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Coastal Clarion - Newsletter
Vol.6, Issue 4 · Winter 2010
After a decade of stable government, the political landscape in British Columbia is undergoing significant change. There are leadership hopefuls in both mainstream political parties, with an election on the horizon in two years or less. A hallmark of a healthy democracy is the opportunity to debate public policies during leadership campaigns.
Before we get ahead of ourselves we should acknowledge that while you might not agree with some of the things Premier Campbell did to manage the affairs of the Province, it is clear that B.C. is a better place because of his outstanding effort and dedication. Thank you Mr. Premier.
Going forward, we raise the flag of caution while the leadership race is underway for government at the political and bureaucratic levels to refrain from introducing new policies or initiatives and delay implementation of major policy changes on the docket. Steering the ship along its current course until new direction can be provided by a new leader and a new Executive is especially germane in the heavily regulated forest sector where market and financial recovery are nascent.
The question is: What should the forestry platform look like for a new leader and government to ensure policies support the recovery of the industry, communities and people that depend on the sector? The industry requires no handouts or bailouts. But we ask that government actions do not create new costs. Ours is a market-based global industry that knows how to compete if government provides competitive hosting conditions that include streamlined regulation, fair and effective taxation, and optimization of the Crown/private forest sector partnership. Strategic investments in market and product development in concert with the industry are also essential, the benefits of which can be seen in Japan and China or in the results of R&D in the coastal Hem-fir project. In addition, big cost items like cap and trade systems should maintain our competitiveness with other jurisdictions while doing the right thing.
Certainty on the land is paramount. In Canada asset-based lending survived the global meltdown. Our biggest asset is our tenure agreements, which are fundamental to raising capital required to invest in mills, new products and markets. First Nations policies must provide First Nations with meaningful economic benefits and opportunities and certainty for forest companies to continue to operate and invest. The industry has thoughtful ideas and solutions to offer.
These are a few items worthy of discussion with leadership hopefuls over the next few months.
Photo: Ministry of Forests, Lands and Mines
Companies taking part in the forestry trade mission to China in November generated sales of 418 million board feet of lumber.
"Total sales orders taken by the 2010 trade mission are five times greater than the China mission of just two years ago," says Forests and Range Minister Pat Bell.
One of the highlights of the mission involved a groundbreaking for a wood-frame construction project in the Tianjin Economic Development Area (TEDA), 160 kilometres southeast of Beijing.
ASIA TRADE MISSION
Tianjin, China groundbreaking ceremonies for wood-frame construction project.
Photos: Ministry of Forests and Range
CHINA TRADE MISSIONN ovember saw another highly successful trade mission as Forests Minister Pat Bell visited China accompanied by more than 30 senior industry representatives from B.C. The delegation viewed completed and in-progress demonstration projects, visited the Vancouver Pavilion at the Shanghai World EXPO and met with development companies that are converting projects to wood-frame construction.
"With 2010 exports to China reaching $342 million in August, and more than 10 B.C. sawmills and a thousand employees dedicated to producing lumber for China, there can be no doubt that China has been an incredible success story for British Columbia" comments Rick Jeffery, President of Coast Forest Products Association. "If just 10 per cent of China's housing starts (or 800,000 units) were constructed in wood, China would represent new demand nearly equal to the United States."
Continued sales growth and realizing a larger share of China's expanding wood construction market will require a clear focus on China's largest, highest-potential builder and developer organizations. With this in mind, the delegation met with some of China's largest development companies to discuss the challenges they face in building with wood.
BUILDING WITH WOOD Overall, developers feel strongly that wood-frame construction has a role in China, both in terms of diversification and as a way of reducing carbon emissions and greenhouse gasses. Low-rise multi-family, resorts, villas, hybrid multi-storey and small commercial and institutional structures lead the way as the strongest near-term commercial applications for wood construction.
Wood construction involves new costs and new opportunities for China's development companies. Developers acknowledged that wood can allow them to differentiate themselves as green, modern and innovative. However, the early stages of projects involve higher costs in securing materials supply, addressing regulatory issues and applying wood construction technologies. These cost drivers slow the pace at which China's major developers can convert projects to wood-frame construction.
WOOD CHALLENGES While improving rapidly, China's supply chain for wood products is nascent in its development and struggles with supply and cost instability. This is a market issue because as the market demands greater product availability, entrepreneurs and traders will react by increasing inventories.
In a regulatory sense, China is at an early stage of learning to design and engineer with wood. From building codes to design to building approval and then to inspection, developers cite that lack of knowledge and insufficient understanding of wood construction slows down the building process and costs them money. Strong support was voiced for continuing the current approach to regulatory advancement, including providing wood-focused training for approval and inspection authorities.
TRAINING AND TECHNOLOGY TRANSFER Developers recognize training and technology transfer as very important, noting that the need for it diminishes with time. Training carpenters and designers and others involved in building with wood is valuable, as is working directly with companies to provide quality assurance and training during their wood-frame learning curve. Greenland – a major Chinese development company – is one example: With funding support from B.C., Natural Resources Canada, and Forestry Innovation Investment, Canada Wood China worked with Greenland to build Dujiangyan Xiang-E school after the Sichuan Earthquake. Greenland is now building a wood kindergarten, and needs less technical support than at Dujiangyan. By the time Greenland does another project, its need for technical support will diminish greatly.
"While China's growth is tremendous and has incredible impact for B.C.," explains Jeffery, "we must keep in mind that a strategic approach to market diversification involves tending to all Asia's markets. This includes traditional as well as emerging markets in other parts of Asia besides China. Korea, Vietnam, Japan and, in future, India are all important to ensuring a diverse base of markets that can support profitable forest companies, strong communities and stable government revenues."
REORGANIZATION SCRUTINY The ambitious reorganization of a half dozen provincial ministries dealing with land, resources and the environment, announced by Premier Campbell, is evidently intended to expedite decision-making on Crown land and resources. The significant organizational change separated the policy and operational responsibilities of five ministries — forestry, energy, environment, agriculture and aboriginal relations — and reassembled them in to the new Ministry of Natural Resource Operations.
What seems most peculiar with the reorganization is the splitting of the "policy makers" from the "operational implementers" regardless of the ministry when one of the key challenges for the forest sector was to maintain consistent linkages between forest policy and operations at the provincial, regional and local levels. And that was between two Branches in the same ministry, not five or more ministries as we now have.
REACTIONR esponse from some quarters, questions whether this new effort to improve the management of natural resources in the province will be successful and deliver some efficiencies of scale.
Vaughn Palmer wrote, "Public servants in the affected ministries are bewildered. They don't know who they are working for. They do not know who they are working with. They don't know what they are supposed to do."
UBC Faculty of Forestry Professor George Hoberg noted, "Separating policy making from operations (permit approvals, monitoring and the like) across the ministries will be troublesome – when policy is separated from operations, the result is major delays. Operations and policy people think about issues differently and have different objectives. When there is no clear authority (one minister) a lot of discussion and lost time occurs."
The coastal forest industry has expressed strong reservations and concerns that progress made with the Ministry of Forests and Range (MFR) over the last few years is now at risk in the reorganization. MFR had developed a new mandate that included competitiveness and advocacy roles and the operational relationship between the government and industry partners was the best it had been in years so understandably the industry does not want to see this progress eroded. These changes aligned government and industry service delivery goals as both parties faced the shared reality of delivering world class forestry with less resources.
"We realized the horse was two pastures over so there was no sense trying to close the barn door," says Coast Forest's Rick Jeffery of the reorganization. "We are now working constructively with MNRO to ensure the needs of the industry are being met. In the meantime, we are suggesting to leadership candidates that a review of MNRO should be undertaken soon to ensure it is meeting the stated goals and objectives without any unforeseen consequences. A hybrid model may be a better option for the forest sector." (Continued below)
In early November, just before the announcement of Premier Campbell's resignation, his Cabinet shuffle quietly created a new ministry. The Ministry of Natural Resource Operations, led by Steve Thomson, former Minister of Agriculture and Lands, has responsibility for permitting and regulations for all resource industries while the Ministry of Forests and Range was combined with Lands and Mines to essentially deal with policy.
The responsibilities of this new "super ministry" will include:
- Crown land allocation and authorizations
- Forests and range authorizations
- Road, bridges and engineering
- Independent power production
- Mines and minerals permits
- Aquaculture licensing
- Water use planning
- Aboriginal consultation for natural resource projects
- Resorts and alpine ski developments
- Fish, wildlife and habitat management
- Resource management compliance
- Forest investment operations
While this major reorganization is underway Coast Forest is working with government to help ensure a smooth transition so that forest industry interests are met and any negative effects on industry are kept to a minimum.
REACTION (CONT’D) In order to expedite approvals and to facilitate resource-based economic development the MNRO recipe for success must contain a number of key ingredients:
Competitiveness and Advocacy – focus on industry competitiveness, acting as an advocate for industry in the approval process to maintain significant progress that was being made and not lose focus and momentum.
He also pointed out that if the PST was reinstated, it would be retroactive to June 30, 2010, which means anybody who purchased goods for their business since then would have to pay an extra seven per cent in owed PST, a tax first designed and implemented back in 1949.
Improved Service Delivery – build on the current forestry approval processes, especially at the Regional and District levels, streamlining to improve the quality and timeliness of permitting.
Results-Based Management – advance a results-based management/professional reliance model across ministries to reflect government demographic and resource challenges underlying the reorganization, while meeting industry's needs, and dovetailing with third-party certification systems and customer driven expectations for sustainability.
Joint Policy/Operation Problem Solving – keep government policy and industry operational forums as the model in place to solve issues across provincial, regional and local levels, including setting standards for MNRO operations.
Compliance Function – establish a District level compliance function/contact for industry to resolve compliance issues before they escalate to higher levels like Opportunities to Be Heard which are time consuming, expensive and divisive.
Economic Sustainability Analysis – establish an analysis group responsible for synergy between policy, legislation, regulation and operations which also undertakes multiple accounts benefit-cost analysis on forest policy and land-use decision.
Review and Assessment– review ministry in the near future to see if it is accomplishing its objectives and delivering permits, approvals and policies in a manner that works for the forest sector.