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Coastal Clarion - Newsletter
Vol.7, Issue 2 · Summer 2011
Premier Clark and Minister of Forests, Lands and Natural Resource Operations Steve Thomson are facing intense political pressure from both sides of the log export debate. The Opposition takes the politically opportune position against the evils of exporting "raw" logs while truck loggers claim log exports are the key to their survival. The truth is a healthy forest sector requires a sustainable balance between meeting domestic manufacturing requirements and logs being exported to markets around the world.
Manufacturing products from the world's most well managed and sustainable forests is Coast Forest Products Association's primary business. As such the association is conducting a detailed and comprehensive analysis of log export policy. Upon completion, Coast Forest will be proposing constructive solutions to government aimed at supporting a world-class forest products industry in B.C.
The goal is to create and maintain a sustainable and thriving forest products industry in B.C., an industry that built our province and continues to be a major employer and important contributor to fighting climate change.
The facts clearly demonstrate that the vast majority of the value from our forest industry comes from manufacturing a diverse product mix which meets the needs of our global customers. The coastal forest sector boasts mills that produce a broad selection of commodities and value added products, giving us the distinction of being one of the most diversified manufacturers of forest products in the world.
StatsCan statistics reveal that 95% of the industry's total revenue comes from products manufactured locally: softwood lumber, a variety of pulp and paper products and other wood products like plywood and veneer. In comparison, log exports are a minor part of the whole industry with revenue valued at only 5%.
To maintain our reputation as a leading supplier of high quality, environmentally sustainable forest products, it's essential that the majority of logs are manufactured in B.C. But international demand for lower value logs helps keep loggers working while providing incremental domestic log supply, which keeps more domestic mills running, creating additional jobs and economic activity at home.
It's in all our best interests to have a strong forest products manufacturing industry in B.C. One that creates and maintains high paying jobs, supports local communities and contributes to government revenues, providing ever scarce dollars for health care, education and social services, the things Premier Clark says families deserve and will receive under her government. The B.C. coastal forest industry is a world leader in forest products manufacturing. Going forward, we must ensure an appropriate balance between domestic manufacturing and log exports.
COAST FOREST BOARD OF DIRECTORS
Photo: Western Forest Products
Lee Doney, Coast Forest Chair
Coast Forest Products Association is pleased to announce the election of the association's 2011 board of directors and its new Chair, Mr. Lee Doney, who is also vice chair of the board of directors of Western Forest Products.
Mr. Doney is highly regarded in the B.C. forest industry and has a long career in government serving as a deputy minister for over 15 years, with two years as the deputy minister of the (then) B.C. Ministry of Forests. (Continued on page 4)
NO NET LOSS HABITAT POLICY
Coast Forest is calling for the Department of Fisheries and Oceans to fully modernize its out dated and narrowly focused No Net Loss Habitat policy, which is currently under review by the federal government.
The No Net Loss policy puts the DFO in the untenable position of trying to permit projects that provide economic benefit without losing any habitat. Coast Forest has a long history of cooperation with the DFO and is recommending the creation of a new policy that uses a balanced approach to examine both biological and non-biological considerations for proposed projects.
"The current policy implies there can be no loss of habitat when the reality is that all development, no matter the mitigation or compensation, will have some sort of impact on the productive capacity of any natural habitat," explains Coast Forest's Rick Jeffery. "It is time to bring the policy into the 21st century with a more balanced approach to habitat harm reduction."
With a habitat conservation policy such as this, at issue should be not how the impacts of industry can be managed to zero but rather whether the impact or risk to the habitat and its species can be minimized to an acceptable and nominal level. This realistic approach implies explicitly factoring in social and economic considerations into the assessment along with the biological aspects associated with preserving habitat. (Continued on page 3)
Now is Not the Time for Victoria to Re-allocate Uncut Volume By Norm Facey, Senior Vice President, Timberlands, Western Forest Products
In 2008 we saw the start of the worst economic downturn in 50 years. During the two years that followed, the B.C. coastal forest sector significantly undercut its maximum allowable harvest volume. Any alternative would have supplied more wood into an already saturated market, thereby deepening and prolonging the downturn and pushing B.C. forest companies further into the red.
Now, as global markets improve, the sector needs to take a longer-term view, reinvent itself and build the resiliency necessary to ensure we can do more than merely survive future downturns. Let's not fool ourselves; while the worst might be over, there are strong indications that markets will be volatile for quite some time.
In light of continued uncertainty, we are concerned that the B.C. government is relying on traditional policies designed for a normal business cycle, rather than tailoring action to reflect the unprecedented operating conditions since 2008. The re-allocation of fibre from long-term tenures to achieve short-term maximum harvest levels is one such policy.
Reallocating uncut fibre encourages more intensive harvesting on low-cost, high-value areas of the land base and compromises the long-term sustainability of provincial tenures. It also reduces business certainty and creates a serious disincentive to invest in B.C.'s forests and forest dependent communities.
Instead of being innovative in the formation of long-term partnerships with First Nations, investing in silviculture to enhance forest productivity for future generations, and developing new and non-traditional markets, the industry's current focus is on harvesting as much volume as possible to avoid government penalties. This practice further jeopardizes the sector's strategic position as we force volume into the system in response to an entrenched government policy.
To become a vibrant, sustainable and globally competitive industry that is the backbone for the provincial economy throughout the market cycle, incentive is needed for innovation and investment. Reallocating fibre that was not cut during the unprecedented downturn and forcing wood into improving yet unstable markets will have the opposite effect.
As the largest member of Coast Forest Products Association, Western Forest Products supports the coastal industry's efforts to reform current thinking on uncut volume. We are seeking resilient solutions that expand the benefits from Crown forests in the absence of short-term trade-offs. These solutions need to thoroughly consider the sustainability of forest tenures and move beyond the application of traditional policies to better support the long-term involvement of First Nations in the forest sector and to create a solid and lasting foundation for emerging markets such as biomass.
We ask that the Province takes the time to find lasting solutions to persistent problems and remembers the market the industry has come through while considering the current market outlook from 2011 to 2013. Now is not the time for Victoria to re-allocate uncut volume.
BC TIMBER SALES UNDER SCRUTINYE stablished by the provincial government in 2003, BC Timber Sales has a mandate to provide cost and price benchmarks for timber harvested from public land in British Columbia. The organization manages about 20 per cent of the provincial Crown allowable annual cut or approximately 16 million cubic metres of timber. On an annual basis, the volume available for BCTS coastal auction sales is about 3 million cubic metres.
While BCTS has four stated business goals, it recognizes and acknowledges its main goal is to provide a credible reference point for costs and pricing of timber harvested from B.C. public land. Secondary goals of maximizing net revenue and providing a reliable supply of timber to the market are both subordinate to BCTS being a credible reference point for costs and pricing of Crown timber.
Coast Forest recognizes the coastal forest sector needs BCTS to be successful in putting its total annual volume allocation of timber up for sale as the bid prices received from the auctioned timber drive the market-based pricing system for setting stumpage in coastal operating areas. However, BCTS failing to advertise its full annual volume significantly impacts timber supply and demand, directly affecting the value bid for timber sales. BCTS's sales costs of developing timber and regenerating sites are an integral part of the MPS because this information provides necessary data for the calculation of Tenure Obligation Adjustments.
REALITY CHECK The forest industry has serious concerns that an insufficient percent- age of the BCTS volume is currently being put up for sale and, in addition, sales that are auctioned by BCTS don't represent the overall coastal timber profile.
Research indicates that recent auction volume has not even come close to BCTS's annual allocation. Since 2007, BCTS has only put up for sale about 60 per cent of the volume it manages. Anecdotally, it appears there is an overriding pressure on BCTS to maximize net revenue in order to cut losses and return to profitability.
This financial pressure has resulted in BCTS focussing timber sales on profitable blocks while shelving less profitable blocks such as the ones tenure agreement holders harvest. If the desire to maximize net revenue results in sales geared to log exports and less desirable sales being withheld from the market, distortions in the MPS equation can occur. Similarly, the pursuit of maximum net revenue can result in bid prices being set higher than realistic.
SOLUTIONS Timber volume sold is a good indicator of BCTS's success in analyzing market conditions and providing a reliable supply of timber that customers view as economically viable and will bid on accordingly.
"It's essential for the volume of market transactions to be at a level sufficient to support the MPS for BC Timber Sales price and cost data to be credible," explains Coast Forest's Rick Jeffery. "Our strong view is that BCTS needs to offer its full annual volume allocation through auction sales each and every year." (Continued on page 4)
NO NET LOSS HABITAT POLICY (CONT'D)
The current national habitat policy is more than 25 years old. At a minimum it should be situated in a more contemporary context and positioned for a future that was not envisaged when the policy was created in the 1980s. A new national policy should embrace an ecosystem approach, considering impacts on a larger geographic scale, and should not be exclusively caught up in a project by project assessment, which can both over- and under-represent impacts. The fact is that the No Net Loss policy is part of a more comprehensive policy, one which as a whole needs to be reviewed and reformed.
The need is for a more rigorous risk-based management approach that is both more efficient and predictable. At the same time, the policy should be supported by a different decision making process, or consultations process that allows for integrated input on the mix of biological, social and economic factors that affect the habitat. And finally, the role of the DFO should be reconsidered because it is apparent that the DFO cannot 'do all things for all projects' in today's fiscal climate. It is time to re-evaluate what the DFO can or cannot do, and what others may do to support a more encompassing and inclusive approach to habitat conservation.
Coast Forest has recommended a meeting with DFO policy leaders, who are reviewing the national habitat policy, to clarify the scope of the policy review and introduce the key areas which should be a focus in any reforms.
BOARD OF DIRECTORS, CONT'D Doney's expertise has covered such diverse areas as labour relations, forest policy, environment, skills and training, labour market research and treaty negotiations with a broad impact on the economy and environment.
Elected to the board at Coast Forest's AGM on April 14 were:
- Chair Lee Doney, Western Forest Products
- Past Chair Ric Slaco, International Forest Products
- Bob Brash, Taan Forest Products
- Kevin Clarke, Catalyst Paper Corporation
- Tom Jones, Teal-Jones Group
- Paul McElligott, TimberWest Forest Corporation
- John Mohammed, A & A Trading Ltd.
- Rowland Price, Delta Cedar Products
- Bruce Shaw, Terminal Forest Product
Coast Forest believes the coastal forest sector has a bright future as a central piece of British Columbia's economic engine. Its 2011 Board of Directors will oversee the coastal industry's efforts to work with government and stakeholders to ensure a competitive, stable and cost-conscious operating environment, and is fully committed to helping Japan deal with the devastating aftermath of the March 11 earthquake and tsunami.
KENNEDY MOVES TO CANFOR Christine Kennedy, Vice President of Lumber Programs, has left Coast Forest Products Association to join the senior management team at Canadian Forest Products Limited. Kennedy worked for the association for six years and was invaluable, providing her insights, experience and intellect to strategic planning, communications and lumber issues. She also lent her skills and international experience to the Canada Wood Group and played a vital role in the many challenges faced by Canada Wood.
Kennedy's dedication and commitment have had long lasting beneficial effects for our members, many of whom saw first hand how her hands-on management contributed to the success of numerous trade missions to Japan and China with government dignitaries and company leaders. Coast Forest thanks Kennedy for all her hard work and wishes her continued success in her new position as Director of Public Affairs and Corporate Communications at Canfor.
(CONT'D FROM PAGE 3) BC TIMBER SALES Additionally, sales need to be of varying sizes and must include a range of timber types (species and quality) that represent the timber profile and customer demand. It's also imperative that auction sales are distributed across the coast and aren't clustered in close-in locations and second-growth stands.
If BCTS is unable to sell its full annual volume of timber sales in a manner that meets these representativeness criteria then the organization will not meet its goal of providing a credible reference point for costs and pricing of Crown timber. As a result, domestic mills will be shorted of log supply at the expense of economic activity, revenue and jobs.
DFO REVIEWS NO NET LOSS HABITAT POLICY
Coast Forest represents forest and paper companies in coastal British Columbia engaged in the harvesting and manufacturing of primary and added value forest products, and pulp and paper products. Together, these companies manufacture 95% of the lumber produced on the coast, 70% of the pulp and paper production and are responsible for 70% of the total harvest. The Association works to ensure that the five coastal species and their product lines have fair access to the global marketplace. Committed to providing leadership to create a thriving forest industry, Coast Forest facilitates cooperation between stakeholders and government on behalf of its member companies.