A pair of Executive Orders from the new administration could bring down many forestry-based carbon offset projects in the US, creating a tangle of legal, contractual, investor and disclosure risks for many US companies. On March 1, 2025, the President issued two Executive Orders targeting forestry and the pulp & paper and building products industries.
The EO Addressing The Threat To National Security from Imports of Timber, Lumber states that
“The United States has ample timber resources. The current United States softwood lumber industry has the practical production capacity to supply 95 percent of the United States’ 2024 softwood consumption…
No later than 270 days after the date of this order, the Secretary of Commerce shall submit a report to the President that includes:
(i) findings on whether imports of timber, lumber, and their derivative products threaten national security;
(ii) recommendations on actions to mitigate such threats, including potential tariffs, export controls, or incentives to increase domestic production; and
(iii) policy recommendations for strengthening the United States timber and lumber supply chain through strategic investments and permitting reforms.”
Note that the figure is based on production capacity, not timber availability.
The EO Immediate Expansion of American Timber Production states:
“The United States has an abundance of timber resources that are more than adequate to meet our domestic timber production needs, but heavy-handed Federal policies have prevented full utilization of these resources and made us reliant on foreign producers… It is vital that we reverse these policies and increase domestic timber production to protect our national and economic security…
(a) Within 30 days of the date of this order, the Secretary of the Interior and the Secretary of Agriculture, through the Director of the Bureau of Land Management (BLM) and the Chief of the United States Forest Service (USFS), respectively, shall each issue new or updated guidance regarding tools to facilitate increased timber production and sound forest management, reduce time to deliver timber, and decrease timber supply uncertainty, such as the Good Neighbor Authority described in 16 U.S.C. 2113a, stewardship contracting pursuant to 16 U.S.C. 6591c, and agreements or contracts with Indian tribes under the Tribal Forest Protection Act as contemplated by 25 U.S.C. 3115a. The Secretary of the Interior and the Secretary of Agriculture shall also each submit to the Director of the Office of Management and Budget any legislative proposals that would expand authorities to improve timber production and sound forest management…
(c) Within 90 days of the date of this order, the Secretary of the Interior and the Secretary of Agriculture shall together submit to the President, through the Assistant to the President for Economic Policy, a plan that sets a target for the annual amount of timber per year to be offered for sale over the next 4 years from Federal lands managed by the BLM and the USFS, measured in millions of board feet.”
By claiming national security threats and imposing new legislative actions on federal lands managed by the BLM and the USFS, could the Feds void or negate existing private party contracts for forest preservation and carbon offsets? Maybe so.
Zach says:
“If the federal government claims national security risk and exercises eminent domain over either land generating forestry based carbon offsets or logging rights attached to the land, project developers may find themselves unable to fulfill contractual obligations. In these cases, the legal doctrines of force majeure and impracticability may offer relief. Force majeure contract clauses provide relief when certain unforeseen events impede a party from delivering their end of a bargain. Existing offset contracts with force majeure covering federal takings would relieve project developers of any contractual responsibilities. Absent such a provision, developers may pursue impracticability as a defense for failure to perform their duties under a contract. This defense would be fact-intensive and may boil down to whether the purchase agreement gives the purchaser rights to specific credits generated by a specific project, or to credits generally produced by a company. Those that transfer carbon offsets only from specific projects will have an easier time arguing impracticability than those that do not if the specific project site is subject to federal takings.
However, eminent domain is not likely to be the government’s first step to scaling up timber production under these executive orders. Federally-owned lands will likely see a reduction in protections before any private land or timber rights are subject to eminent domain. Carbon offset projects generating credits from federally protected lands may already be poor quality, as those have inherent additionality questions. Therefore it is unclear whether these executive orders will impact any legitimate offset generation.”
Members can read more about carbon risk here. In addition, members have access to our checklist Identifying & Updating Climate Risks and Uncertainties – which may be needed at the moment.
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