The forest industry is never short of complexities that transcend the regular tasks of financing and running our businesses. In the British Columbia forest sector First Nations rights and title are at the top of the long list of exogenous factors impacting the business. Resolution of these issues is needed with an approach that ensures a win-win-win outcome for First Nations, government and the forest industry. To quote the Supreme Court of Canada in Delgamuukw – “We are all in this together”.

Premier Campbell has recognized the need for a positive outcome, investing heavily in a “New Relationship” with First Nations. Implementation of this New Relationship is manifesting itself in the proposed Recognition and Reconciliation Act (R&R Act) and a New Royal Proclamation. At the heart of the matter these two measures are designed to change the way First Nations and the provincial government conduct their business in order to address the legal requirements, directed by the courts, to repatriate the relationship and to provide expediency, clarity and transparency to the murky business of recognizing aboriginal rights and title. And not to be understated, a change is required to provide the needed certainty to attract the investment required to drive the economy of the province. In the forest sector the status quo weighs negatively on the performance of the industry to the detriment of all parties. We need to move forward.

In this respect, the R&R Act could be one of the most important pieces of legislation in our history. Given the importance and nature of the legislation it is essential we get it right and ensure there are no unintended consequences. For the forest industry the legislative package must not have negative impacts on our balance sheets and operating costs. It must respect the billions invested in the industry and provide the platform for all parties to attract new investment in a capital intensive industry.

Two of the main features of the proposed framework legislation are revenue sharing and shared decision making. In these two critical areas regulatory provisions must be designed to align forest industry and First Nations interests while providing a mechanism to quickly deliver the benefits.

The economic prosperity of the forest industry and First Nations both depend on taking advantage of the opportunity to create workable and acceptable solutions that so far remain elusive. It also depends on the provincial government coordinating all of its First Nations policy activities and properly informing itself of the ramifications so it can help paddle the canoe we are all in together with a steady and stalwart arm.

BLACK LIQUORWhen the U.S. pulp and paper industry binges on a black liquor subsidy intended to encourage the use of alternative fuel, Canadian producers end up with the spins as the Canadian government tries to steady our industry against a blatant subsidy that reduces U.S. production costs by about $200 per tonne. The U.S. industry is expected to make billions of dollars from blurring the edges of a vague section of the tax law before the one-year credit expires.

The absurdity, of course, is that the loophole in American policy that creates a tax credit for alternative fuel consumption is obviously completely looped! By adding diesel to the black liquor, a byproduct of kraft pulp mills which is refined and used for alternative energy, the cocktail is eligible for the credit even though this means that mills are now burning more diesel instead of less! U.S. producers are laughing all the way to the bank while Canadian producers suffer a pounding headache caused by the unfair market advantage.

There are over 70,000 pulp and paper jobs at stake across Canada and another 150,000 indirect jobs affected. Three pulp and paper mills have closed down in the last few weeks alone under the pressure.

CANADA’S RESPONSEThe Canadian government has come to industry’s aid with a billion-dollar package called the Green Transformation Program, which will provide a credit of 16 cents per litre of black liquor consumed at Canadian pulp mills in 2009, retroactive to January. The credits are aimed at funding capital investments to improve energy efficiency or environmental performance and must be spent within three years.

Most importantly, the federal government has been cautious, ensuring the credits comply with the Canada-U.S. Softwood Lumber Agreement. The program falls under the “safe harbour” clause which allows governments to support environmental management, protection and conservation, as long as these activities don’t affect the price of timber.

“The Canadian government did the best they could under the circumstances,” explains Coast Forest’s Rick Jeffery. “However, the package will only aid some of Canada’s pulp and paper companies and it will not provide immediate short-term relief to counteract the U.S. program. In other words, U.S. producers continue to receive monthly cash payments, which will continue to distort pulp prices worldwide and cause further hardship for competitors.”

WHO WINS?Another uneven playing field has been created in the process among industry players in Canada, between the thermal mechanical producers that don’t produce black liquor and the kraft producers, who directly benefit from the credits.

Adds Jeffery: “Catalyst, the biggest pulp and paper producer on the coast, will be the accidental victim because it shut down its only kraft mill in Crofton due to a lack of markets. Its other three mills are thermal mechanical operations.”

According to RBC Capital Markets Analyst Paul Quinn, Mercer, Canfor Pulp and Domtar are expected to fast-track projects and gain the most advantage from the credits. To a lesser extent West Fraser, Canfor and Cascades stand to benefit. “…It will improve the long-term competitiveness of the Canadian pulp and paper industry by reducing operating costs, reducing company-funded capex spending over the next three years and potentially increasing the industry’s capacity to produce excess electricity for sale to the grid.”

Today the coastal forest industry finds itself operating at about 25 per cent of its logging capacity, about 43 per cent of its lumber manufacturing capacity and approximately 60 per cent of its pulp and paper capacity.

“Any time government gets mixed up in subsidizing business, it is less than optimal, and they create winners and losers,” concludes Jeffery. “The real solution is for the U.S. administration and Congress to close the tax loophole and stop polluting the market – and the planet.”

CREATING A LEAN OPERATIONAL STRUCTUREThis is an exceptionally difficult time in the coastal forest industry and current market conditions are reflected by historic low coastal harvest and lumber production levels. Some economists are forecasting that the second half of this year may show a slight improvement. The steps we take today will help to bring costs down as we strive to put in place the lean operational structure (for industry and government) necessary for competing globally.

COAST REGION OPERATIONS ISSUES FORUMAn example of a joint Ministry of Forests and Range and industry group that is making this happen is co-chaired by Jim Gowriluk, MOFR Regional Executive Director and Otto Schulte, Vice-President Interfor Coastal Woodlands. By being creative and finding opportunities not only to get through these unprecedented tough times, but also by being positioned when our markets recover on a sustained basis, the OIF has taken the minister’s challenge to heart and has identified a number of “quick wins” that focus on localized issues and operational efficiencies.

The following changes have recently been implemented in the coast region:

Region scale population for pre-sorted pulp logs which enables reduced scaling intensity
Miscellaneous stumpage rate of $0.25 per cubic metre for hogged tree material and $0.50 per cubic metre for wood chips
Increased activities authorized within road permit right-of-ways that will no longer require a special use permit
Expanded opportunity for ocular waste estimates commensurate with revenue risk
Transition provision added for implementation of road permit timber mark policy until June 2010

The OIF is developing an implementation plan for a number of other “quick wins” and has also identified opportunities that they have labeled as “not so quick wins”. These proposed changes would be helpful to industry, but will likely require policy and/or regulatory change and ministry branch level direction.

ASSISTANT DEPUTY MINISTERS & FOREST INDUSTRY POLICY COORDINATION GROUPThis group could be the logical body to provide the support and decision making to enable implementation of the “not so quick wins”. The ADM group is chaired by Phil Zacharatos, Acting ADM of Operations and has as members all MOFR assistant deputy ministers, Coast Forest, COFI and ILMA Forest Committee chairs and vice-presidents. Originally formed in response to the need to manage high level issues of concern between the forest industry and the ministry, the group’s objective is to develop a more effective overall mechanism for discussion and consulting on upcoming changes to the ministry’s legislative and policy regimes. More recently, the group has evolved as a support to the Regional Issues Forums by addressing operational issues specific to the Coast and Interior groups as well as issues common to both. The group’s role in the quick-win process will be timely decision making on Regional OIF policy change recommendations or a dispute resolution mechanism which may elevate a given issue to the deputy minister or minister.

COMMITTED LEADERSHIPTwo very straightforward words when combined can be the most powerful force to positively influence and change safety performance in your operation - permanently.

If a company is not getting results in safety, nothing really will change unless there is a personal and fundamental commitment from senior operating managers that they want things to change. Furthermore, unless the most senior person in the organization decides he or she has basically failed at improving safety, then everything else the organization works on, at all levels, will be short lived and default back to the path of least resistance. Accepting that injuries are a cost or inevitable outcome of business is truly accepting failure.

The term failure is hard to grapple with, because it is directly tied to accountability, responsibility, personal values and possibly questions of competence. An owner runs the business, owns the results, hires employees, trains leaders, creates the culture and defines the values the organization works under. Ultimately, the owner “owns” the outcomes in all these areas - good, bad and ugly.

Some will argue “yeah, but” the employee made the decision to do this or that. However, this argument runs up hard against a dead end when one steps back and asks what the company did or didn’t do to enable that employee to think his or her actions were acceptable. The leadership accountability boomerang comes back fast in 95 per cent of all incidents that occur.

So, accepting there is a need to change is a huge move forward in becoming a fully committed leader in safety. Once the need is established there are a series of absolutes that need to be role modeled for direct and indirect reports and frontline forces. The following list is not exhaustive or in priority and certainly is not limited to the owner or senior manager of the company:

Never walk by a safety infraction: not reacting to the situation is as bad as committing it yourself
Inspect what is expected: follow through on expectations demonstrates you care
Drive to ‘root cause’ on your review of incidents: incidents should be treated as free lessons by others not impacted; drive forcefully to meaningful causal factors
Know your people, positions and their personal aspirations: connecting at a deeper level shows sincerity and personalizes your commitment to a safe workplace
Acknowledge the contributions: every person wants to contribute somehow so seek that behaviour or practice out and reinforce it.

Notice something about this list: it can be adapted to any function of leading and managing. Take out the word safety and it truly reflects just managing proficiently. In addition, the activities require the boss to get out from behind a desk, out of the office and out into the operations to actually be a role model for his peers, supervisors, managers and his people. This is the definition of committed leadership.

ANNOUNCEMENTS Coast Forest is extremely grateful to Keith Rush for his dedication and sincere commitment to improving safety in the forest sector, serving as safety liaison between the BC Forest Safety Council and Coast Forest until this spring. Keith has left the Council to pursue new adventures on Vancouver Island, and the mantle has been passed to Western Forest Product’s Peter Lineen, who has taken over this important role. Peter is Director of Western Forest Products’ Environment, Health & Safety program, is an alternate director for Rick Jeffery on the Council, and is active with a number of safety committees and working groups.

CONGRATULATIONS Western Forest Products has named Stephen Frasher as president of the company. Frasher is the former president of the Washington Marine Group and replaces Dominic Gammiero, who has been acting president since Reynold Hert’s departure in 2008 and subsequent move to the BC Forest Safety Council in March of this year.