ENHANCING LOG MARKETS (2007)

In recent years the provincial government has taken steps to revitalize the BC forest industry aimed at resolving the softwood lumber dispute with the United States. In order to encourage the implementation of a more competitive bid system, the government developed policy revisions to establish the creation of MPS (Market-Based Pricing System) for stumpage, First Nations Forest & Range Agreements allowing First Nations to obtain forest tenures and the development of community-based forest licences. In addition, the government passed Bill 28 reallocating 20% of crown forest licences from forest companies to BC Timber Sales in an effort to provide a volume of timber on which the market-based pricing system for stumpage could be determined. Finally, the Ministry of Forests and Ranges undertook a review of log export policies in the province culminating in the report – “Generating More Wealth from British Columbia’s Timber: A Review of British Columbia’s Log Export Policies”.

Accordingly, if businesses are going to be required to bid competitively for timber or First Nations are going to have access to open log markets, then unfettered access to domestic and international markets should be available.

An example of where access to all potential log markets has been successful is the OIC (Order-in-Council) granted for the North Coast and Kalum Forest Districts (comprising a large area of the Coast and Northern Transition Zone), allowing log exports. The North Coast/Skeena region has seen a huge decline in manufacturing capacity with the closure of sawmills in Terrace, Hazelton and Smithers and the pulp mill in Prince Rupert. These closures were brought about by poor timber quality, large timber inventories of low value hemlock, high logging and transportation costs and the increase in value of the Canadian dollar. The opportunity to export logs has stabilized and actually enhanced logging, booming, hauling, ship tending and barging jobs. In addition, the ability to market logs for export has allowed businesses to access more marginally economic stands of timber for utilization by existing local area sawmills and smaller owner-operator sawmillers. This has, and will continue, to create/foster more economic opportunities and employment to businesses in the Northwest and exposing the Northwest to a broader range of domestic and international customers. It should be noted that under the existing OIC, only 35% of a licence may be exported at a fee-in-lieu of $1.00 per m3. Additional volume exported over the 35% limit is subject to a surplus test and must be offered to domestic processors on a right of first refusal basis. If that additional volume is not “blocked”, exporters can pay an increased fee-in-lieu to export those “refused” logs.

The report noted above contains recommendations that would allow 50% of the hemlock in stands that would be otherwise uneconomic to harvest to be exported at varying fee-in-lieu of manufacturing fees depending on the indicated value of stands. In addition, non-hemlock species such as spruce and fir, that have traditionally higher values than hemlock, would be exempt from export. Due to lack of demand for spruce and fir by local processing facilities and the high transportation costs to transport to manufacturing facilities on the South Coast and, because these species make up only a very small percentage of stands, the proposed limitation on exporting these species further penalizes market loggers/exporters in the Coast/Northern Transition zone.

THE CHAMBER RECOMMENDS

That the provincial government:

1. go beyond the recommendations of the Wright/Dumont report and permit log exports of all non-cedar species in regions that have an economically depressed forest industry;
2. maintain minimum fee-in-lieu fees for a least 50% of the species exported and an increasingly graduated fee-in-lieu for timber exported above 50%, based on the surplus test currently being implemented; and;
3. encourage the liquidation of low-value stands and invest in silviculture to create and promote healthier and economically viable stands for the future.