By PAULA TRACY, InDepthNH.org
CONCORD – Enabling legislation that would allow municipalities to tax standing wood and timber on land used for carbon sequestration went to a public hearing Monday with a mix of support and opposition.
But one thing everyone agreed on is that this is a new thing to consider and a new revenue source for landowners that did not exist 20 years ago.
Finding fairness that keeps municipalities whole and compensated for a loss in timber tax revenue is what is being sought, advocates said.
To not pass the bill would be incentivizing property owners to enroll timber tracts in carbon sequestration to avoid paying a timber tax, said Coos County Administrator Mark Brady.
The state has seven carbon forest capture “farms” or properties listed on its newly required registry that shows over 175,000 acres in carbon production so far.
House Bill 123, which would allow for a new version of the tax on such properties, got a public hearing Monday before the House Municipal and County Government Committee.
This would add a new way the government gets paid for forest use.
It is supported by the New Hampshire Municipal Association and its members as a way to get revenue other than timber after it falls. It was opposed by the Nature Conservancy for its potential impacts on small landowners who want to avail themselves of the carbon sequestration market and the Business and Industry Association, which sees the bill as creating a new tax.
It has been that a yield tax was levied by local government after a registered timber cut.
But now commercial landowners can make money by letting the trees stand and draw up carbon in the atmosphere as they grow for extended periods of time.
Such carbon “sequestration” is a new revenue possibility just by registering the land with various regulated and unregulated boards, including the California compliance board.
That state allows for corporations interested in getting to net zero emissions the chance to reduce their carbon footprint by buying these carbon credits which let the timber stand and grow, but in some cases, reducing the tax yield from logging.
Under a bill passed last year, the state was required to create a registry of properties being used for carbon sequestration. It has been up since late December and includes the name of the owner, the county or counties impacted, the acreage amount, when they were registered and for what term.
A link to the registry is here:
That list shows that by far the largest parcel registered is the Connecticut Lakes Headwaters tract totaling 141,062 acres in Coos County, which is at the state’s very northern tip.
It is registered as “Finite Carbon – The Forestland Group/CT” and shows that that land is in a 100-year carbon agreement which began July 18, 2013.
The Forestland Group is the company that owned the land before Aurora Sustainables took the land over several years ago https://aurorasustainablelands.com/
It enrolled the property into the California compliance market and Aurora has assured that with its merger it is actively managing the tract for both carbon and wood.
But separately, that land is also subject to a public easement on the property held by the state of New Hampshire. It was acquired more than 20 years ago when International Paper sold it with $33 million in public funds spent on an easement with the intent of keeping the land open to the public for traditional recreation and for logging to help the regional economy.
A 10-year cutting agreement on the land which Aurora proposed to the state reduced by about half of the traditional annual cut on the land has not been approved.
This has been seen as a drastic change in the land’s use and a problem for local tax coffers.
The 10-year agreement was returned to Aurora and is subject to negotiation now with the state Department of Natural and Cultural Resources.
Sarah Stewart, commissioner of DNCR, said Monday that she is awaiting discussions with the new governor, Kelly Ayotte, on the 10-year agreement. She said earlier this winter the state Attorney General’s Office was looking at the 10-year proposal and the language of the easement along with the state forester.
For the town of Pittsburg, which in the past saw a large part of their town budget paid for through timber tax on that land, they have been given a one-time payment in lieu of taxes by Aurora.
But there is concern for a long-term loss of revenue in the future.
The bill is sponsored by Republicans with the prime sponsor Rep. Arnold Davis, R-Milan.
It states, “This bill enables municipalities to collect tax on standing wood or timber on land that has been enrolled in the carbon sequestration registry.”
The carbon registry, which is now on the state Department of Natural and Cultural Resources website, last updated on Jan. 15, shows a collection of owners from big to small who have registered their land with various carbon markets.
There are 7,224 acres owned by Lakes Region Conservation Trust, registered for 100 years on Oct. 29, 2015 in Carroll, Belknap, Merrimack and Grafton counties; 15,861 acres owned by Green Acre Woodlands for 40 years registered in 2022; 11,358 acres for Chocorua Forestlands in Carroll County named “Anew White Mountain Forestry” which was registered in 2020; Blue Hills Foundation Carbon Program in Strafford and Belknap County which registered 6,598 acres; Northeast Wilderness Trust Corp’s “Anew Eagle Mountain Forestry Project” which signed up 122 acres in Hillsborough County for 40 years in March 2021; and the Robert Rotberg Trust in Carroll County. The trust registered 114 acres for 20 years in August 2024.
The effective date if passed could be as early as April 1, 2025.
Rep. Davis said it is a simple bill that does one thing: adds carbon sequestration projects to pay “their fair share” to the yield tax section of existing law.
He said historically, assessing officials would cruise the properties and assess the standing value but it became cumbersome and likely not very accurate.
In the 1940s, he said some would clear cut to avoid that assessment.
The state timber tax of 10 percent was then changed as a yield tax on the cut and made the system more accurate.
It has worked well for the past 75 years, but Davis said now there is another way of business for timber land owners and carbon sequestration, while legal has created “a loophole.”
“This bill intends to keep the towns’ whole,” he said.
New Hampshire is the second most forested state at 84 percent behind Maine.
The forests are maintained also for habitat and fire protection. He said in the future a lack of coverage for carbon sequestration could have a negative impact on all of that.
In many cases the carbon credits are worth more than the timber itself.
“It is very important to remember this is not a new tax,” he said.
An amendment was offered which he supported.
Before 2013, Davis said former owners of the Connecticut Lakes tract paid $175,000 a year to Pittsburg. Stewartstown and Clarksville got lesser amounts.
But the new owners are cutting less and “that’s a big hit,” he said, to the residents of the town. “It’s nothing illegal. It’s just a loophole that needs to be closed,” said Davis.
Like the timber tax, the tax would only be levied when carbon sequestration properties received a yield from carbon credits, he said.
Davis asked if everyone goes to carbon sequestration what’s going to happen to the timber industry.
He said Milan Lumber, in his town, used to secure 20 percent of its wood from the Connecticut Lakes tract and is now having to replace that with wood from New York by road and rail.
He said the mill went down to working four days a week for a lack of wood.
Ray Gorman of Colebrook, a District 2 Coos County Commissioner, and County Administrator Mark Brady spoke in support of the bill.
Gorman said logging in Coos County has always been a major part of “what we do” with 23 unincorporated towns with few residents but vast forests.
“This will be a significant loss to us,” Gorman said, “It’s a complete change in land use.”
The cut from the (Connecticut Lakes land) has gone from 30,000 plus cords a year to 15,000 cords a year on that property, Gorman said.
Brady said what makes Coos unique from other counties is the number of unincorporated places. He said the two main economies in the county are timber and OHRV tourism.
The Connecticut Lakes tract is a huge tract and he said both Gregg and Shaheen secured $33 million to get the easement when it was harvesting more than 40,000 cords a year.
“We are trying to be agnostic about carbon credit,” Brady said. “We just want to make it all work. But if you are going to a carbon-first economy…If you leave the back door open…you are de facto incentivizing carbon,” he said. “The rational person would do that.”
He said Coos County is 20 percent of the land mass and two percent of the population of the state “yet we are the identity of the state.”
Brady said bigger pieces of property owned by corporations and smaller property owned by individuals are different.
“We are talking about the bigger pieces of property,” Brady said. Conversion of those parcels to sequestration is what “scares us” at the county government level.
Executive Councilor Joe Kenney of Wakefield, who represents the north country, said carbon sequestration was not an issue five years ago. But it became a noticeable issue with the Connecticut Lakes tract when it was recently sold and the new owners announced plans to reduce the cut.
He said a lot of the economy in that region relies heavily on the forest.
Kenney said he advocated for a carbon registry last year because he wanted to know what the incentive was and who was a player in this.
Now, he said, it appears the Northeast is a target for these carbon offset programs because this area has done such a good job of forest management.
If you cut you have to file an intent with the public. It’s a very transparent and understandable program but now there is no transparency for carbon sequestration.
“My sense is this is fairness,” he said, “and that others don’t escape that tax.”
He also added that when you look at the state and where we are, we are leading the nation on this issue of carbon tax credit.
“Many other states are way behind,” he said. Gov. Ayotte, he said, is “on to it.”
Meredith Hatfield, representing the Nature Conservancy, opposed the legislation.
She said she had not had a chance to consider an amendment and would add more testimony after looking at it but said she deeply understands the challenges and wants to keep the local governments whole.
She said the Nature Conservancy represents the “mom and pop,” smaller landowners who want to take advantage of this carbon sequestration program.
She suggested that the bill be tabled when more data on impacts are being generated in the coming year by the Department of Revenue Administration.
Natch Greyes, vice president of public policy for the Business and Industry Association, opposed the bill as well and said this would be a new tax because one does not currently exist for carbon sequestration.
Charles Levesque, who has presented publicly on the complicated subject of carbon sequestration and was among the authors of the Connecticut Lakes Headwaters easement, said when some speak about a “carbon program” there are many, not just one and don’t cover all the various time frames for enrollment.
One, the voluntary market is non-governmental, world wide and is a 40-year market.
The only one that is a 100-year deal in this area of the country is the California compliance market.
Levesque said it is not a new tax but an alternative payment of the yield tax.
“It’s just a rebranding,” he said.
Jasen Stock, executive director of the NH Timberland Owners Association, offered the committee a position paper on the subject and said they have members “all over the map on this.”
“These carbon programs are a new animal for us,” he said. “Twenty years ago this was not on the radar.”
Brodie Deshaies, legislative advocate for the New Hampshire Municipal Association, said the organization is in support of the bill as amended.
