capacity for the project would be required every 10 years instead of every 25 years. This would result in renewed occurrences of some of the initial costs in developing a project.

The benefit would be a more frequently updated and more accurate assessment of the carbon sequestered by the project, relative to its baseline.

Baseline: Currently, credits for an IFM project's estimated carbon stock above common practice for an IFM project, after deductions and buffer pool contribution, are awarded after its first annual reporting period.

Proposed: Under the proposed protocol, these credits are distributed evenly across the 10-year crediting period, with some exceptions. This is intended to reflect a baseline scenario of incremental harvest of a project area down to the level of common practice over a 10-year period, rather than immediate harvest in the first year. We borrow this approach from the protocol for avoided conversion forestry projects.

Ecology may issue credits on an accelerated schedule if the project is less than 1,000 acres in size or if it's demonstrated that a legal and plausible plan to harvest at a faster rate was in place at the time of the project's initiation. See Section 6.2.1.2 of US Forest Protocol Version 1.0 for the specific requirements.

Expected impact: Project developers would receive credits more slowly over time, reducing the present value of the project at its initiation.

Given the expected time involved in the carbon stock reaching common practice in a project's absence, we expect the credit issuance to more closely reflect the actual additional carbon sequestered over time.

Baseline: The current protocol assesses the risk of reversal of the carbon sequestration an IFM project is credited for. The sources of that reversal are assigned a percentage of likelihood over the project's 100-year lifespan. The considered risk categories, and their maximum values in the current protocol, follow:

Financial: Five percent

Management: Four percent

Social: Zero percent

Natural Disturbance (fire, disease, other): Default values of four percent, three percent, three percent, respectively.

Currently, the maximum risk of reversal from these factors, which combine multiplicatively (see below for fire and disease risk), is 17.6 percent. Wildfire risk for project areas where no fire risk reduction work has been done are assigned a four percent risk value. Disease or insect outbreak risk is assigned at three percent, and "other" risks, also three percent. Financial risk on private lands is five percent and management risk four percent. Financial risk can be brought down to one percent if the forest project is covered by qualified conservation easement, or is on public or tribal lands. Social risk, currently at zero percent in the 2015 protocol, was two percent in the two earlier California protocols, and is at two percent in climate action reserve's most recent protocol, 5.1.

The baseline combined risk for fire and disease is: (1-0.04) × (1-0.03) = 0.931. (1-0.931) × 100 = 6.9 percent, which we compare to the new ecology tabulated values described below.

Proposed: Under the proposed rule amendments, upper risk limits would increase to 12 percent for fire, and to eight percent for biotic risk. The assessed risk for fire could be reduced by as much as half by applying approved vegetation treatments to the project area. For each IFM forestry project, new data lookups are proposed specific to the project's area, rating the likelihood of a fire, its probable severity, and the likely carbon released from such an event. Specifically, the data sets proposed are TreeMap 2022 and US Forest Service Annual Burn Probability.

Also proposed is use of a dataset for evaluation of disease risk (National Insect and Disease Risk Map).

Ecology has published an assessment area data file where fire and disease risk, drawn from the datasets described just above, are combined at the watershed scale within a particular ecoregion.

Areas are identified by "hydrological unit codes" (HUC), which are cataloged at various scales. The HUC-10 scale, which ecology presents in the data file, typically ranges from 62 to 390 square miles.

The values listed in the data file indicate a range of six percent to 14 percent for the ecoregions in Washington state. The average combined fire and biotic risk is presented in Table 1 below.

Table 1 average combined fire and disease risk for ecoregions in Washington:

Average 8.2 percent.

Standard Deviation 1.6 percent.

"Other" catastrophic events risk would remain at three percent and the social risk factor would increase to the two percent value of previous California protocols and the climate action reserves current forestry protocol.

Expected impact: The theoretical maximum required buffer pool contributions would rise from 17.6 percent to nearly 30 percent.

However, using the average risk for fire and disease estimated above and incorporating the social risk value of two percent and retaining the other unchanged risk factors near their upper thresholds we obtain a reversal risk of:

(1-0.04) × (1-0.04) × (1-0.03) × (1-0.02) × (1-0.082) = 0.804, or 19.6 percent.

Averaging of buffer pool data from 50 projects issued credits by CARB, most of those using the 2015 protocol were at or near the upper limit of the buffer pool contribution.

We estimate these protocol changes will move the average buffer pool contribution from 15.4 percent under the current protocol, to 19.6 percent. This change would apply to every reporting period for which credits are sought.

This represents five percent fewer "tradeable credits" for landowners and/or project operators:

(1-0.196) - (1-0.154) / (1-0.154) × 100 percent = 5.0 percent.

This proposed change addresses criticisms that under the current protocol, buffer pools have insufficient credits to compensate for likely reversals. By increasing the buffer pool contribution we increase the likelihood that the issued credits will be real and permanent, consistent with the legislature's directive.

Baseline: Under the current protocol, carbon sequestered by reducing harvest in a forestry management project is assumed to induce additional timber harvest elsewhere, either nearby or in the broader marketplace. Currently, the number representing this "leaked" amount is assumed to be 20 percent.

Proposed: Under the proposed rule and new protocol, the assumed leakage rate would increase to 40 percent.

Expected impact: The baseline for this aspect of the proposed rule is that 0.8 times the estimated sequestered carbon due to reduced harvest relative to the project's baseline is retained for crediting. Changing that to retaining 0.6 times the estimated sequestered carbon difference from harvest reduces the number of credits retained at this step [of] the calculation by 25 percent, 0.6/0.8 = 0.75 (75 percent) of the rule's baseline. This change applies to every reporting period for which credits are sought.

The expected benefit is to more closely align credits issued with the legislative mandate that they be "real, permanent, quantifiable, verifiable, and enforceable; and … [a]re in addition to greenhouse gas emission reductions or removals otherwise required by law or that would otherwise have occurred."

Baseline: The existing protocol requires that IFM and avoided conversion projects determine the total estimated amount of carbon stored in harvested wood products as part of baseline calculations. These estimates intend to average the harvested wood products as carbon storage potential of products in both in-use and landfill-based wood products as part of the project over a period of 100 years.

Proposed: Rather than requiring that proponents model baseline harvests, the proposed protocol provides the option of a conservative estimate for the volume of harvested wood in the baseline scenario.

The proposed protocol also allows the use of a harvested wood products calculator (developed by the climate action reserve for use in the CAR[B] US Forest Protocol 5.1 and adapted by ecology with minor alterations) to standardize quantification methods. This tool has been adapted by ecology from a tool developed by the climate action reserve.

Expected impact: The proposed changes are expected to make calculation of carbon in wood products both in the baseline (common practice) scenario and in the project's case, easier and more consistent, due to the allowed use of a provided common tool and/or dataset. This would make project baseline harvest modeling unnecessary for the project operator, while also providing project specific data for calculating carbon in wood products.

The changes are not expected to consistently shift estimates in one direction or the other. They primarily provide clearer calculation guidance and easier access to data which hasn't changed.

Baseline: Under the current rule, avoided conversion projects must have a third-party appraisal as to the most profitable use of the existing forest land, should it be converted to another use. This could be agriculture, or real estate development, for example.

Proposed: Under the proposed protocol, a second independent appraisal, from a different firm would also be required.

Expected impact: Avoided conversion project developers would bear the added costs of a second appraisal.

The second appraisal would provide assurance that the credits issued by ecology would meet the legislature's requirements as to their being "real, permanent, … verifiable," etc.

Baseline: The current protocol makes no distinction as to the size (acreage) of the forestry offset project.

Enrolling separate parcels into the market as a single project may not generate much cost savings compared with enrolling each tract individually due to inventory, sampling, and verification requirements in the protocol which would typically require that each individual tract be treated as a standalone project for the purposes of inventory sampling.

Proposed: Under the proposed protocol, by enrolling in an aggregate, a project would:

Require fewer sample plots to generate a forest carbon inventory of sufficient statistical certainty to avoid a confidence deduction. Greater statistical uncertainty associated with individual project areas would be compensated through aggregation with other project areas/parcels. Allowable standard errors for individual areas/parcels are established based on the total number of participating areas/parcels in the aggregate.

Have a less frequent verification schedule than is required for standalone projects generating more than 10,000 credits per year.

These features are taken from the climate action reserve's guidelines for aggregating forest projects as an appendix to the US Forest Protocol and adopting the relevant sections from the reserve's US Forest Protocol 5.1.

The proposed protocol requires that no single forest owner in the aggregate enroll more than 5,000 acres (for private lands) or 10,000 (for tribal or public lands, or private lands with a qualified conservation easement). It also limits the project-level target sampling error for plots/parcels within the aggregate to no more than 10 percent.

Expected impact: The increased flexibility in aggregation requirements would make enrollment into aggregate projects easier for smaller landowners. This is consistent with the legislature's instructions regarding forestry offsets rule making, which include "… to increase the development of offset and carbon removal projects by landowners across the broadest possible variety of types and sizes of lands, including lands owned by small forestland owners."

Baseline: Under the current rule and protocol, third-party verifications are required at least every six years.

Proposed: For projects generating less than 10,000 credits per year, or until 120,000 credits have been issued, we propose reducing the on-site verification frequency to every 12 years.

Additionally, projects undergoing long-term maintenance and not seeking credits would be able to undergo a desk verification instead of an on-site verification.

Expected impact: These changes are expected to reduce costs for smaller projects and those no longer seeking credits, which should make participation easier.

This is consistent with the legislature's mandate to encourage offset projects among the "broadest possible variety of types and sizes of lands, including lands owned by small forestland owners."

Baseline: The existing protocol requires that IFM and avoided conversion projects finalize their project area by the conclusion of the initial verification; reforestation projects may finalize their project area by conclusion of the second verification period. Project boundary reductions (termination of a portion of the project) are not explicitly permitted in the protocol. Project boundary expansions are not permitted after the project area has been finalized.

"Listed" refers to the filing of an initial listing form for the project. "Registered" means an entity has been through a reporting period, been verified, and received credits.

Proposed: In alignment with the climate action reserve's most current protocol, boundary reductions for a forest project would be allowed. They are treated as intentional reversals, to be compensated for with compliance instruments from the owner/operator. Intentional reversals are losses of sequestered carbon due to actions by the owner/operator of the project.

Expected impact: Providing greater flexibility for project boundary changes would reduce the likelihood that changes in project ownership or other circumstances would result in a full project termination. Avoiding full project termination would result in benefits of the project owner/operator not having to compensate for previously issued credits. This would be costly.

Baseline: Ecology's existing US Forest Protocol has a 40-acre even-aged (clearcut) harvest limit. Tribes and other prospective project developers have indicated that the 40-acre maximum is not aligned with typical practices for Washington's Douglas fir forests, which are usually harvested in larger even-age blocks.

Proposed: In the US Forest Protocol revision, ecology is proposing an adjustment to the even-aged harvest maximum size. These are presented in Table 2 below. Basal area is the cross-sectional area of a tree at breast height.

Table 2 Basal area retention requirements in proposed protocol

Harvest Retention (Square Foot Basal Area/Acre of All Species) Maximum Size of Even-aged Harvest Block (Acres):

0 60

≥15 < 20 80

≥20 < 25 120

≥25 < 30 400

≥30 < 40 600

≥40 Unlimited

Expected impact: Forest landowners have submitted public comments citing inefficiencies involved in the 40 acre block size restriction. It was expressed that this size of clearcut was uneconomical and alignment with the 120 acre clearcut size limit in Washington's forest practices rules would be preferred.

By allowing larger harvest area boundaries providing some trees are left, we expect participation in an offset project would be more economical. Communication with one forestry company suggested that though these changes make enrolling forest lands under the protocol more appealing than the rule baseline, the degree of additional incentive wasn't large enough to likely compel them to participate in the offset program.

Baseline: Under the current rule and protocol, only two types of carbon sequestration reversal are recognized: Intentional and unintentional. Intentional reversals trigger a verification requirement and are compensated for out of credits issued to the owner/operator of the project. For unintentional reversals, the carbon loss is compensated for with credits from the reversal buffer pool.

Proposed: In the proposed protocol, a computational reversal category would be created. This category applies when no changes were made by the landowner or operator to the site itself. These reversals might result from an inaccurate growth model forecast or sampling errors and would most likely be discovered during verification or while preparing annual reports. Instead of the reversal being compensated for out of the previously issued credits, deficits can be subtracted from future issuances. New verifications are not required, and the reversal can be confirmed on the regular verification schedule.

Expected impact: The new reversal category allows some reversals that previously would have required a verification within a year to be confirmed on the previously established schedule. This would reduce verification costs and allow for compensation out of future credits instead of those previously issued to the owner/operator of the project.

COSTS OF COMPLIANCE: EQUIPMENT: Compliance with the proposed rule, compared to the baseline, is not likely to impose additional costs of equipment.

COSTS OF COMPLIANCE: SUPPLIES: Compliance with the proposed rule, compared to the baseline, is not likely to impose additional costs of supplies.

COSTS OF COMPLIANCE: LABOR: 3.2.2 Changing the crediting period, the timespan over which the project is first evaluated, from 25 years to 10 years.

For IMF projects, a reassessment of common practice carbon stocks, legal restrictions and timber markets of the project would be required every 10 years. This would result in a more frequently renewed occurrence of some of the initial costs in developing a project.

The initial project costs will be partially repeated every 10 years, although with some efficiency gains. We estimate repeated 10-year costs at 70 to 80 percent of initial project development costs, exclusive of reinventory.

Discussion with one project developer provided an initial total development cost range of $200,000 to $500,000, depending on project size. Inventory costs also vary with project size. Communication with a separate developer of a large project put that cost at roughly 35 percent of the cost range cited above.

Using the middle value of 75 percent representing efficiency gains and 65 percent for the non-inventory initial costs we get: 0.65 × 0.75 = 48.8 percent, which we round to 50 percent for ease of presentation. Twenty-five year project development/crediting costs would increase by 50 percent at years 11 and 21 each. Using a relatively standard five percent discount rate for private entities we get: PV = (0.585 × 0.0.5 [00.5]) + (0.359 × 00.5) = 0.472 of initial costs.

Where the 0.585 and 0.389 above are the discount factors at years 11 and 21, using the five percent rate.

The present value cost of this proposed change over 25 years is a 47 percent increase in project development/maintenance costs.

Applying this to an initial cost range of $200,000 to $500,000 gives us an estimated added cost range of $94,400 to $236,000. The wide range in value reflects the cost variation depending on project size.

Present value cost of recrediting every 10 years: $94,000 - $236,000 per project.

COSTS OF COMPLIANCE: PROFESSIONAL SERVICES: 3.2.7 Requiring a second independent appraisal of best alternative use value for avoided conversion forestry projects.

Avoided conversion project landowners would bear the added costs of a second appraisal.

These costs can be highly variable, depending on the property and type of conversion under consideration. Some properties may have different conversion prospects within them, depending on property location and composition. For example, one part of a property may be most profitably converted to agriculture and another part of it, residential use.

Communication with a specialty appraiser indicates the cost could vary from $10,000 to $20,000 for a simple plot with only one conversion prospect, to over $100,000 for a noncontiguous project with different most valuable nonforest use alternatives.

Based on this information, we estimate the proposed change would add $30,000 to the cost of a typical avoided conversion project.

The vast majority, more than 90 percent, of forestry offset projects are for IFM. The additional cost may add 10 percent to an avoided conversion project's overall cost, assuming they have similar overall costs to an IFM project's.

COSTS OF COMPLIANCE: ADMINISTRATIVE COSTS: Where applicable, ecology estimates administrative costs (overhead) as part of the cost of labor and professional services, above.

COSTS OF COMPLIANCE: OTHER: 3.2.1 For IFM projects on private land, limiting the project's baseline carbon stock for the relevant forest type to 20 percent below that of the project's carbon stock.

We estimate this change would, on average, markedly reduce the number of credits issued in the first annual reporting period.

Additionally, the proposed method for determining common practice carbon stocks is expected to raise that value in many cases, making the gap between it and a project's carbon stocks narrower in many instances.

Of IFM projects in Washington, Oregon, and Montana issued credits by CARB, on average, they listed initial carbon stocks 69 percent above common practice for their local forest type. These states were chosen due to their forest types being more similar to Washington's forests than California's.

Nine of the 12 projects currently in these states listed an initial carbon stock 20 percent or more above common practice.

Applying the proposed protocol changes to the average from these nine projects (1.69, or 69 percent above common practice), with the common practice value being one. The impact of the proposed rule amendments would be the proportional difference between crediting under the baseline (1.69) and crediting under the proposed rule amendments (a 20 percent reduction to 1.69).

Crediting under baseline: 1.69

Crediting under proposed rule: 1.69 - (0.2 × 1.69) = 1.352

Instead of crediting for carbon stocks 69 percent above common practice, credits for 35.2 percent above common practice would be issued. The proportional reduction would be a 49 percent reduction in the number of credits for the first reporting period.

The calculation above is for the average of our project sample. Some projects would be impacted more and others not at all. This average reduction is for the first annual reporting period. To assess the impact on the overall project, we considered a separate sample of projects that had been ongoing for 10 years or more.

This separate sample of 20 IFM projects awarded credits by CARB indicates nine subsequent reporting periods average approximately 10 percent (9.5 percent) of the credits reported in the initial reporting period. We present this to emphasize that under the current protocol, a large number of credits are issued for the first reporting period relative to subsequent ones.

Cost: A 49 percent reduction in credits issued in the first reporting period for the proxy sample described above.

3.2.3 Issuing credits for avoided harvest in IFM projects on private lands over the course of 10 years.

Project developers would receive credits more slowly over time, reducing the present value of the project at its initiation.

Using a private discount rate of five percent, which is typical when considering time preferences of businesses to capture their opportunity costs: PV = C_year/i (1-1/[(1+i)]^n)

If we assume the first tenth of credits are issued at the same time the original lump sum would have been and discount the other nine installments, we get: 0.81 = 1/10+(1/10)/0.05(1-1/(1+0.05)^9)

Credits previously awarded in the first reporting period for the initial carbon stock above common practice for IFM projects would be worth roughly 19 percent less as a result of them being issued over 10 years instead of in a lump sum.

Present value of credits dispersed over 10 years: 0.81 times credits issued.

3.2.4 Increasing the contribution upper limit to the reversal protecting buffer pool from 17.6 percent to 30 percent of issued credits, depending on local fire and disease risk assessments, while allowing for reductions due to risk reducing management practices.

The theoretical maximum required buffer pool contributions could rise from 17.6 percent to nearly 30 percent.

From the estimate in Chapter 2 above, using the average risk for fire and disease and incorporating the social risk value of two percent and retaining the other unchanged risk factors at their upper thresholds we obtain an average reversal risk of: (1-0.04) × (1-0.04) × (1-0.03) × (1-0.02) × (1-0.082) = 0.804, or 19.6 percent

Averaging of buffer pool data indicates most projects in previous protocols were at or near the upper limit of the buffer pool contribution.

We estimate these protocol changes would move the average buffer pool contribution from 15.4 percent under the current protocol, to 19.6 percent under the proposed protocol.

This represents five percent fewer "tradeable credits" for landowners and/or project operators: (1-0.196) - (1-0.154) / (1-0.154) × 100 percent = 5.0 percent

Over 25 years, which corresponds to the baseline crediting window, and using a five percent private discount rate, the present value of the increased buffer pool contribution is: PV = 0.95/0.05(1-1/(1+0.05)^25)= 70.5 percent, compared to five percent × 25 years = 125 cumulative percent, if the sum were not discounted.

Discounting the credit reduction of five percent at a five percent rate over 25 years yields the equivalent present value of a 2.6 percent reduction, but this assumes the credits are distributed evenly over time across projects. This change, in combination with the others here, are presented in Chapter 5.

Cost of buffer pool increase: Five percent reduction in credits per reporting period.

3.2.5 Increasing the credit deduction for carbon emissions assumed to be induced (leaked) outside the project area from 20 percent to 40 percent, of the carbon sequestered within the project area due to reduced timber harvest. This applies to IFM projects, compared with the project's baseline harvest scenario.

This proposed change will reduce the credits issued to landowners/operators for forestry offset projects.

As in Section 3.2.1, we use the credits awarded by California's CARB to IFM projects in Washington, Oregon, and Montana as a proxy for what issuance of offset credits might look like for Washington's forests.

Reviewing submitted documentation for these 12 projects and adding up the total credits issued and/or claimed by operators and the submitted adjustment for "leaked" harvest, we calculate a credit reduction going from 10.7 to 21.4 percent of the initial estimate of overall sequestered carbon. It should be noted the leakage deduction percentage is smallest in the first reporting period, which is expected. This is due to the initial forest inventory selection, relative to a project's baseline, often being above "common practice," as discussed in Section 3.2.1.

It should also be noted that the longest running project in this sample has submitted for only eight reporting periods. This estimate should be considered a rough approximation.

Using the percentages above, we calculate: 0.786C/0.893C = 0.891, or an 11 percent reduction in overall credits based on the proposed change in leakage requirements.

This change would apply to each reporting period where credits are sought.

Considering the current 25-year crediting window and discounting future credits at a five percent discount rate, as in Section 3.2.4, yields a present value credit loss of 6.2 percent.

COMPARISON OF COMPLIANCE COST FOR SMALL VERSUS LARGE BUSINESSES: 7.2 Analysis of relative compliance cost burden: A wide range of entities undertake forestry offset projects, ranging from forest and timber management companies, conservation groups, family land trusts, and sovereign tribal nations.

In estimating the cost of the protocol changes in Chapter 3, we relied on the reduction of carbon offset credits likely to be received along with additions to fixed costs and qualitative assessments. The value of offset credits are set in private markets, and the price of the credits are highly variable. This makes estimating precise monetary costs speculative.

Landowners can undertake an offset development project themselves or hire a third-party developer.

Landowners may receive fewer credits, and developers fewer projects for work due to reduced credit issuances. Ecology is aware of only one entity that is in the "business" of owning land for the sole purpose of developing forestry offset credits.

In Chapter 3, we calculated the estimated per-project costs to comply with the proposed protocol changes. In this section we only qualitatively consider the relative cost burden on smaller versus larger entities, in part because the value of the credits being sought varies in the marketplace. Additionally, it isn't known whether an entity will hire a project developer or carry out the project themselves.

It is also worth noting that ecology, to date, has just recently issued its first offset credits under the current protocol.

It is reasonable to assume that a large forest management company, well versed in keeping track of timber inventory, would be able to meet carbon inventory requirements of the proposed protocol with a lower cost per employee company wide. This is driven in part by the company having other lines of business. Conversely, a family land trust conducting the work themselves, would face a relatively high per employee cost.

We recognize the compliance costs will likely be higher for smaller entities, even if they are not "businesses" in the traditional sense. Given the varied types of organizations that might undertake a forestry offset project, and uncertainty around cost across organizational size, we do not attempt to quantify this difference, as it would entail considerable speculation.

As we were not able to confidently quantify the relative compliance costs of small and large businesses, and based on the above indications that costs are likely disproportionate, we included elements in the proposed rule to mitigate disproportionate costs for small businesses as far as is legal and feasible, and completed other requirements under RFA. These are discussed in the remainder of this chapter.

MITIGATION OF DISPROPORTIONATE IMPACT: 7.3 Action taken to reduce small business impacts: RFA (RCW 19.85.030(2)) states that: "Based upon the extent of disproportionate impact on small business identified in the statement prepared under RCW 19.85.040, the agency shall, where legal and feasible in meeting the stated objectives of the statutes upon which the rule is based, reduce the costs imposed by the rule on small businesses. The agency must consider, without limitation, each of the following methods of reducing the impact of the proposed rule on small businesses:

(a) Reducing, modifying, or eliminating substantive regulatory requirements;

(b) Simplifying, reducing, or eliminating recordkeeping and reporting requirements;

(c) Reducing the frequency of inspections;

(d) Delaying compliance timetables;

(e) Reducing or modifying fine schedules for noncompliance; or

(f) Any other mitigation techniques including those suggested by small businesses or small business advocates."

We considered all of the above options, and the goals and objectives of the authorizing statutes (see Chapter 6). We limited compliance cost-reduction methods to those that: Are legal and feasible; and meet the goals and objectives of the authorizing statute.

Some of the considered options required under RFA did not meet the criteria of being legal and feasible, as they would not have met the goal of issuing offset credits that are real, permanent, quantifiable, verifiable, and enforceable. This is the case with reducing substantive regulatory requirements, delaying compliance timetables, or modifying fine schedules.

While it does not specifically address inspections in the traditional sense, the proposed rule amendments would reduce the verification frequency required for projects seeking less than 10,000 credits annually. To the extent that smaller businesses own or manage smaller projects, this would serve to reduce disproportionate impacts for small businesses.

Similarly, the proposed rule amendments would loosen parcel-level sampling (inventory) requirements to allow for easier aggregation of smaller land holdings into one project. While there may be limited correlation between business size and project land holding size, to the extent that smaller businesses own smaller parcels that are included in an aggregated project, the proposed rule would reduce disproportionate costs to small businesses.

Finally, as discussed in Section 4.2 of our analysis, the proposed rule amendments would reduce barriers and increase incentive for offset projects to participate in the program. In conjunction with the above reduced verification and sampling requirements, this may encourage more small businesses to participate in the program. As we do not expect any entity to participate unless they expect a net benefit, these new participants would receive net benefits (profits) of participation, though not without risk.

SMALL BUSINESS AND LOCAL GOVERNMENT CONSULTATION: 7.4 Small business and government involvement: We involved small businesses and local governments in its development of the proposed rule amendments, using: The environmental justice working group, the US Forestry Protocol technical working group, the ecology air quality rules and state implementation plan updates listerv, the cap and invest offsets listserv, public meetings, and community forums.

We also involved several tribal governments during the rule development process. Engagement included letters to tribal leaders and natural resource directors to inform them of our process and progress related to this rule making, tribal forums focused on the content of this rule making, and individual meetings with several tribes, including the Quinault Tribe, Suquamish Tribe, the Tulalip Tribes, the Confederated Tribes of the Colville Reservation, and the Hoh Tribe.

NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM (NAICS) CODES OF INDUSTRIES IMPACTED BY THE PROPOSED RULE: 7.5 NAICS codes of impacted industries: The proposed rule amendments likely impacts the following industries, with associated NAICS codes. NAICS definitions and industry hierarchies are discussed at https://www.census.gov/naics/.

115310 - Support Activities for Forestry

237210 - Land Subdivision

541620 - Environmental Consulting Services

813312 - Environment, Conservation and Wildlife Organizations

CONSIDERATION OF LOST SALES OR REVENUE, IMPACT ON JOBS: 7.6 Loss of sales or revenue and impacts on jobs: Businesses that would incur costs could experience reduced sales or revenues if the proposed rule and protocol changes significantly affect the prices of the goods they sell. The degree to which this could happen is strongly related to each business's production and pricing model (whether additional lump-sum costs would significantly affect marginal costs), as well as the specific attributes of the markets in which they sell goods, including the degree of influence each firm has on market prices, as well as the relative responsiveness of market demand to price changes. Finally, overall shifts in economic activity in the state, including competition within markets and attributes of the labor market, simultaneously adjust in response to changes in compliance costs.

Similarly, employment within directly impacted industries, other industries in Washington, the labor market within and outside of the state, and in the state as a whole will also adjust in response to a change in costs.

Relative to baseline, the estimated reduction in carbon offset credits issued for a particular project would result in the equivalent of lost revenue, provided the price of the credits remained unchanged. Offset credit prices are volatile, however. California's offsets with direct benefits to the state and outside of any invalidation window have fallen 17 percent in the past year but appreciated 8.4 percent in the past six months.

A more recent indicator of potential volatility for Washington's compliance market generally are the most recent allowance auction results. In the December 2025 auction, allowances for 2024 and 2025 sold for $70.86, while 2028's allowances sold for $29.40 per metric ton of carbon dioxide equivalent.

Over 25 years, we estimated a 36 percent present value reduction in credits issued and a 47 percent present value increase in project costs. We expect this will reduce the number of projects undertaken relative to the rule's baseline. These proposed changes, in combination, aim to shift the forestland selected for projects from areas of unusually high current carbon density toward areas where credits could be obtained through more forward-looking management of forest growth.

As noted in Section 7.2, varying types of entities have undertaken offset projects as an ancillary activity. In other words, it is not their main "business." This is another factor which makes quantifying the proposed impacts problematic.

Land trusts, for example, generally work to preserve and protect land for future generations. The increased ease of aggregation in the proposed rule would likely help smaller land trusts trying to develop a project, while the estimated overall reduction in credits would make a project less lucrative. A smaller land trust would likely hire an outside entity to develop an offset project.

Estimating the fraction of land trusts under the rule baseline that might host a viable IFM offset project would be difficult. Estimating the impact of the changes would likewise be largely speculative.

Given that ecology has only recently issued forestry offset credits to one project under the existing protocol, and the volatility of credit prices, we cannot quantify the jobs impacts of the protocol changes. For this reason, the magnitude of sales, revenue, or impacts on employment from the rule in any specific economic sector within the state of Washington is unclear.

The public may obtain a copy of the small business economic impact statement or the detailed cost calculations by contacting Kayla Stevenson, Department of Ecology, Climate Pollution Reduction Program, P.O. Box 47600, Olympia, WA 98504, phone 360-972-0313, email kayla.stevenson@ecy.wa.gov.

January 21, 2026

Heather R. Bartlett

Deputy Director

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