Weyerhaeuser Company (WY) Earnings Call Transcript & Summary

Hello, and welcome to Weyerhaeuser's 2021 Virtual Investor Day, and thank you for joining us. With me here today are Russell Hagen, our Chief Development Officer; and Nancy Loewe, our Chief Financial Officer. Let me spend just a moment here at the outset to walk you through today's agenda. I'll start off with a brief strategic overview including a summary of what we we've accomplished over the last couple of years and where we're headed over the next several years. Next, Russell will discuss Weyerhaeuser's growth and business developments initiatives. Including our Natural Climate Solutions, Timberlands and Wood Products businesses. After that I will update you on our plans to capitalize on operational excellence and innovation to further improve our industry-leading operating performance. Nancy will then talk to you about our ESG leadership position and walk you through what is one of the most impressive carbon records of any company around. Following that, she will cover our capital allocation approach and initiatives, including the announcements we made this morning. And then I will offer a few closing remarks. We'll then take a short, 5-minute break and after that we'll open it up for questions and answers. Before we start, I will note, we'll be making some forward looking statements today. Please review the warning statements in the presentation slides and on our website regarding the risks associated with forward looking statements. A copy of the presentation materials will be available on our website and a replay of this session will be posted shortly after the event. So we'll go ahead and get started. Over the last several years, our employees and our management team have been hard at work, making Weyerhaeuser a better and more valuable company. We've been optimizing and enhancing our portfolio of assets, we've been improving our operating performance, we've been pursuing new growth and value accretion opportunities, and we've significantly strengthened our balance sheet. We've combined these strategic initiatives with solid execution to improve our competitive positioning and to deliver record results over the past year. And today, we're very excited to share with all of you more details on how our strategy will support long-term sustainable growth and drive strong returns for our shareholders. I'll begin with our investment thesis. At Weyerhaeuser, we're focused on 4 key levers to drive value for our shareholders: an unmatched portfolio of assets, industry-leading performance, a strong ESG foundation and disciplined capital allocation. Over the last several years, we've made significant improvements across each of these areas. This has positioned us very well for the future. And today, we'll share more details about our longer-term plans across each of these levers and how we will drive superior value for our shareholders into the future. Before I move on, some of you may have noticed that we've added ESG to our investment thesis. Well, we've been focused on ESG at Weyerhaeuser for many decades. We believe it makes sense at this point to explicitly add that to our investment thesis. Similar to portfolio performance and capital allocation, ESG plays an important role in our company. ESG principles guide us in how we conduct our business. But increasingly, sustainability represents a compelling business opportunity for Weyerhaeuser. And we believe that our ESG leadership will drive significant long-term value for shareholders. For those who are newer to our story, I'll spend a few minutes here with a brief description of our company. Weyerhaeuser is the largest private owner of timberlands in North America with 11 million acres of high-quality, highly productive timberlands across the United States. We're one of North America's largest producers of wood products with 35 manufacturing facilities that produce lumber, OSB and a variety of engineered wood products. We also have 18 distribution facilities located in key markets across the U.S. And finally, our Real Estate, Energy and Natural Resources segment focuses on maximizing the value from every acre we own, including our new Natural Climate Solutions business. All of our business segments have significant scale and industry-leading performance. and we manage them within a tax-efficient REIT structure. In fact, we're one of the largest REITs in the U.S. Over the many decades as a leader in the industry, we've developed deep unrivaled expertise in creating and capturing superior value across every step of our integrated supply chain, from our proprietary seedlings to our unmatched expertise in forest management to our efficient low-cost manufacturing facilities, all the way to the end customer. We're constantly striving to be the best and to drive value at each and every step of the process. And that includes capturing incremental value through our HBU land sales, energy and natural resources leasing activity and realizing the optionality across our land base through our new Natural Climate Solutions business. Our unique portfolio and differentiated capabilities, together with our strong execution across the entire supply chain, including the ability to drive cross-business synergies positions Weyerhaeuser to create significant value across all of our businesses. Ultimately, our ability to generate strong returns for our shareholders over time is largely a function of the competitive advantages that we bring to the marketplace. And I can tell you without hesitation that we do bring significant advantages to the businesses and markets where we compete. No other company has the same scale and quality of assets, financial flexibility and the breadth and depth of expertise across the entire supply chain that we have here at Weyerhaeuser. When you combine that with the solid reputation and strong culture that we've built over many decades, we have a powerful platform to leverage and driving value for our customers, our suppliers, employees and other stakeholders. And many of these things are very hard for our competitors to replicate. Further, these competitive advantages will help ensure that we deliver on the long-term plans and targets that we'll share with you today. Let me pivot for a moment to some of the fundamental drivers that will, we believe, be significant tailwinds for Weyerhaeuser in the coming years. Russell will get into more detail on each of these here in a few minutes. But at a high level, there are several macro trends driving continued growth and demand for our products and opening up new and potentially meaningful opportunities for our industry and our businesses over the next several years. As I've said before, we are very bullish on U.S. housing, both new construction as well as repair and remodel, which will continue to drive growing demand for our products. For a variety of reasons, including the environmental benefits of building with wood. We expect to see more and more usage of wood in construction beyond traditional single-family housing markets. This will be another increment of wood demand in the years to come. Additionally, we're expecting continued growth in the overall demand for wood fiber on a global basis. Weyerhaeuser will continue to benefit from this trend in the years to come. And lastly, I think we've all seen that there is a growing appreciation for the risks and impacts of global warming and climate change. As the largest private owner of timberlands in North America, and one of the largest manufacturers of climate-friendly wood products, we expect our forests and wood products to play an important role in mitigating the effects of climate change. And our new Natural Climate Solutions business will be a key part of that effort with cost-effective solutions to help customers meet net-zero ambitions. Again, Russell will speak to each of these in more details in here in just a few moments. I'll just say here that I'm very excited about the opportunities out in front of us. This should be a period of strong and growing demand for the forest products industry and Weyerhaeuser will be very well positioned to capitalize on these strong markets and new opportunities to deliver superior returns for our investors. As I mentioned at the outset, we've been hard at work, driving improvements across each of the value levers of our investment thesis. Just since the beginning of 2020 and throughout the many challenges that we've experienced over the last year, we've improved our timber portfolio. We formed a new Natural Climate Solutions business with Russell leading that effort. We've continued to drive significant OpEx improvements which has led to industry-leading margins across our businesses. And as we've experienced over the last year, when we combine our industry-leading performance with strong pricing, our businesses generate significant cash flows. We've also continued building on our long-standing ESG leadership position with our new sustainability strategy and our just-released carbon record, which we think will generate a lot of interest and excitement. We've paid down a significant amount of debt, and we've instituted a new dividend framework that will return a significant amount of cash to shareholders in a sustainable manner. Our people have done a remarkable job. We've made great progress, and we're now very well positioned to move into our next phase of driving growth and creating value for our shareholders. Looking forward, we have detailed plans for how we will drive growth and deliver superior value. Specifically, and we'll share this with you today, the targets we've set for the next several years through the end of 2025. Starting with our portfolio. We will, of course, continue optimizing and improving our portfolio of assets. Additionally, we intend to make investments of around $1 billion over this time period to further grow our timberlands portfolio. We will do it in a prudent manner and in a way that generate attractive returns and create superior value for our shareholders. Within Real Estate, Energy and Natural Resources we intend to grow Natural Climate Solutions to a $100 million per year business. Russell will share more details on our growth plans in just a few moments. We will remain focused on our operating performance, and we'll look not only to maintain an industry-leading position, but to continue to further separate ourselves from our competition. I will share more details on how we intend to do that later in the presentation. We also plan to enhance our ESG leadership position through our 3 by 30 initiatives and our ongoing work around sustainability at Weyerhaeuser. We intend to make meaningful progress against the greenhouse gas reduction targets we announced today and to capitalize on our positive carbon story to position the company as a very attractive option for those looking to invest in leaders in the ESG space. And Nancy will go through this in more detail during her ESG presentation. With our portfolio, industry-leading performance and the macro tailwinds I referenced earlier, we expect to generate strong cash flows through this 2025 time frame and beyond. Through our disciplined capital allocation approach, we expect to generate significant amounts of free cash flow and return the vast majority of that cash to our shareholders through our new dividend framework as well as opportunistic share repurchase. As we've said, we will return 75% to 80% of adjusted FAD to shareholders through our base dividend, variable dividend and share repurchase. Our dividend framework is designed to facilitate sustainable growth in our base dividend, and we do expect to grow our base dividend by approximately 5% per year from 2022 through the end of 2025. Nancy will provide more detail on this and other capital allocation items, including the interim supplemental dividend and the increased share repurchase authorization that we announced today. In summary, we've made great progress on upgrading our portfolio, improving our operating performance, building on our ESG leadership and demonstrating a commitment to disciplined capital allocation. We have detailed plans with specific targets to drive further improvements across each of these areas through 2025. And as we deliver on these targets, we will grow the company and deliver superior shareholder returns. Now let me turn it over to Russell to share a bit more detail on our growth and business development initiatives, including Natural Climate Solutions.

Thank you, Devin, and welcome, everyone. I'm excited to speak to you for the first time in my new role as Chief Development Officer. In this role, I have the opportunity to lead a portfolio management team, which includes acquisitions and divestitures, Real Estate, Energy and Natural Resources as well as our new Natural Climate Solutions business. This alignment gives us an end-to-end view of every aspect of portfolio management, which creates unique opportunities to identify and capture additional value across our operations. Over the past several years, Weyerhaeuser has built a strong track record of optimizing and enhancing our timber portfolio, and using our asset value optimization process to maximize the value of every acre we own. We have also realized significant gains through our disciplined capital investments to enhance the value of our assets and drive improvements in our operating performance. Today, I'm looking forward to talking to you about the next generation of asset value optimization and how we are using these tools to increase the value of our portfolio and capitalize on the optionality of our 11 million acres. I'll begin with a quick overview of the macro trends that are driving our overall growth strategy, then I'll discuss growth and business development initiatives for each of our segments. I'll focus, in particular, on natural climate solutions, which we believe, given our unique portfolio will create a lot of value over the coming years and further position Weyerhaeuser as a uniquely attractive ESG investment. As Devin mentioned, we believe 4 fundamental trends will drive substantial growth in demand for sustainable forest products and serve as catalysts for the new market opportunities over the next decade. These trends include increased demand for housing, growth in wood-based building or mass timber construction, rising global demand for wood fiber and emerging demand for natural climate solutions. First, on housing. On the demand side, millennials and Generation Z are entering the homebuying market. Collectively, these demographic groups represent the largest population cohort in the U.S., and they are coming into their prime home-buying years. As this group enters the housing market, there's a growing demand for every level of housing and a shift from multifamily to single family homes. Additionally, we are seeing a post-pandemic consumer preference for more single-family suburban homes, supported by ongoing work-from-home flexibility. On the supply side, the underlying demand for housing, which is driven by new household formations has exceeded the level of new house home construction in every year since the Great Recession. As a result, U.S. housing is now severely underbuilt with a current deficit of approximately 4 million units. When combined with the shift in preference among older Americans to age in place, it's clear that the current 1.6 million annual housing start rate must increase if we're to significantly reduce the housing deficit. Beyond U.S. housing, we expect global population growth and economic modernization will drive steady growth in global construction, including infrastructure, housing and industrial and office buildings. Today, global construction totals over $12 trillion a year and is on a square footage basis is expected to increase 50% over the next several decades. As city planners, architects, developers and consumers increasingly appreciate the benefits of wood-based construction, including its sustainable nature, lower carbon footprint, and ultimately, we believe lower cost of construction compared with traditional steel and cement, we expect construction of tall wood buildings will become more and more commonplace. We've already seen a transition in building codes across developed countries to include mass timber in the construction of tall buildings, and we expect this trend to continue as technology and adoption improve. Global growth also drives demand for many other uses of fiber, such as consumer products, packaging and specialty pulp. Taking all this into consideration, we expect global demand for softwood fiber will grow 25% by 2030. Relatively few timber-growing regions can sustainably supply more softwood fiber. Declining harvest volumes and long-term supply chain challenges will limit supply from regions like Canada, Europe and Russia. The U.S. West and New Zealand will continue to benefit from strong markets, but material supply growth is not likely from these regions. This paves the way for the U.S. South, which has significant upside and ability to respond to increase in domestic and export demand. With our unmatched timberland portfolio in the West and South U.S., Weyerhaeuser is in a very strong position to benefit as these demand trends further develop over the next decade. The final trend I will discuss is climate change, which has become one of the most significant challenges of our time. Governments and businesses across the globe are recognizing the urgency for climate action and making significant net-zero commitments. The customers, investors, stakeholders are urging meaningful progress against these targets. Achieving these commitments will require governments and companies to take major steps to modify operations, invest in low-carbon activities and by offsets to reduce environmental impacts. This will serve as a catalyst for substantial reallocation of capital and resources throughout the global economy. There are currently limited cost-effective solutions to achieve meaningful carbon renewables and climate change mitigation. We firmly believe that forest and renewable energy will be an important source of cost-effective solutions and that carbon capture and storage, which I will discuss, will also contribute to future carbon reduction efforts. The time for action is upon us in limiting global warming and will require all currently available solutions. Turning to our strategic and business development initiatives. At a high level, our growth strategy through 2025 is focused on 3 areas: growing natural climate solutions to a $100 million per year business; continuing to optimize and invest in our timberland portfolio with a target investment of $1 billion; and investing in our Wood Products business to further reduce costs, improve productivity and grow our lumber production by roughly 5% annually through 2025. Before I go into the details, I want to set the stage with a brief discussion of our next-generation asset value optimization process. AVO, or asset value optimization is our fundamental approach for maximizing the value of every acre we own. It was originally established several years ago to identify higher and better use properties that generate a premium over timberlands. As we've demonstrated, this AVO program has allowed us to consistently capture significant premiums to timber values through our real estate business. For the past year, we have been focused on developing a next-generation process that enhances our ability to identify and capture value from various timber and non-timber attributes, including carbon, renewable energy and other Natural Climate Solutions opportunities. We are calling this AVO 2.0. This sophisticated technology-enabled approach which leverages remote sensing, satellite imagery, machine learning and other advanced data analytics, has generated step change results in our ability to identify strategic growth opportunities and most importantly, manage every acre in our portfolio to maximize value across the full suite of attributes and opportunities. I'll begin the discussion of our strategic and business development initiatives with natural climate solutions, one of the most important focused areas of AVO 2.0. There are 4 primary elements that make up this business. The first 2 are well established in our portfolio and include mitigation and conservation and renewable energy. Forest carbon and carbon capture and storage, or CCS, our newer businesses that have the potential to drive significant long-term value as markets develop. We expect to grow Natural Climate Solutions into a $100 million a year business by the end of 2025. This is roughly a fivefold increase from where it is today. Currently, the business is comprised primarily of renewable energy leases and mitigation banking income. Although we are forecasting meaningful growth from these activities in the future, we expect the primary catalyst for growth will be forest carbon and carbon capture and storage, which are currently in early days of market development. It's important to note that our $100 million target does not represent the full potential of this business. Demand for natural climate solutions will spend decades and Weyerhaeuser is uniquely positioned to benefit as the markets develop and expand well beyond 2025. Over the next several minutes, I'll provide a more in-depth look at each of the 4 components of the Natural Climate Solutions business. With some context on the current landscape, future market drivers and how we expect to participate. I'll begin with Forest Carbon. Forest Carbon offsets can be generated from carbon that has proven to be sequestered, measurable over time and represents a permanent removal of carbon. Importantly, the carbon store must be additional. That is, there must be a change in management practices that results in incremental carbon sequestration beyond what would occur under business-as-usual operations. Within North America, the most common project type is improved forest management. And this will be our primary focus as we are evaluating potential forest carbon projects within Weyerhaeuser's existing footprint. This means we will consider opportunities to modify certain management practices like silviculture, to capture and store more carbon than our baseline carbon inventory within project areas. Developing and managing verified carbon credits is not a trivial process, and all credits are not created equal from an integrity perspective. We are committed to only bringing projects to market that meet the highest level of integrity requirements, ensuring that our credits represent a meaningful carbon removal that clearly contributes to climate change mitigation. I also want to be clear that carbon credits, which I just discussed are different from the carbon removals described in our carbon record, which Nancy will speak about later today. Our carbon record accounts for both carbon removals and emissions but it does not necessarily represent a pool of carbon deemed as additional for the purpose of monetization of forest-based carbon credit projects. Let's now discuss the 2 primary markets where forest carbon credits are transacted. Compliance markets are the result of government regulations to reduce greenhouse gas emissions. In this market, entities trade emission permits or purchase offsets to meet regulatory targets. The best-known U.S. compliance market is California. It is a highly complex, very restrictive and requires a time commitment in excess of 100 years. In contrast, voluntary markets are not driven by regulatory mandates. This market primarily serves buyers seeking ways to meet carbon reduction commitments such as net-zero targets. As more companies publicly commit to climate change mitigation and net-zero goals, there will be a greater need for carbon offsets, which will drive growth in the voluntary markets. We believe the voluntary markets are best suited for the projects we develop, given the complexity and time commitments of the compliance markets. However, the timing and scope of our participation will depend on future carbon prices. Although pricing is highly variable, credit prices in the voluntary market generally range from $5 to $10. At this level, only a small number of our acres would generate favorable project economics, but we expect the range of candidate acres will expand as carbon pricing continues to improve. Currently, voluntary markets are in early stages of development, but the addressable market is significant. Global net-zero commitments to date cover about 30 billion metric tons of annual carbon emissions. However, annual carbon credit issuances total only about 1% of the committed volume and existing compliance mechanisms and emission trading programs will not be sufficient to move the world to net zero. Voluntary market transactions, in particular, forestry carbon offsets are expected to contribute significantly. Last year alone, forestry and land use projects comprise of 30% of voluntary credit issuances, and we believe the volume of forest carbon transactions is positioned to grow substantially over the coming years. It is important to note that not all timberlands will be suitable for carbon projects. The value of standing timber differs by region, species type, productivity and markets. This means the appeal of growing for carbon versus growing for timber will vary by landowner. And even within portfolios of timberlands, with this in mind, we expect owners of low-value timberlands to be the first to participate in the forest carbon markets given current pricing. The value proposition starts to look more compelling for owners of high-quality timberlands as carbon prices increase and become more competitive with timber prices. As the voluntary market grows and carbon prices increase, a broader group of timber owners will have an alternative to harvesting timber to generate income, which will result in additional competition for fiber and logs and certain wood baskets. This pricing competition should influence timber values over time which will benefit landowners even without direct participation in the market. I will close my discussion on Forest Carbon with a brief outline of the path to monetizing the carbon credit in an update on where we are at along that pathway. Monetizing the carbon credit involves a series of steps. It begins with assessing the carbon potential of a wood basket or region, after which specific projects are identified and documented. The project can then be submitted to a voluntary market registry for verification. After verification is complete, the credits are issued and available for sale. Finally, the seller must manage the carbon inventory for the life of the agreement. Typically, most landowners will outsource their carbon projects to third-party developers. The outsourced model makes sense for landowners who don't have a large portfolio of potential carbon projects because of the complexity and the expertise required to bring a project to market. However, landowners who outsource this work share a meaningful amount of the economics with the developer. In general, we expect to develop and manage our own projects. Given our scale, timber management expertise and technology-enabled approach, this will allow us to optimally manage our portfolio of carbon opportunities while capturing the highest value. We have completed initial assessments across the Northeast and for select locations in the West and South and commenced work to develop a potential project scenarios, economics and timing across multiple candidate areas. As a result of this work, we're initiating a pilot project in New England and positioning other timberlands for potential projects. We expect to have the New England project completed with the option of bringing these credits to market during 2022. Turning now to our Carbon Capture and Storage. In addition to carbon sequestration in our forest, we have a unique opportunity to participate in the development of geologic, carbon capture and storage, or CCS. This is enabled by our surface and subsurface ownership in targeted areas in the Gulf Coast region, where CCS development has the most near-term potential. At a high level, CCS is a process where carbon dioxide is captured at the source, typically an industrial facility and transported along pipelines to a storage location and injected into deep subsurface formations for safe permanent storage. This process has been used for decades in the oil and gas industry to improve hydrocarbon recovery. However, the cost has been a significant barrier to broader adoption for just carbon mitigation. But a few things have changed, which positions CCS for future growth. These include continued advances in technology and infrastructure, significant capital commitments to develop CCS by companies in heavy industries with hard-to-abate carbon, and last, federal tax and direct investment support. This includes recent legislation with specific CCS tax incentives and the new infrastructure bill, which contains nearly $12 billion for large-scale CCS commercialization and pipeline infrastructure. The map on this slide is an example of our AVO 2.0 process. It shows our surface and subsurface ownership, combined with proprietary geologic data mapped against major industrial carbon emitters and existing CO2 pipeline infrastructure. Through this process, we have identified the potential for several large-scale CCS hubs. On 400,000 acres of Weyerhaeuser surface and subsurface ownership. And we now are in discussions with several potential companies that have significant expertise and interest in developing CCS projects on our acreage. Similar to our approach, when partnering with developers of solar and wind projects we do not intend to invest in the development or manage the operations of CCS projects that we enter. Instead, we will benefit from lease and royalty payments for the access to our surface and subsurface ownership. As we think about how this business will develop over the next few years, it's important to note that even with growing market demand and government backing, it will take time to finalize geologic assessments, permits and infrastructure before projects become operational. As a result, we expect these revenues will begin to emerge towards the end of the 2022 to 2025 time frame. Last, I'll touch briefly on our renewable energy and mitigation banking business. Through our AVO 2.0 process, we have identified a number of potential new wind sites, primarily in our Western and Northeastern ownership. We've also identified 200,000 additional acres for potential solar development. As is typical in these types of projects, not all areas identified will be developed, but it does position us to create a significant project pipeline. Turning to our mitigation banking business. We are one of the largest providers in mitigation services in the Southeast. We have operating banks on over 20,000 acres in additional mitigation projects in entitlement on 11,000 acres. With the expected increase in building and infrastructure required to support population expansion, particularly in the Southeast, demand for mitigation banking is expected to triple by 2030, and we are well positioned to grow our business in that market. Turning now to Timberlands, the second focus area of our growth strategy. Our portfolio optimization and acquisition decisions follow a rigorous analytical process. We have identified using data analytics and market intelligence, a series of targeted investment zones, where we see potential to strategically increase or decrease our Timberlands' footprint over time. That analysis forms the foundation of our portfolio decisions. We then apply our proprietary data analytics, including many of the AVO 2.0 tools I have described and our deep boots on the ground understanding of timberland operations and markets to evaluate and prioritize specific investment opportunities. This approach allows us to efficiently pursue timberlands that fit our strategic profile and provide the highest return opportunities. Over the past year, we have completed 4 acquisitions and divestitures totaling over $1.2 billion that enhance the value of our portfolio and demonstrated the benefits of these tools and approach. In our Western Timberlands, we sold lower value, less productive acreage in Southern Oregon and Northern Washington. We also acquired highly productive acreage in mid-coast Oregon, which fits seamlessly into our existing ownership, provides additional timber to our mills and adds fee volume to our export business. In the South, we acquired high-quality timberlands in Alabama that are strategically located near our existing ownership and are in an attractive pulp and log markets. Although these transactions reduced our timberlands holdings by 140,000 acres collectively, they resulted in higher annual harvest volume, $30 million of annual EBITDA improvement and cash yield uplift of nearly 5% that will be sustained over the long term, all while generating additional capital for future redeployment. These recent transactions demonstrate our ability to enhance the value of our timberlands through disciplined investment and portfolio management. We remain committed to growing the value of our timberlands over time. And looking forward, we are targeting to invest $1 billion in strategic timberlands acquisitions focused in the U.S. South and West between now and the end of 2025. These investments will be made with a high level of discipline and rigor, and we expect to generate near-term cash yields comparable to the recent transactions I just discussed. As Devin outlined in his opening remarks, we actively manage all aspects of our value chain from the integration of our timberlands and mills to our supply chain and log merchandising to our marketing and log export program. This competitive advantage drives incremental value from the timberlands that we operate and enhances our near-term results. In addition, our silviculture and productivity investments allow us to capture additional returns throughout the harvest cycle. Last, as I discussed in the previous slides, the sheer size and diversity of our portfolio generates tremendous option value. While we do not include these values in our acquisition underwriting, we have repeatedly demonstrated that we have the expertise to capture additional value from real estate, ENR and conservation opportunities over time. And with increasing demand for emerging natural climate solutions, there's an opportunity for even further upside. I'll wrap up the Timberlands section with some comments on our business development efforts and specifically, our export growth strategy. Weyerhaeuser has a long history of exporting into the Asian markets from our Western Timberlands. Building on this experience, operational scale and supply chain reliability, we are increasing efforts to target new markets for our Western export program. This includes selling high-grade logs to new customers in China and exploring opportunities to sell into additional Asian markets. The Southern markets, as I discussed earlier, are in the best position to respond to growing export demand, not only for logs into the Chinese and Indian markets, but for wood fiber, pulp and biomass into the Japanese markets. We are also seeing increased interest from nontraditional markets such as Turkey as well as the Middle East and other parts of East Asia. Today, our Southern export program is in the early stages of development, but we are well positioned for increased participation as this growing market continues to develop. Turning now to Wood Products, the final focus area for growth. We have transformed our Wood Products businesses over the last number of years through disciplined capital investments and OpEx improvements. As Devin previously mentioned, we have achieved black at the bottom in Wood Products and delivered peer-leading margin performance across all manufacturing businesses in 2020. Looking forward, our OSB and distribution businesses are well positioned given the favorable supply-demand outlook, and we will continue to improve efficiencies and reduce costs in these businesses. However, with rising demand for wood-based building, we see additional opportunity to expand our lumber production and enhance our engineered wood products to serve the growing market for these products. Looking specifically at lumber, we expect North American lumber demand will increase by 10 billion board feet or 17% from 2020 to 2025. This is supported by favorable demand fundamentals for new residential construction, particularly single-family housing as well as repair and remodel and wood-based commercial construction. With Western markets in balance and limited ability to add production capacity and continued reduction in Canadian production over time, we expect the U.S. South to serve as the primary supplier of incremental lumber supply. As a result, our Southern Timberlands and manufacturing operations are well positioned to capitalize on this new opportunity. Another area of demand growth is mass timber, which is gaining acceptance in the United States and overseas. This trend is supported by the environmental benefits of mass timber and continuing improvements in the production and building processes. As the relative cost of mass timber construction decreases over time and the benefits are demonstrated in larger projects, we expect to see capacity expansion and increasing adoption in construction of commercial and multiunit buildings. While Weyerhaeuser has no current plans to invest in cross-laminated timber or mass timber panel manufacturing, we do expect to benefit as a supplier of lumber and engineered wood products, which are feedstocks for mass timber construction materials. We view this as a compelling growth opportunity and are strategically positioned to serve this emerging market with our existing product base. Turning now to our lumber portfolio. Several years ago, we made the decision to modernize 2 of our highly strategic lumber mills, Dierks, Arkansas and Millport, Alabama. These were relatively low-risk investments in proven operations with strong teams, markets and fee timber alignment. The projects were completed in 2018 and 2019, and the results have been outstanding. We have reduced controllable costs by 15% and enhanced our product mix. The projects also increased our lumber capacity by 320 million board feet at an attractive cost and have generated an estimated 30% return on investment. Following these strong results, we announced earlier this year a third modernization project at our Holden, Louisiana mill and an expected completion date in 2023. With the success of Dierks and Millport and Holden on the horizon, we continue to view investments in our existing businesses as the primary catalyst for enhancing our Wood Products portfolio in the future. This proven strategy serves as a strong foundation for our target to organically grow lumber production by 5% annually. We expect this production growth will be achieved by capturing the full uplift of our Millport and Holden projects as well as additional disciplined capital investments. Additionally, we'll continue to position both our lumber and engineered wood products businesses to capitalize on the emerging mass timber market. With our unmatched portfolio of assets, deep expertise and proven track record, we are well positioned to achieve these targets. Before handing it back to Devin, I will just summarize the growth strategy we announced today. We are focused in 3 areas: growing Natural Climate Solutions to a $100 million per year business, continuing to optimize and invest in our Timberlands portfolio with a target investment of $1 billion and investing in our Wood Products business to further reduce costs, improve productivity and grow our lumber production by roughly 5% annually through 2025. This growth strategy is aligned with our investment thesis, and we believe success in each of these areas will enhance portfolio value and shareholder returns. And now I'll turn it over to Devin.

Thanks, Russell. A core part of our company strategy for some time has been a relentless focus on achieving industry-leading performance across all of our businesses. This is something that we're focused on each and every day. And today, we'll give you a little more detail on how we will continue to drive performance improvements going forward. Since 2014, we've made tremendous progress on improving our operating performance in each of our businesses. Our unrelenting focus on operational excellence has been at the heart of this improvement. Across the company, we've been working to attain an industry-leading cost structure, driving superior execution in everything we do and identifying opportunities for future improvements. OpEx has become part of our culture and is now deeply ingrained in our organizational DNA. Over the past couple of years, we've also increased our focus on innovation. I'm encouraged by the progress we're making, and we are now starting to really leverage innovation to accelerate improvements in all parts of the company. OpEx and innovation will be the primary drivers for our operating performance improvements going forward. And I think the OpEx and innovation culture that we're building will be a sustainable competitive advantage for us well into the future. As a reminder, the foundation of OpEx at Weyerhaeuser has always been cost control and margin improvement. That was the focus when we initiated the first operational excellence program back in 2014, and it will undoubtedly continue to be a core part of OpEx going forward. But as OpEx continues to evolve into what we call OpEx 2.0, we've broadened our approach for driving operational excellence and incremental value. Specifically, we've added future value creation, which is important for any company, but certainly, that's true for a long-term business such as ours. We've also included cost avoidance and efficiency as part of OpEx 2.0, as we believe that incentivizing these activities will create a better business today but also position us well for the future. And we're always looking for more opportunities to drive cross-business synergies and improvements throughout our integrated supply chain. Over the last several years, operational excellence has become a core part of who we are as a company. In fact, during a recent employee survey, 95% of our employees indicated that they understood how their work contributed to our OpEx goals. That level of alignment is a great indicator of how deeply ingrained this is within the organization. Our OpEx 2.0 efforts are supported by an increased level of focus on innovation at the company. We've been working to foster an innovative culture across our businesses and our functions. And we've implemented new tools to better engage our workforce around innovation. We've also been increasing the role that innovation, both big and small, plays in how we run our business on a day-to-day basis. I'm really excited about the progress that we've been making on this front. I've highlighted just a few examples here on the slide of innovation that are driving improvements in our businesses today from increasing mechanization in steep slope logging out west to leveraging drones for a wide variety of forestry applications. We are seeing improvements across our Timberlands business. On the Wood Products side, we've been increasing our usage of automation and leveraging artificial intelligence to drive efficiencies and performance improvements in our mills. We've also been working on some proprietary tools and processes for drying lumber, which is allowing us to capture more value and increase the amount of higher value product that we produce at the mills. Again, these are just a few examples, but I believe that our innovation program is a very valuable source of competitive advantage and for Weyerhaeuser to set us up well for the future. But ultimately, these efforts are all about results. And as you can see, we've delivered meaningful improvements across our businesses. Through 2020, we've captured $750 million of OpEx improvements. We've achieved black at the bottom in our manufacturing businesses Meaning we're positioned to be cash flow positive even in a historic downturn like the Great Recession. We've delivered record results both in terms of cost structure and EBITDA generation from an EBITDA benchmarking standpoint. We were #1 or #2 in all of our businesses in 2020, including being #1 across all of our manufacturing businesses. I'd also note, we haven't stopped there. We've targeted another $50 million to $75 million of OpEx improvements for 2021. Our OpEx and innovation efforts have been paying off in terms of improved operating performance. And we are fully committed to ongoing improvement in the future. So looking forward, we will continue to focus on leveraging OpEx and innovation. This will include maintaining an industry-leading cost structure, increasing the mix of higher value products and improving reliability across our manufacturing operations. We plan to further reduce our controllable costs in our lumber business by approximately 10% and our OSB business by approximately 5% by the end of 2025. And we'll look to continue driving cross-business operational excellence at every opportunity. In total, we're targeting an additional $175 million to $250 million of operational excellence improvements across the company from 2022 through the end of 2025. This supports our continued ability to deliver industry-leading performance across our businesses, which will translate into improved cash flow generation and ultimately drive superior financial results and value creation. Now let me turn it over to Nancy to discuss ESG and our carbon record.

Thank you, Devin. Sustainability is one of our core values. It's been part of the way we do business since we were founded more than 120 years ago, and we believe our sustainability performance and strategy will be a key driver of shareholder value over the long term. And today, I'm excited to give you an update on our sustainability progress, with a particular focus on 2 meaningful milestones: the release of our carbon record and our submittal of a science-based greenhouse gas reduction target. I'll start with a brief update on our sustainability strategy and ambitions. Last year, we launched a new sustainability strategy with 3 critical focus areas: first, continuing to build on and enhance our solid ESG foundation; second, fully integrating sustainability into our business processes and priorities; and third, intensifying our work in 3 critical challenge areas, where we believe our company is uniquely positioned to have a positive impact in the world, contributing to climate change solutions, meeting the need for affordable and sustainable housing and ensuring the rural communities in which we operate are thriving places to work and live. We're calling this work 3 by 30. And our commitment is to make tangible progress in each area by 2030. Over the past year, we've made considerable progress in all 3 of our focus areas. With respect to our ESG foundation, we've refreshed our strategy on DE&I, which is diversity, equity and inclusion, and we're implementing best practices that will improve our ability to attract and retain diverse talent. We also enhanced our ESG reporting with 3 new disclosure frameworks that align with the TCFD, SASB and the UN Sustainable Development Goals. In business alignment, we are on track for fully integrating sustainability into our core business processes, key goals, performance plans and capital allocation across all 3 business segments. This will create additional avenues to identify and drive value through sustainability-linked opportunities that improve margins, better service our customers and meet new or emerging market demand, such as natural climate solutions. And finally, with respect to positive impact, we've made strong progress across each of the 3 positive impact areas. And today, I'm excited to share how we are leading the sector through 2 meaningful achievements related to contributing to climate change solution. Those include today's release of our inaugural carbon record and our submittal of a science-based greenhouse gas reduction target that aligns with the path to net 0. Our forest and wood products have a tremendous role to play in mitigating climate change. We own millions of acres of forest that absorb carbon from the atmosphere, and that carbon is stored for decades in the long-lived or long-lived wood products we produce. By 2030, we envision a world where the value of working forests and the products that come from them are fully recognized as one of the key solutions for slowing and reducing the impact of climate change. We believe this will drive incremental demand for our sustainable building products and support market opportunities for carbon and climate solutions, and we're excited about the role our company is poised to play as these markets continue to develop. Through our research, stewardship and industry leadership, we are committed to demonstrating how working forests can and should be part of a sustainable, biodiverse and climate resilient solution today and long into the future. For the past 2 years, our sustainability team has been deeply involved in the development of forest carbon accounting guidance. This guidance will specify how companies account for carbon removals and ensure consistency in measuring how forests and wood products provide critical carbon removal climate solutions. Today, we're proud to lead our sector in disclosure and methodology as an early adopter of the future greenhouse gas protocol on carbon removals and land use. With the publication of our carbon record today, we can confidently and proudly declare that our net impact is significantly carbon negative, meaning we remove more carbon from the atmosphere than we emit each year. We don't believe there is another industry that can make this claim. And given our scale, we believe there is no other company that's a better true carbon-negative investment than Weyerhaeuser. As you can see from this slide, our annual carbon removals drastically outpace our emissions. Turning to the components of our new carbon record, beginning with our direct carbon removals. Last year, our U.S. timberlands removed approximately 10 million tonnes of carbon dioxide equivalents from the atmosphere. This is the increase in above-ground carbon attributable to forest growth and management practices after we account for harvest and mortality. These removals alone exceeded our scopes 1, 2 and 3 carbon emissions. We also are responsible for another 22 million tonnes of scope 3 removals across the value chain. And this is primarily carbon stored in our own long-lived wood products and products that our customers make from our logs. Altogether, our carbon removals in 2020 totaled 32 million metric tons of carbon dioxide equivalents. This equates to removing 7 million passenger vehicles from the road for 1 year or offsetting the annual emissions from 8 coal-fired power plants. Moving now to our emissions, which totaled 7 million metric tons in 2020. Our direct and indirect emissions are primarily attributable to electricity and fuel usage within our Wood products mills. These emissions totaled only 1 million metric tons, and the relatively minimal value speaks to the low carbon intensity of wood products manufacturing. We also have approximately 6 million tonnes of scope 3 emissions. And these are primarily emissions generated by customers who purchase our wood fiber and emissions associated with the products and services we buy. As companies across our value chain work to reduce their emissions, which many of them already are or have committed to, we expect our scope 3 emissions to decrease over time. Finally, it's worth noting that in alignment with the draft greenhouse gas protocol guidelines, we are reporting carbon removals and emissions separately rather than adding them together. The clear separation promotes transparency and helps drive the focus for continuous emissions reductions over time, which will be critical to limiting global warming to 1.5-degree Celsius. In addition to our carbon emissions and removals, there's an enormous amount of carbon stored in our forest that remains in place year after year, decade after decade. And when we say enormous, we're talking about 2.3 billion to 3.6 billion metric tons of CO2 equivalent. Approximately 1 billion metric tons is stored in our trees, in their roots. We can calculate this pool of stored carbon with a high degree of accuracy by leveraging our internal scientists and state-of-the-art inventory management system. Our forest also stored an impressive 1.3 billion to 2.6 billion metric tons in soil and other biomass. For these pools, we rely on a mix of regional and specie-specific estimates to quantify a range of stored carbon. We've been managing our forests sustainably for 120 years and are proud to be the stewards of such an amazing natural resource. This is why we firmly believe that our approach to sustainable forestry is one of the most impactful things we can do to combat climate change. As a company, we are committed to contributing to climate change solutions. And that means not only removing CO2 from the atmosphere but also doing our part by decreasing our own emissions. Last year, we committed to setting a greenhouse gas emission reduction target in line with the most recent climate predictions. Today, we're announcing that we have set and submitted that target to the science-based targets initiative at the most ambitious level in alignment with the Paris Agreement goal of limiting global warming to 1.5 degree Celsius. With this very important milestone, we're excited to join a select group of climate leaders who are on a path to net-zero emissions. Our target includes a commitment to reduce our Scope 1 and 2 emissions by 42% overall, and our Scope 3 emissions by 25% per tonne of production, both by 2030. We expect to achieve these targets primarily through energy efficiency projects, increased renewable energy usage and supplier engagement. And we'll report on our progress annually. And we expect to receive formal approval of our target, later this year. And in the meantime, we've shared the comprehensive methodology behind our calculations as well as our broader carbon record on our sustainability website. And we look forward to updating our carbon disclosures annually. Before wrapping up, I'd like to spend a few moments on our ESG ratings and indices. Where we've achieved best-in-class performance among North American companies and peers. We think it's critical to continuously benchmark our ESG progress and take pride in efforts toward improving our ESG performance and scores, and increasing our disclosures. In 2020 alone, we achieved significant year-over-year improvements in our S&P Global, MSCI and ISS scores, as well as several others, as a result of our improved performance and disclosure. We have worked hard to set and achieve ambitious sustainability goals, and this effort has earned us a myriad of external recognitions that we're very proud of. In addition to these specific awards and recognitions, we're also part of numerous ESG and socially responsible investment indices. In summary, we have a long history of operating with a strong ESG foundation. It's part of our strategy, and we are uniquely positioned with our Natural Climate Solutions business to grow as carbon markets develop. And with the announcements today on our carbon record and setting a science-based emissions reduction target, we have further enhanced our industry-leading position as a premier ESG investment opportunity. And now I'm excited to talk to you about our ability to create value for shareholders through disciplined capital allocation, including the announcements we made earlier today. I'll start with a quick review of our balanced capital allocation philosophy. At Weyerhaeuser, we have 3 key priorities for capital allocation: returning cash to shareholders, primarily through our dividend framework, but also through opportunistic share repurchase; investing in our businesses through disciplined high-return capital projects; and value-enhancing growth opportunities. All while maintaining an appropriate capital structure. Over the past 18 months, we've taken strategic actions in all of these areas to position Weyerhaeuser to deliver superior long-term value for our shareholders. We implemented a new dividend framework that enhances our ability to return meaningful and appropriate amounts of cash to our shareholders across markets cycles. We made disciplined investments to undertake additional high return capital projects to enhance the value of our portfolio. And we strengthened significantly our balance sheet. I'll spend a few moments on each of these areas, beginning with our dividend framework. Our framework targets a payout ratio of 75% to 80% of our annual adjusted funds available for distribution or FAD. This underscores our commitment to return a significant portion of our free cash flow back to shareholders. The framework includes 2 components. First is our sustainable quarterly-based dividend which is currently set at $0.17 per share. It's supported by the steady cash flow from our Timberlands, Real Estate and ENR segments. Our base dividend is sustainable across market cycles and we're committed to growing it over time. We'll supplement the base dividend each year with an additional return of cash to achieve the targeted 75% to 80% of adjusted FAD. We expect to achieve this primarily through a variable supplemental cash dividend, which is largely tied to performance from our Wood Products segment. The supplemental dividend will normally be paid in the first quarter of each year based on prior year cash flow. Under certain circumstances, we may also utilize opportunistic share repurchase to return cash to shareholders. Next, I'll talk briefly about our capital expenditures, which are organic investments to sustain and enhance our wood products and timberland operations. These disciplined investments have been a key driver of the operating improvements and cost reductions that Devin talked about earlier and will support continued OpEx improvements into the future. For 2021, we continue to anticipate $460 million of CapEx, and this includes the beginning phase of our recently announced Holden sawmill modernization project. Looking forward, we expect our 2022 to 2025 annual CapEx level to be moderately lower than 2021, somewhere in the range of $420 million to $440 million. This level of investment includes CapEx required to support the growth targets that Russell previously discussed and it demonstrates the low capital intensity of our growth strategy for those businesses. Now let's discuss our capital structure. Core to this is maintaining a solid investment-grade credit profile. We ended the second quarter of 2021 with approximately $1.8 billion of cash and a leverage ratio well below our target of 3.5x. Over the past 18 months, we've paid down $1.1 billion of debt and reduced our pension liability by almost $800 million. We also plan to retire $150 million of debt when it matures in the fourth quarter. With these actions, we have strengthened our balance sheet, enhanced our credit profile and created significant flexibility and dry powder in the form of debt capacity. This positions us to strategically deploy capital to grow the value of our portfolio and our returns to shareholders. I'll move now to a brief summary of our year-to-date cash flow generation in today's announcement that we have declared an interim supplemental dividend. Our financial results in the first half of 2021 were truly unprecedented. We generated over $2 billion of cash from operations, our highest first half operating cash flow on record as lumber and OSB prices surged to historic highs during May and June. Adjusted FAD through the second quarter totaled nearly $1.9 billion. Assuming the midpoint of our targeted 75% to 80% payout ratio, that translates to nearly $1.5 billion of cash earmarked for shareholder returns through a combination of our base plus variable supplemental dividend. We've returned $255 million of base dividends through midyear of 2021, leaving approximately $1.2 billion of cash or $1.60 per share, already earmarked for the variable supplemental component of our dividend. And as I previously stated, our intention is to generally pay the full supplemental dividend annually in the first quarter based on the prior year's cash flow. But given the strength of the first half financial results and a good line of sight to full year cash generation, we are accelerating a small portion of our first quarter 2022 accumulated supplemental dividend for payment in the fourth quarter of this year. This morning, we announced that our Board of Directors has declared a onetime interim supplemental cash dividend of $0.50 per share, payable on October 19, 2021 to shareholders of record as of close of business on October 5, 2021. I want to emphasize that this is a onetime off-cycle cash return, and it should not be interpreted as a change to our commitment to generally pay the entirety of our supplemental dividend on an annual basis in the first quarter. The interim dividend enables our shareholders to benefit from extraordinary market conditions with a supplemental dividend in the first calendar year of our new dividend framework. Additionally, the specific amount of the dividend allows us to take advantage of a onetime tax planning opportunity to enhance our future NOL capacity. We're excited to accelerate this return of cash, and we also look forward to delivering a meaningful supplemental dividend in the first quarter of 2022. After the interim supplemental dividend is paid next month, there remains an impressive $1.10 per share of supplemental dividend earmarked for payment in the first quarter of 2022. This is prior to the contribution from our second half 2021 results. I'll now discuss our expected full year dividend payments for 2021 and 2022. Combining the interim supplemental dividend announcement today and a full year of our base quarterly dividends, we expect our 2021 dividend payment will total $1.18 per share. This level of payout translates to an attractive dividend yield at our current share price. Looking forward to 2022, we're on pace to return more than $1.78 per share of dividends next year. Our base dividend is currently $0.68 on an annualized basis, and we anticipate this amount will increase next year, and I'll discuss that more in a minute. We also expect our variable supplemental dividend will increase beyond the $1.10, currently earmarked, due to an incremental contribution from our second half 2021 results. This level of payout will generate a 2022 dividend yield that is well in excess of what we expect to deliver in 2021. It's worth noting that we anticipate second half 2021 adjusted FAD will be lower than the first half of 2021, primarily due to lower average price realizations for lumber and OSB as well as higher capital expenditures in the second half of the year. Let's now spend a few minutes on our base dividend and specifically our plan to grow it over time. Since establishing our new dividend framework in late 2020, it's been our intention to grow the base dividend as we generate incremental cash flow that's sustainable across market cycles. The portfolio growth and OpEx targets that Russell and Devin have outlined, will sustainably increase our annual cash flow generation over the next several years. As a result, today, we are committing to grow our base dividend by approximately 5% annually, beginning in 2022 and through 2025 as we make progress against those targets. We're excited to make this commitment in the first year of our new dividend framework, and we believe it underscores our ability to prudently return meaningful and growing amounts of cash to shareholders. I'll now briefly summarize the components of our total dividend framework and recap what investors can expect between now and year-end 2025. I've already talked about the foundation of this framework, which is our growing base dividend, sustainable and supported by our Timberlands, Real Estate and ENR segments. We then had a variable supplemental dividend that's supported by strong Wood Products earnings power. With our proven ability to be black at the bottom in our Wood Products business, we have confidence that we'll deliver an annual supplemental dividend across most market conditions. In summary, we're incredibly excited about the near and long-term benefits of this dividend structure for our shareholders, and we look forward to returning meaningful amounts of cash through this framework across market cycles. I'll wrap up this morning with a discussion of share repurchase. We believe share repurchase is a meaningful tool for returning capital to shareholders under certain circumstances, and we look to repurchase shares opportunistically when we believe it will create significant value. Entering the third quarter, we had $414 million of authorization remaining under our existing $500 million repurchase program. As you can see on the slide, we've executed on that authorization during the third quarter. And with the new $1 billion authorization announced today, we have significant flexibility to opportunistically repurchase shares. We're committed to allocating capital for this purpose as we look to maximize shareholder value within our overall capital allocation framework. In summary, driving superior long-term value for shareholders through disciplined and balanced capital allocation is the fourth lever in our investment thesis. The actions we've taken over the past 18 months have positioned us well for the future. With our new announcements today, we're further demonstrating our commitment to return meaningful and appropriate amounts of cash to shareholders across market cycles while also investing to grow the company over time. And now I'll turn it over to Devin for some closing remarks.

Thank you, Nancy. Over the past few years, we've made significant progress on improving our portfolio and achieving industry-leading performance. We've continued to build on our strong ESG foundation and have taken a number of actions to strengthen our balance sheet, invest in our businesses and have positioned Weyerhaeuser to return significant amounts of cash to our shareholders. Today, we detailed a number of strategic actions to enhance shareholder value over the coming years. These actions and related multiyear targets will support the growth of our company and our cash flows, improve our competitive position in the marketplace and further differentiate our company as a leader in ESG. These actions will also ensure that we continue to return meaningful amounts of cash to our shareholders through a growing base dividend, a variable supplemental dividend that allows shareholders to continue to benefit from wood products markets and through opportunistic share repurchase, all while continuing to invest in our businesses and maintain an appropriate capital structure. In summary, with our unmatched portfolio, our industry-leading performance, our strong ESG foundation and our disciplined capital allocation approach, combined with the strategic actions that we've outlined today to further improve in each of these areas, we are well positioned to drive superior total shareholder returns for our investors in the years to come. We will now take a brief 5-minute break to set up for the questions and answers period. We'll be back shortly, and we look forward to taking your questions. [Break]

All right. Well, welcome back, everyone. We'll go ahead and get started with the question and answers here momentarily. Just a brief note, I understand that there was an issue with the webcast, so that may have gone down for a few minutes. I will remind you that the full webcast will be available on our website as soon as the event. And so we're sorry about that, but let's go ahead and move on to the Q&A period. So just a couple of brief notes. [Operator Instructions] So with that, I think we'll go ahead and kick it over to the operator to get us started.

[Operator Instructions] Our first question today comes from George Staphos with Bank of America.

Congratulations on the progress so far. I wanted to spend the first question on your targets. Having targets is wonderful. But how do you guard against the unintended consequences of having to keep up with a 5% dividend growth rate on the regular dividend or the $1 billion investment program which is obviously tied to that? How aligned is the dividend growth to the program? And would you reconsider the program over time as the investment opportunities aren't yielding the return that you wanted? So that's general question one. General question two is how do you plan on reporting on Natural Climate Solutions? Will this be a separate business line item? Or will you report it within one of the segments? And will you consider managing project [ areas ] for carbon inventories for others? Or it's just purely for Weyerhaeuser?

Yes. Thanks for the question, George. Maybe Nancy and I will tag team the first part, and then we'll turn it over to Russell for the second question. Nancy, you want to talk about the confidence level and the dividend target that we put out there?

Yes. So as we've said, any growth in our base dividend would come from growth in our steady Timberlands and Real Estate business -- Real Estate and ENR business segments. And with today's announcements about the targeted Timberlands acquisitions over the next several years through 2025 as well as the growth in our Natural Climate Solutions business, those will support this 5% annual growth in our base dividend. Things like lower interest payments and operating -- OpEx, sustainable performance improvements will also contribute to that. And we modeled several different scenarios and sensitivities under different market conditions and specific business objectives, and we feel confident that we'll be able to fund a 5% annual growth in our base dividend through 2025.

Great, Nancy. Russell, you want to talk about the carbon business?

Sure. And George, I think you had a couple of questions there. So if I missed one of them, please repeat. But I think your first question was in relation to the $1 billion investment. I believe that was focused on the timber side. As we look at that opportunity, we're going to be very disciplined. We think that the $1 billion fits kind of within our profile. We've been in the market. We've been active in the market both on the buy side and the sell side. So looking at the strategic areas where we want to invest, we think the $1 billion makes sense. But we're only going to do deals that make sense to create value for the portfolio. So we'll be very disciplined in that regard. As far as managing carbon for others or, I think, on other projects, our focus is going to be on our portfolio, and we can go into that in a little more detail later. As far as our reporting segments, we're not going to change our current reporting segment. We basically have the Natural Climate Solutions. The current 22 million is sitting within our energy and natural resources, and then our mitigation banking and our conservation is within the real estate program. So today, given the size, it just makes sense to have it kind of within the existing segment. On an annual basis, we'll report our progress against our targets. And then as the business grows, if it makes sense to break that out as a separate segment, we may consider that sometime in the future. But we'll provide you updates on a regular basis as to our progress.

Terrific. So I guess in summary, George, the targets we put out, we certainly feel that they're aggressive, but we feel very confident in our ability to meet those. And we have a lot of work ahead of us, but feel very good about our ability to deliver on those.

Our next question comes from Anthony Pettinari with Citi.

On Timberlands optimization, is it possible to talk a little bit more about where you're seeing the most attractive opportunities for acquisitions, maybe especially in the U.S. south? And are there subregions where Weyerhaeuser is underrepresented or maybe on the other hand, where you look to accelerate divestitures? And then is it possible to kind of frame that against your outlook for future southern log price improvement, which has maybe lagged expectations over the last decade?

Russell, you want to take that?

Sure. Yes, the way I would look at our portfolio is we're in every major growing timber area in the United States in the west and in the south. And so we have a very broad perspective across all of our portfolio and across all the major timber growing regions. So given that, we have a unique kind of opportunity to see what is coming to the market and how those values are trading and really how the operations work within those regions. So again, we look at every opportunity within our ownership. We look very closely at how it matches with our manufacturing base, and then we identify kind of the strategic locations where we wanted to invest. And as we've demonstrated in the past, we may divest. And so that portfolio optimization is an ongoing process both on the buy side and on the sell side. I would say that -- as we've announced, we're going to be pursuing $1 billion of transactions through 2025, that we're going to be a net buyer over the next number of years. That would be the expectations. But if there's an opportunity or we see a need to divest of a property and reinvest, that's something we'll also consider. Our focus will be in the west and in the south. Again, we have a lot of opportunities throughout kind of both of those regions.

Got it. Got it. And then just the $1 billion investment program and the dividend growth, does that assume some level of southern log price improvement over the next few years? Is there a certain benchmark, whether it's an inventory level or a level of housing starts or -- that you think that we need to see before we see more price tension in the south?

Yes. A couple of comments there. Certainly, as we think about the go-forward plan, there is some recovery in southern sawlog that is baked into that. As we've said, over the last several years, it's been slower to come back than we would have expected. That being said, we are seeing continued growth in the U.S. south in terms of new capacity coming into that region. We're seeing more opportunities around export. So our view over the long term is that we are going to see southern sawlog prices continue to grow and improve. In terms of how that's going to fund the dividend growth that we've laid out, we've been pretty modest in our internal modeling just because we want to make sure that we're able to meet that 5%. So in other words, we don't need significant log price appreciation in order to meet that 5% dividend growth. Although, again, we do believe southern sawlog pricing will improve over time.

Our next question comes from Susan Maklari with Goldman Sachs.

My first question is thinking about the goal that you talked about within climate solutions. Could that perhaps change or in any way influence where you're kind of targeting in terms of geographies for timberland acquisition? You've mentioned in the commentary that you've got a pilot program in New England. Does this mean just maybe that you're open to more geographies or more incrementally focused on growing areas that you haven't been maybe expanding as rapidly in the last few years?

Yes. Russell?

Yes. What I would say is -- that's an interesting question. Our primary focus in our acquisitions is really on kind of the near-term and the midterm and the long-term returns that are really specific to the Timberlands operations. If you recall in the one graph, I showed kind of what are the option values that we're pursuing through our AVO 2.0 and bringing those forward. And that's really where a lot of the Natural Climate Solutions focus is. As far as acquiring with that thesis today, I would say that would be outside of kind of our underlying economic evaluation or underwriting, but it's an opportunity that we see as a potential for the future. And I think as we've demonstrated in the past, we've done a really good job of capturing those alternative values through our real estate program and our ENR program. So I would say it's something we're definitely paying attention to as we think about the investment thesis and our approach over the next number of years. It won't be included kind of in the underwriting and the valuation analytics.

Yes. The only thing I would even add to that, Susan, is just certainly, that's true with respect to the near term. But one of the things that's really exciting about the AVO 2.0 work that Russell and his team are doing is it just opens up a whole another level of optionality across the land base. And so we're focused on capturing that value with our existing land base. And I do think over time, that will ultimately become a bigger player in terms of how we think about our A&D activity. So really exciting work there. It's going to feed, I think, a lot of how we think about acquisitions and divestitures into the future.

Okay. That's helpful. My follow-up question is kind of shifting gears. You obviously announced $1 billion repurchase authorization this morning. And can you talk a little bit to the timing of working through that? Anything that we should kind of be thinking about there and maybe a little bit more in terms of where the buyback and the authorization, using the authorization kind of fit within your overall thoughts on capital allocation? Is there any increased interest in kind of working through that maybe a little faster than you have in the past?

Nancy, you want to cover that?

Yes. Sure. As we've said, we think share repurchases is a good tool for delivering return of capital back to shareholders under certain circumstances, and specifically, that's when it's the best option to create shareholder value. So the primary rationale for our increase in the authority to $1 billion today was to give us more flexibility to be opportunistic about buying back shares. And that's flexibility in terms of both the amount, up to $1 billion of share repurchase, and also the timing to allow us to move quickly when we see the opportunity arise. And so we're not going to set a specific amount or a certain time frame. We're going to continue to look at share repurchase on an opportunistic level in terms of when it creates shareholder value.

Our next question comes from Mark Weintraub with Seaport.

One question on the $80 million of incremental EBITDA you're expecting from the -- I think primarily as far as carbon and CCS. Can you [ give us a sense ]? Is that based on things that are already visible? Or does it depend on new development?

Yes. Mark, the way I would think about the $80 million, right now, the business is at about $22 million. So that $80 million kind of growth is going to be centered really in 3 areas. The first is in the renewable energy. As I mentioned, we're having significant demand for solar installations in the southeast, and we've been working on that kind of pipeline of potential projects and bringing developers in for really a couple of years. So we'll start seeing that come to market in the next -- in the near term. On the mitigation banking, we have a very active program. We continue to build out our mitigation credits as we see the southeast continue to grow and demand continue to expand. We're starting to serve that market, and that business is starting to grow. So I think in the near term, that will also make contributions. When you look at the carbon, the carbon forestry and the carbon capture and sequestration, the carbon forestry market is still pretty small. You saw the growth that we're projecting or we're expecting to $50 billion. I've seen estimates that it growing to $100 billion. And so we're definitely in the early stages of the growth of that market. And as that grows, we're going to expect prices to increase. Our focus has been to AVO, our whole carbon opportunity within our portfolio so that when prices reach that point where it makes sense, we can readily act and bring projects to market. But we only have a small pilot project up in the Northeast that we're expecting to bring into market in 2022. On the carbon capture and storage, the reason that is so unique is that we have a very unique ownership in the Gulf South. And so we're working with potential developers to really accelerate the development of some of those projects in the Gulf South. I would expect that we'll sign contracts in kind of the early 2022 time frame. And it will take a couple of years to get those -- the geological assessments done, the permitting and the infrastructure installed and the operations going. But in the interim, we should see some cash flows from lease payments right away, et cetera. But the real cash flow generation from that will be when we actually start seeing carbon injected into the subsurface ownership.

Okay. And just trying to get big picture, the longer-term growth opportunity, is that -- the forest carbon, is that sort of the one that's yet to be developed, but ultimately can be the biggest potential source? And in that context, I think you talked about 10 million -- I forgot the denomination, but 10 million tonnes or something in 2020. Is that a standard type number or your harvest was lower than normal last year. And so that's not something that we should look at as a regular ongoing type number? And how does one think about beginning to scope the potential value from that carbon capture?

Sure. So the way I would think about it is -- yes, we definitely feel that there's more opportunity to grow beyond just our 2025 target. And I think that's really going to be driven by the renewables because there's going to be a lot of renewable energy demand as states put forward their renewable energy requirements. And then I think it's in the carbon-- in the forestry and then also in the carbon capture and storage. So I think those are going to be kind of the future growth beyond what we're projecting in the 2025 time frame. So that will definitely be the focus. As far as how to dimension it, again, we're going through our AVO 2.0 process to identify all the carbon opportunities. As I mentioned, we're really focused on what we call improved forestry management. And so it's the carbon that you capture as a result of changing your civil culture or your forestry practices. And then that carbon is actually built out over 20 years of the 40-year contract. And so as we bring more projects to market, you'll see a pipeline develop of carbon projects, and then it will be additive over that period of time. And so you'll see a kind of a long cash flow profile building over time. And obviously, it's going to be dependent on carbon prices. So does that kind of answer your question, Mark?

It does. But maybe in that point, you made a reference to like a $5 or $10 per unit. How does that relate to this conversation as it is currently?

Yes. So the reference to the $5 to $10 is right now, the carbon market is in early stages. And so there's a number of protocols, registries. And as you look at where carbon is trading and granted is still early. So price transparency isn't really there. So a lot of the pricing that you're seeing is based on surveys. Because in the voluntary market, a lot of it is over-the-counter trading. And so looking at the surveys, it's anywhere from $5 to $10. I will point to a recent survey that came out that showed the carbon pricing in the American carbon registry, which is one that we're looking at very closely is now at about between $11 and $12. And so as we start seeing carbon prices increase, then we'll start thinking about, okay, which projects are appropriate to bring into the market. I will say at $11 or $12, we'll probably bring that pilot project that we're working on in the Northeast, that might make sense at that stage to kind of get a feel for how these projects operate, how we actually manage it over time.

Our next question comes from Mark Wilde with BMO.

Devin, I wanted to start off, the growth in the lumber business that you're talking about, which looks like about 800 million board feet by 2025 from this year's base. Is that likely to be just debottlenecking in some of these rebuilds? Or could that possibly be a new greenfield?

Yes, Mark. So that incremental lumber production is coming just through organic growth within our existing mill footprint. So we've got the Holden project, which we've announced, which is a brownfield modernization project, which is about 100 million board feet. We've got about 50 million board feet of additional production coming from the Millport project as we ramp that up to full production. And the rest of that is really just coming through debottlenecking, improving rates, improving reliability, just the sort of normal capital projects that we have in our existing footprint. So we don't have any greenfield projects in that, no more big modernization projects. It's really just replicating projects that we've already done in the mill set.

Okay. That's helpful. And then, Nancy, I'm wondering if you could just put a little more color around that NOL structure that you mentioned to let you pull forward a portion of the variable dividend. And sort of how you just thought about that decision in the context of also at the same trying to establish some kind of predictability around Weyerhaeuser's dividend strategy? I mean, you just rolled this out in the fourth quarter of last year, and you've already made a kind of a onetime modification here. So just to help us think a little bit about that balancing act between wanting to be kind of financially kind of rational to take advantage of situations like that, but at the same time, being consistent and predictable for investors.

Yes, sure. Thanks, Mark. As we've said, our -- normally, we would be paying the supplemental dividend annually in the first quarter following the prior year's results. And we really do that to ensure we're aligning the supplemental dividend with the cash we're generating from operations. This year was unusual with unprecedented first half financial performance driven by the Wood Products pricing environment. So our decision to pay an interim dividend was to enable our shareholders to benefit from this extraordinary market condition, and it's in the first calendar year of our new dividend framework. So it's -- from that standpoint, we feel like it's pretty good news. Additionally, the level, the $0.50 per share level allowed us to optimize our NOL capacity. So it's a onetime tax planning opportunity, as we said. And what it means is, basically, if we hadn't paid an interim, then we would be utilizing our NOLs this year. So by paying an interim $0.50 per share at that level, that allows us to preserve our NOL capacity that otherwise wouldn't be available in 2022. And that's really why it's a onetime opportunity. And going forward, we -- as we talked about, there's still the majority of the supplemental dividend to be paid and earmarked for first quarter of 2022.

Our next question comes from Mark Connelly with Stephens.

As Russell pointed out, a severe housing construction [indiscernible] has been in place for some time now and still have predictions that we're going to reverse it and get a big housing boom. So what gives you confidence that the barriers to the higher housing starts are really behind us? Is it just this incredible pickup in pent-up demand?

Yes. I think there are a few things that go into that. And no question, we've been talking about this dramatic uptick in housing for a number of years. I think everyone agrees that there is a significant amount of pent-up demand for housing. We're seeing that in the market today. We talk to the homebuilders all the time and the demand is certainly there for more home building. And in fact, whether you think we're underbuilt by 3 million units or 5 million units, we're going to really have to elevate the level of building in the U.S. to catch up on that anytime in the foreseeable future. So I think the demand signal is there, and I think people generally agree on that. The challenge has been overcoming some of these supply side challenges. And that's really been the story over the last 3, 4, 5 years. And what we've seen is, each year, we gradually improve. We build a little bit more housing year after year. We've gotten to the point now where certainly, we think we're going to be well above 1.5 million housing starts for the year. And I think that the supply side challenges, they're not completely going away. It's just a matter of each year, the homebuilders find some incremental capacity to keep driving that up over time. And so obviously, I think we could be building at a much higher level today if it weren't for some of the supply side challenges. But I have a lot of confidence in talking with the homebuilders that they've got a line of sight on how they're going to continue to grow the amount of home production that they've got in the pipeline over the coming years. So I think it's just going to be gradual year-over-year improvement. And ultimately, again, we have a lot of homes that we have to build here in the United States. And so we have a very bullish outlook over the next 5 to 10 years.

That's helpful. Just as a follow-up, Nancy, how should we think about the primary drivers of buyback activity. This just gives me an opportunistic program. I'm sort of hoping you could help us understand the funding and utilization triggers other than cheap stock.

Yes, sure. Thanks for that follow-up question. We see it, as we said, is a good tool when it's an opportunity to create shareholder value. We have -- it's one of many tools in our capital allocation framework. And so that's why the flexibility in allowing us to go up to $1 billion. And it's fair to say, you can read into that we believe there are opportunities where we could buy back shares in addition to the previous authorization limit, which was at -- we had about $400 million left. But look, we're not -- we're not going to give a number in Q3. As we shared in the slides, we did start to buy back shares, and we'll give a full report in our third quarter earnings when we release. But again, it's really about having that flexibility and opportunistically buying back shares.

And our next question will come from the webcast.

Thank you. I'll paraphrase the question here. Many companies outside the forest products industry now seeks to plant trees to support carbon neutrality goals by 2030 through 2050. Does Weyerhaeuser -- is Weyerhaeuser considering a program to manage the tree farms of non-forest products companies.

Russell, why don't you take that question?

Sure. Yes, tree planting has become very popular. We think that's good. A lot of companies are looking to enter programs like the Trillion Tree program or we're seeing other companies even invest in afforestation type programs. As I mentioned, as we look at the carbon opportunity on our Weyerhaeuser portfolio, it's really around the improved forest management. And so it's managing the existing timber stands to incrementally grow carbon so that we can then take that to the carbon markets. Afforestation is a very different model. The cash flows associated with that are very long term. And we really don't have any property or timberlands that meet those requirements. And so the opportunity, I think, is going to be focused really on our existing portfolio. We'll watch that continue to develop. Again, it's early stages in this whole program. And if there's opportunities to participate in afforestation type program or partner with somebody in that regard, we would assess that. But today, our focus is really going to be on our portfolio and the carbon optionality within that portfolio.

Thank you. One more question from the webcast. Does the targeted 75% to 80% return of adjusted FAD just include dividends or our share repurchase is also included in that total?

Yes, sure. So the way that the dividend framework is set up is to give us some flexibility to utilize share repurchase as part of that 75% to 80%. We think that flexibility can be very helpful as we are returning cash to shareholders under different market conditions. I would say, in year 1, so for this year, the first year of our dividend framework, the full 75% to 80% will come via dividend. So the base plus supplemental dividend. And that share repurchase, anything we do will be over and above that 75% to 80%. But again, we do have that kind of flexibility in the future if the market conditions weren't using it in that way.

Our next question is going to be a follow-up on the phone line from George Staphos with Bank of America.

I wanted to come back to the OpEx targets of $175 million to $200 million over your planning horizon. The company has done a terrific job over the last number of years, I think the figure is $750 million cumulatively and in recent years of the benefit that you've created. And in recent years, as you said, Devin, that a lot of the programs now really coming bottoms up. And even, I think, in answering one of the questions you mentioned, you're not looking at it, as Mark's question, not any large projects or rather organic. Can you talk to us a bit about how these next -- this next tranche of projects might differ from what we've seen in the last couple of years and how confident again that you can hit that kind of number given that you've already been so successful with the $750 million cumulative fleet so far? And then I have a follow-on.

Yes. Well, look, OpEx has been one of the remarkable aspects of our strategy over the last several years. We've captured a lot of value through hard work in really every corner of the business. And I would say unlike when we first started OpEx back in 2014, where it was very much a top-down-driven goal and target, at this point, the way those targets are developed is every mill, every operating area in Timberlands has a 5-year road map to get to top-quartile performance. And those OpEx targets are really built from those individual road maps. And so each mill, each operating area has a number of specific targets that they need to achieve. And that gap closure is really what drives the OpEx number. And so it really cuts across all parts of the supply chain from continuing to automate and mechanize our logging in the West really working on how we do road building to drive those costs down, silviculture execution improvements all the way through the mill and the blocking and tackling around driving reliability across the mill set, leveraging new technologies to drive efficiencies. And so it really has become part of the DNA of the organization. So we have a lot of confidence in our ability to get to that $175 million to $250 million. Those projects are really coming across the board from every part of the organization. We've had even more momentum, I would say, on OpEx after we rolled out OpEx 2.0. And the other thing is we've really been increasing our focus on innovation. And I think those efforts will generate more OpEx opportunities and ideas and ways to drive efficiencies, reliability, cost reductions throughout the system. So a lot of work going on there, very exciting. And again, we have a lot of confidence in our ability to continue to execute on those OpEx programs.

And then kind of a larger-picture question in terms of the carbon opportunity ahead of you and some of the things that will go along with it. And again, I really appreciate the details you gave us on the presentation around that. First, with the mitigation banks, to the extent that this becomes a larger and larger program, not just for warehouse but for other companies perhaps, will that ultimately engender more regulation from an environmental standpoint as you're depositing carbon into the ground, anything that we need to factor into our thought process for Weyerhaeuser around that regard? And then as you think about afforestation programs and carbon capture, and again, it's laudable that we are now focused on that as you are as a company and as a society that also could be somewhat deflationary over time for timber as long -- if there's not a sufficient amount of growth in wood products' demand. So as you look out longer term, what do you think the long-term growth rate is going to be for wood and wood fiber that will help to balance the growth of forest to prevent deflation in some of your key products.

Maybe I'll take the first part, and then you can speak to the regulatory impacts of some of the things that we're thinking about.

Sure.

There's a balance certainly. And as we use the forest to sequester carbon there may be some impacts to the overall availability of timber. But I would say, on balance, our view is when you think about operating in a world that is focused on global warming and climate change, one of the best building materials that you can find anywhere, bar none is wood. And there is a growing appreciation for the benefits of building with wood. So I think and I think our view is, over time, this conversation is going to drive more demand for wood products, not less. And so that's kind of how we think about that. Maybe you want to speak to the regulatory impacts of some of these things?

Yes. So George, specific to carbon, I think on the carbon forestry side, there are very strict protocols that are in place for you to bring a project to the market and actually transact on the carbon credits. And these are in the voluntary markets, not in the compliance markets. The compliance markets are even more stringent as far as time line, et cetera. But I think the protocols that are being established for the voluntary market are very appropriate. So I would expect to see those long-term markets to continue to grow over time and not necessarily see a regulatory overlay within there. Some of the regulatory requirements, depending on where they are directed for emission reductions or greenhouse gas mitigation may influence the way those markets grow and price. But I don't see that being a significant impact in the development of the voluntary markets in the near term. And the carbon capture and storage that definitely, we're going to see probably a pretty state-level regulatory framework around that to ensure that as you establish the infrastructure, do the injection, that the geological formations are going to work as prescribed, that it's going to store the carbon permanently for a long, long time. And so yes, we would expect to see a regulatory framework, and that is being developed because it is different than the gas -- oil and gas regulatory framework that is currently in place, but that regulatory framework is forming around the carbon capture and storage. But I think with the demand for carbon capture and storage because you only really look at what is available, for carbon mitigation first up is forest and then really next in line is the carbon capture and storage. I think you'll see a very appropriate response, particularly since the federal government is now directing capital, I mentioned $12 billion towards the development of the infrastructure for carbon capture and storage. But I don't think it's -- it will be a framework that will be unmanageable. I think we'll be able to manage through it, and our partners -- our development partners will be able to manage through it effectively.

Our next question is a follow-up from Susan Maklari with Goldman Sachs.

One of the things that we hear a lot from homebuilders is the value that they see in the EWP products as it reduces the labor content, helps to maybe build a bit faster than they would with some of the other products that are out there or alternatives. Can you maybe talk to any opportunities that you see to kind of further add value to the construction process, maybe the ability to expand that portfolio at all? Or anything that's in there that perhaps could kind of just increase your ability to capture some of that growth that's coming through in housing?

Yes, absolutely. And that's one of the reasons we're really excited about our EWP business. I think as we see more wood-based building generally or even the homebuilders looking to drive efficiencies in the process so that they can build more homes, I think EWP is an important part of that. So we have a little bit of additional production that we think is available within our existing footprint on the EWP side. We're working very closely with not only the home builders but the dealers, the distribution network. We're working with academic institutions like Boise State and some others on how do we leverage efficiencies in the system. And I think EWP is a really important part of that. So in short, yes, we think that is an opportunity. And we -- as an industry, but we, in particular, at Weyerhaeuser, are excited to participate and really help drive that forward in the future.

And our next question will come from the webcast.

Thank you. The question is, how have recent hurricane and fire season activity affected Weyerhaeuser's operations during the third quarter?

Sure. I'll take that. In Q3, we have had some impacts from fire, from weather. Fortunately, on the fire side in the West, although it was a pretty severe fire season across much of the Pacific Northwest, we didn't have any real impacts to our land in terms of damage. However, we did have fire restrictions, operating restrictions in certain parts of Oregon. So we lost a little bit of production on the timberland side in Q3 as a result of those fire restrictions. More broadly, in terms of weather, Hurricane Ida, some of the other weather systems that we've seen in the south, we lost some production on the timberland side, as you would expect, as the hurricanes have come through. So a little lower volume out of the south than we had perhaps expected. We lost a little bit of production time on the Wood Products side as well. We had 1 mill in particular in Louisiana that was down for about 2 weeks after the hurricane due to power outages, et cetera. So we have experienced a little bit of impact from weather, fire, hurricanes, et cetera. I would say just on the note of Q3 in general, in addition to the weather, there are some other things going on. You've probably heard about transportation challenges. We haven't been immune to that. So certainly, that's been a bit of a headwind in the quarter. And just the general labor issues in trying to manage through COVID, not perhaps producing as much as you might otherwise be able to do as you manage through COVID and some of the inflationary pressures around resins, et cetera. But that all being said, I think our team has done just a remarkable job navigating all of these challenges in the quarter.

And our final question today will come from Mark Wilde with BMO.

Two follow-ups for Russell, fairly short. First, Russell, on that $80 million of non-timber earnings, can you just give us any sense of how you think that cadence is over the next 4 years?

Yes. As far as the cadence, again, as I mentioned, I think first, you'll see the renewable energy EBITDA kind of increasing over the next couple of years. And then the mitigation banking, I think, will pace with that also. And then I think you'll see a little more back-ended loaded kind of in that 2025 time frame coming from the forestry carbon and the carbon capture and storage. I will say if carbon prices increase and it makes sense for us to bring projects forward on the forestry carbon side, that's the whole emphasis for 2022 is to wrap up our assessment of our carbon opportunities. And if prices dictate, we'll bring that forward too. But I would say the CCS is going to be a little more back-end loaded just because of the development time required.

Okay. And then those renewables in the south that you've mentioned, is my follow-up here, Russell, you talked about Southeast solar, and I'm just curious, is that more likely to come through outright land sales in the like solar farms? Or might that be structured as long-term lease payments?

Yes. So the goal is to structure those as long-term lease payments. And that fits with a lot of the developers' kind of capital requirements and what they're -- how they're trying to structure those businesses. I will say we'll have instances where utilities will prefer an outright acquisition of the timberlands. And I'd say a majority of it will be in a lease structure, a long-term lease structure.

And will you be able to provide us with some visibility on sort of terms around those lease structures?

What I would say is the structures that we're negotiating kind of on a present value basis are well in excess of what you would realize on a timber operating basis. So we're capturing a meaningful premium to timber for those development and lease structures. It's a really good business.

That's what I'm hearing from some others.

You bet.

All right. Well, I think that was the last question, and that is the conclusion of our event. So again, thank you very much for joining us for the last couple of hours. We've got a lot of really exciting work going on at Weyerhaeuser. As you heard today, we are very optimistic about the demand drivers for our products and our services and some of the new opportunities that are out in front of us. We've done a lot of work. We've got a lot of work left to do around improving our portfolio, growing our company, growing our cash flows, enhancing our competitive position to be industry-leading from an operating performance standpoint. I think we've got a terrific ESG story. We've taken some actions this morning in publishing our carbon record, our greenhouse gas reduction targets to really enhance our role as the leader in ESG in our space and even more broadly. And we're really excited about the targets and the goals that we've laid out, which will allow us to grow our company and return cash to shareholders and ultimately deliver superior shareholder returns for our investors. So again, thank you for joining us today, and thank you for your interest in Weyerhaeuser.