Revitalizing BC?s Forest Industry: New Opportunities

Overly restrictive regulations, poor resource management, and changing global markets prompted the government of BC to overhaul its number one industry. Under the Premiere?s New Era Promise, the government created the BC Heartlands Economic Strategy, which includes the Forest Revitalization Plan. On March 26, 2003, the government implemented the FRP which contains sweeping reforms that will completely change how the forest industry operates and revitalize BC?s forest industry.

The expected results of the changes contained in the FRP are to open up new opportunities, open up new markets, and to ensure sustainable forestry practices are practiced. The FRP will take a few years to implement with a few of the changes requiring new legislation or amendments to current legislation.

Opening Up New Opportunities

Timber Reallocation ? Under the FRP, 20% of the logging rights will be reallocated from major licensees. The breakdown of the reallocation will be: 10% will be reallocated to BC Timber Sales, 8% will be made available to First Nations, and 2% will be made available to communities. The reallocation process will begin on April 1, 2004 but licensees will be allowed to continue logging at current rates until areas to be returned to the government have been identified. The reallocation of logging rights will provide new opportunities for communities, small-scale salvagers, the value-added sector, First Nations, and entrepreneurs.

New opportunities include:

?Woodlots and Community Forests ? These are small- and medium-scale forestry operations that help communities to diversify their local forest economies. The benefits of these operations are that employees are hired locally and supplies are purchased locally.

?Small-Scale Salvagers ? Small-scale salvage is the harvesting of dead, damaged, diseased, insect infested, or wasted timber that would otherwise not be harvested by the holders of other forest tenures. New legislation will be introduced to create a new form of salvage tenure called The Community Salvage License. This will allow interested communities to participate in management of small-sale salvage. The Salvage Non-Renewable Forest License will continue. On April 22, 2003, a committee comprised of MLAs was created to restructure the small-scale salvage program. The restructured program is expected to be implemented after the government?s 2003-04 fiscal year.

?Value-added Sector ? This sector is comprised of mills and manufacturing plants that make products from timber or lumber. Many of these manufacturers do not hold long-term logging rights. Instead, they buy wood from others, including major tenure holders and woodlots. The old system resulted in the value-added sector having difficulties in getting the wood it needs. The reallocation of tenure to market loggers, removing timber processing restrictions, and the ability of the value-added sector to bid on the increased volume of wood sold by BC Timber Sales through reallocation, will give the value-added sector more access to timber.

?First Nations ? First Nations will now be able to become more involved in the forestry industry. This will be accomplished by the reallocation of 8%, from the current 3%, of the total provincial allowable annual cut to First Nations and by sharing a portion of forest revenues with First Nations for the first time in the industry?s history. Only First Nations who enter into accommodation agreements, as it relates to negotiating treaty agreements, will be allowed to participate in the reallocation of tenure and shared revenues. Treaty agreements identify what rights First Nations have to what lands and what rights First Nations have to the timber on those lands. First Nations will be subject to the same laws and policies as other tenure holders, and they will pay the same fees, including stumpage. The tenures will be non-transferable. Like other licensees, First Nations will have the option of logging timber for their own use, selling it to other processors, or working to develop and sell it in partnership with others in the forest sector.

New Timber Pricing System ? The government charges a fee, called ?stumpage?, for Crown timber harvested by forest companies. Under the FRP, the government will implement a market-based stumpage system that reflects global market realities and local harvesting costs. This means the new system will be auction-based with about 20% of Crown timber being sold each year through hundreds of timber sales, which will vary in size and contain terms of up to four years. The timber will be auctioned by BC Timber Sales to the highest bidder. The auction results will be used to determine the stumpage rates of the other 80% of Crown timber. The new timber pricing system was implemented on February 29, 2004 on the Coast only. It is expected the new timber pricing system will be implemented in the Interior later in the year. BC Timber Sales provides access to 13% of the provincial allowable annual cut. It awards short- and long-term licenses based on revenue bids and other factors. BC Timber Sales clients include market loggers, sawmill operators, lumber remanufacturers, and specialty wood products manufacturers.

Amendments to the Forest Act ? Amendments to this act include changes to cut control regulations, provide more flexible provisions for starting and stopping a cut control period, restrict companies from ?carrying? unharvested volumes of timber forward into another cut control period, eliminate timber-processing requirements so licensees can sell timber within BC instead of processing it themselves, end appurtenancy requirements allowing BC?s 600 mills to accept BC timber regardless of where it was logged, and eliminate mill closure penalties allowing companies to execute business decisions on closing uneconomically viable mills. This means tenure holders will be able to transfer or subdivide licenses without penalty and without ministerial permission; unused wood will be able to flow to other, potentially more valuable uses; and open up the forest industry to new, potentially more innovative or effective forest managers.

New Forest and Range Practices Act ? Effective January 31, 2004, this act replaces the Forest Practices Code of British Columbia Act, 1995. The new act holds operators accountable for results and strategies in their forest stewardship plan and to ensure the conservation of soils, timber, wildlife, water, fish, biodiversity, cultural heritage resources, forage, and plant communities. The new act will be results-based, meaning it focuses the attention of government and industry to on-the-ground results, and less on process and paperwork. The three main changes to this act are: it includes tough penalties for non-compliance increasing the maximum penalty from $100,000 to $500,000; for the first time the act gives government the authority to intervene to prevent environmental damage; and clearer objectives are set for key environmental values. Operators may begin planning future harvesting or range activities after January 31st but any activities already approved under the Forest Practices Code may continue until December 31, 2005.

Opening Up New Markets

BC exports about 70% of its lumber to the US while Japan is a major market for Coastal forest products. Softwood trade disputes with the US and Japan?s weak economy means BC must explore new international markets to retain a healthy forestry economy. BC is pursuing new markets in China, Southeast Asia, India, and other countries.

Marketing BC?s Products – Funded by 1% of direct forest revenues (stumpage fees), the government formed the Forestry Innovation Investment program (FII) in 2002 to market BC?s forest products. To strengthen existing markets for forest products and to create new opportunities, FII will invest $8.6 million in 35 projects that are cost-shared with industry. Included in the 35 projects is a $12 million Dream Home China demonstration site that will promote BC building products and wood-frame construction techniques to a booming Chinese housing market. China is currently introducing building codes that permit the use of wood in the construction of homes where China has typically used cement. To appreciate the potential market in China, the country has a population of 1.2 billion people and recorded 10 million housing starts in 2001.

Marketing BC?s Practices ? The Market Outreach Network was created to communicate the facts about BC?s sustainable forest management around the world. The network is guided by a council representing government, industry, forest communities, and First Nations. The network?s activities will support and build upon existing markets in Europe, Japan, and the US and will also reach out to emerging markets to demonstrate the added value that BC forest practices bring to the marketplace.

Changes in the FRP are only being implemented after extensive consultation with forestry stakeholders and careful consideration of all the effects on the industry, forestry workers, forestry communities, and the province. Implementing so many fundamental changes in such a large industry takes time and the government will need to iron out any kinks during the implementation process while businesses and workers adapt to the new plan. The end result of the FRP will be a stronger forestry industry, a stronger economy, more jobs, and better social programs for all citizens of the province of BC.

* Portions of this article have been reprinted with permission from the Ministry of Forests? Web site.

** Part II of this article will take a look at how businesses and entrepreneurs in Tumbler Ridge can capitalize on the FRP at the local level.