This spring, when forest companies, operating on the coast, reported their earnings the results were moving in the right direction with the coastal forest industry poised to return to profitability. After several decades of difficulty, we are finally facing the prospect of a rejuvenated forest industry.

But this turnaround did not happen by accident. Diversification strategies and tough measures that were begun five years ago are taking effect, however, we need to stay on course if forestry is to continue to be a strong economic force in our province.

Today the coastal forest industry is less dependent on the American commodities market, more flexible and more able to provide products for a changing world market. In the last five years we have grown our market share in China by 600 per cent and in Korea by 200 per cent. Additionally, we have held our own in Japan during very difficult market conditions.

Key to a healthy coastal forest industry is efficient and cost-effective production. To that end, four outdated mills were forced to close in the last five years, but a new modern mill was also built, meaning the number of mills has gone from 29 to 26 on the coast. Mill closures and $180 million in capital improvements in the remaining sawmills has increased average capacity by 19 per cent, increased productivity by 18 per cent and increased lumber recovery by 7 per cent, all significant steps to increase the economic viability of the sawmill sector. On the pulp and paper side, more than $160 million has been invested to improve environmental performance, increase energy efficiency, improve productivity and reduce greenhouse gas emissions.

Our recent market study has identified the key markets for industry moving forward and, not surprisingly, these markets build on the characteristics and attributes of our unique coastal species. The study clearly indicates there is a future for the coast, but it will require continued hard work and diligence to realize these market opportunities.

The problems that the coastal forest industry has faced over the past few years have provided an opportunity for focused leadership towards a more prosperous and sustainable future, and industry is stepping up to that challenge.

GREEN BUILDING AND CLIMATE CHANGEOver recent decades, Canadian forest products have been the focus of environmental and substitute building material campaigns, often alleging that using less wood, alternative building materials or specific certification systems would be better for the environment. In recent years, 'green' or sustainable building, which aims to reduce the environmental impact of buildings, has also been gaining traction in North America and Europe. While the intent is sound, the application has been troubling. Although wood is by far the most environmentally superior building material, the most prominent sustainable building system favours non-wood building materials and FSC over other recognized certification systems.

Added to this, growing public and government attention to climate change is prompting a shift to green building codes as one means of reducing greenhouse gas emissions. As the sustainable building movement grows, it is vital that the environmental attributes of wood are recognized by customers and also by regulatory agencies in the form of building codes.

COALITION STRENGTHFacing a complex blend of technical, issues management and communications challenges, Canada's industry associations and government agencies have responded with a uniquely aligned partnership, where each organization contributes their own particular strengths. Facilitated by the Wood Promotion Network (WPN), a new Sustainable Building Coalition has worked to rapidly identify, prioritize, set timelines and define organizational leads for the huge range of tasks involved in the green building front. The Coalition is made up of the Forest Products Association of Canada (FPAC), FP Innovations, the BC Market Outreach Network (BCMON), Natural Resources Canada, the Council of Forest Industries, Coast Forest, the Canadian Wood Council (CWC), and other associations and company representatives.

Managed thoughtfully, residential and commercial green building is a natural fit for sustainable, renewable Canadian forest products. Our customers know that wood products are the most sustainable building materials on Earth, but seeing that recognition carried through in new green building codes and sustainable building systems is a significant challenge.

"We need technical experts and communicators, skill sets which haven't always resided in the same organizations," explains Coast Forest's Rick Jeffery. "In some cases, effective issues response involves the voices of many associations and government agencies. In others, the best course of action is for some of us to stand down while either the technical or outreach experts lead the way."

It makes sense when building code or technical issues require attention for the technical specialists at the CWC and FP Innovations to address these issues. When it comes to customer outreach and communications, much of the expertise resides in FPAC, BCMON and the WPN. This turf-free approach demonstrates new heights of professionalism within the industry, enabling us to focus on the real issue: positioning wood in the sustainable building movement.

ALIGNMENT IN CHINAThe drive to align and make optimal use of resources isn't limited to our Canadian operations. Since 2004, the Canada Wood Group has been delivering collaborative programming in our international markets as well. China has been a key focus of our alignment attentions with associations acting as a single entity in China, conducting shared seminars and trade show initiatives, and collaborating in market research projects. And not surprisingly, the strategy has worked. Between 2002 and 2007, sales volumes to China have grown by over 600 per cent. Forestry Innovation Investment's (FII's) Dream Home China centre has provided a working environment that fosters collaboration and, acting together, our organizations now provide a full range of promotional, technical and customer support services to China's growing market place. The next step is to integrate our China group with FII's Shanghai-based organization to advance the next stage of market growth in China.

COAST MARKET PRICING 2007 The Ministry of Forests and Range (MOFR) implemented a new version of the Coast Market Based Pricing System (MPS), effective June 1, 2007. Coast MPS 2007 incorporates a single equation pricing model that utilizes competitive auction sale information from B.C. Timber Sales' program to determine stumpage for coastal tenure agreement holders. It includes a number of new variables that should simplify appraisal data needs, yet better represent operational and log transportation factors. Piece size has been introduced to reflect second-growth logging chance compared to old-growth stands. In addition, a market distance variable replaces truck haul and water transportation distance, better reflecting the dependence of distance to market for all cutting authorities.

B.C. TIMBER SALES STRUCTURAL REVIEWA year ago Minister Coleman directed a review of the B.C. Timber Sales (BCTS) program to assess if the delivery model being utilized effectively addressed the program mandate. As a result, the strategic goals have been re-ordered and prioritized. BCTS, as a high performing organization, provides a credible reference point for costs and pricing of timber harvested from public land in B.C.; provides a reliable supply of timber to the market through open and competitive auctions; and maximizes net revenue.

In conjunction with prioritizing its strategic goals, BCTS is establishing an enhanced set of performance targets and measures, and plans to publicly report on those measures on a quarterly basis. This report card approach is needed particularly for price and cost referencing relative to tenure obligations. "This reporting out approach is transparent and should provide credible data from the auction process it has been mandated to manage," says Larry Henkelman, Chair of Coast Forest's Timber Pricing Group.

GOVERNMENT ACTIONS REGULATION WORKSHOPCoast Forest worked with the Ministry of Environment to co-host a workshop in May on the Government Actions Regulation (GAR). The regulation enables government to make land use decisions to protect values that require special management not already covered by objectives set out in the Forest and Range Practices Act. The workshop provided clear guidance on responsibilities, processes and required considerations when government enables a GAR decision.

Deputy Minister of Environment Chris Trumpy opened the workshop by reflecting on examples of GAR decisions he has made. He summarized that it was important for the decision maker to have the necessary support materials referencing strong science, risk management and economic considerations, as well as the need for meeting the review and consultation requirements with impacted tenure agreement holders.

The workshop attracted 35 participants from the Ministry of Environment, Ministry of Forests and Range and industry. Participants said the workshop was "very useful in clarifying many issues" and it was "an excellent forum for acquiring information that is critical for continuous improvement for business practices pertaining to the provisions of the regulation". Senior Ministry of Environment staff proposes to hold similar workshops with industry counterparts in the Interior regions of the province.

Coastal companies are continuing to pursue SAFE Company certification, designed to improve safety at all levels of operation. "The program looks at companies 'and prime contractors' current safety programs and conducts a gap analysis to adjust procedures to improve safety and meet the certified standard," says Keith Rush, Coast Forest's Safety Consultant.

In mid-May there were 1,550 registered companies of which 70 are now fully certified. TimberWest, Interfor, and some of Western Forest Products' divisions join the District of Mission in leading the way on the coast. Additionally, several large coastal contractors have recently been certified to the SAFE Companies standard. These include Hayes Forest Services, MOH Creek Contracting, Mount Sicker Lumber Company and Oyster River Logging. Many other licensees and contractors are now registered in the program and are busy working on the details of their audit submissions.

FOREST SAFETY ADVOCATES The BC Forest Safety Council recently announced the appointment of four more Safety Advocates to assist small companies in their efforts to become SAFE certified. Three of the advocates are located on the coast, Cary White of Parksville, an ex-logger and WorkSafeBC officer, Dave Mullett of Quatsino, an ex-logger and Safety Specialist and Cal Hill of Terrace, also an ex-logger and veteran logging supervisor. They join Safety Advocate Bob Lamonde of Cranbrook.

COASTAL FOREST INDUSTRY'S FUTURE (CONT'D FROM PAGE 3)Currently, the most profitable operations manufacture western red cedar, Douglas fir and other unique species. One of the study's conclusions is that the old-growth harvest consumed in the specialty sector, including western red cedar, should be given full industry and government support. It is the only sector on the coast that consistently generates enough value from log sales to make harvesting profitable even at current high coastal logging costs. Specific policy measures, designed to support this sector, should be developed to ensure that a steady supply is maintained at affordable levels to support a stable cedar processing industry into the future.

A significant amount of the increasing second-growth forests is hemlock-balsam, which makes up 60 per cent of the coastal timber supply. Along with finding solutions for the higher costs associated with manufacturing products from this species, the study points out that a better understanding of the harvesting costs of the new second-growth forest and the age class/harvest options needs to be developed. This will provide a better understanding of where the products produced from these forests could fit in the global market place.

The good news is that B.C.'s coast is not limited by any market, or product restrictions or limitations. The key to the coast's competitiveness in these markets lies in cost reduction in delivered log costs and processing or in determining ways to define an economic timber base.

The report outlines four major recommendations for critical next steps, including further research to fully integrate all available data, and increase harvesting and processing knowledge of hemlock-balsam to maximize its potential.

The full report is posted at www.coastforest.org