I think what you have here is a bald-faced hornet taking advantage of tree sap oozing from damage caused by a sapsucker. The pattern of holes is typical for sapsuckers who feed on both the sap and insects attracted to the sap. The most common sapsucker in your area is the red-naped sapsucker (Sphyrapicus nuchalis).

Bald-faced hornets do utilize chewed bark and wood during nest building but the pattern and size of the damage shown in the photos suggests otherwise.

Here is more information on woodpeckers/sapsuckers:

http://cru.cahe.wsu.edu/CEPublications/FS057E/FS057E.pdf

https://extension.usu.edu/files/publications/publication/NR_WD_006.pdf

http://fieldguide.mt.gov/speciesDetail.aspx?elcode=ABNYF05040

http://icwdm.org/handbook/birds/woodpeckers.asp

And here is some additional information on bald-faced hornets:

http://extension.uidaho.edu/clearwater/files/2014/11/Homeowner-Guide-to-Yellowjackets-Bald-Faced-Hor...

Thank you for submitting your question and the photos and I hope this information proves useful.

Dale,

I've not seen this level of activity by bald-faced hornets before but it is within their realm of possibility.  Typically they choose older wood that is easier to chew but maybe they are getting both carbohydrates (from the sap) as well as wood pulp from the bark or fresh exposed cambium layer beneath the bark.  There shouldn't be much damage now as the hornet colonies are slowing down and will soon die off.

If you're worried about further damage to the tree, you could, either now or once the tree is dormant, loosely wrap the area with fine, stiff wire screen material. It shouldn't be tight to the limb as you don't want the tree to envelop the mesh once it starts producing healing tissue.  It will also have to be checked regularly to make sure it isn't girdling the branch.

Excluding one area of the tree may force the sapsuckers to start holes in other parts of the tree so that should be a consideration as well.

Hopefully the damage to the tree isn't too extensive and the hornet activity you've observed doesn't occur again.  Good luck and thank you for sharing these photos and this particular behavior.