The Last Word - A summer of industry uncertainty

By Jim Stirling

The fortunes of forest industry workers have peaked and plummeted during a summer of uncertainty in British Columbia. On the coast, a strike stopped most logging and wood processing. And the provincial Liberal government announced new rules about how forestlands will be managed. In the Interior, short-term sawmill production curtailments were routine, and while mill closures have been announced, new ownership promises to resurrect others.                                   

The town of Mackenzie has endured an emotional rollercoaster ride. Canfor Corporation announced in May that it proposed closing for an indefinite period its two sawmills in Mackenzie, a forest industry dependent district about 190 kilometres north of Prince George. The familiar villains were cited for the move including low US housing demand, the high Canadian dollar and escalating costs. The mill closures represented about 450 mill jobs and many more in the bush and service and supply sectors in Mackenzie.                                   

Canfor’s intention triggered considerable community and political outcry. The company’s board of directors agreed to re-assess the Mackenzie situation. The result of that process— announced in late July—is that one (the older) sawmill will close and the other will be reconfigured to remain operational on a three-shift basis. It translates into about 20 jobs saved and 1 0 eliminated. It also means Canfor’s Mackenzie operations will cut lumber production by about 150 million board feet a year.                                   

Canfor’s decision to keep one mill in Mackenzie was greeted with much relief. But the other shoe may yet drop. The operational realities remain: the poor lumber markets, the elevated Loonie, high operating costs and now challenges by the US that Canada is reneging on its obligations under the Softwood Lumber Agreement. The Americans have formally requested arbitration into these complaints, and stepped up monitoring of Canada’s compliance under the agreement. And of obvious shareholder concern, Canfor reported a net loss of $ 8.8 million for the second quarter of 2007. The mountain pine beetle epidemic imposes a broader long-term future context for dimension lumber producers in BC’s Interior. The reduction in suitable timber supply brought about by the beetle looms huge on the horizon for the entire industry.                                   

Other forest companies in BC are confronting similar financial challenges. Pope & Talbot Ltd was attempting at the time of writing to rearrange a line of credit. As a consequence, the US-based company says its assets are on the table as it tackles financial restructuring. The company’s interior BC operations include sawmills at Fort St James, Castlegar, Grand Forks and Midway and a pulp mill in Mackenzie. Forest workers in those communities have had their lives essentially put on hold.                                   

The immediate future appears brighter in Kamloops. Interfor’s Canadian operations have reportedly completed a deal with Weyerhaeuser Co, to acquire its Kamloops sawmill and the 700,000 cubic metre wood basket supporting it. More importantly for the mill and bush workers dependent on the operation, Interfor announced a plan to invest in the mill to ensure it has a future.                                   

Meanwhile, Pat Bell, BC’s Lands Minister, was talking excitedly this summer about imposing an ecosystem based management regime up and down the provincial coastline. It’s a new name for a basic intent that’s already part of timber harvest planning. The ecosystem management approach is, in general terms, designed to protect vulnerable landscapes and their occupants from the impacts of timber harvesting. It means special attention must be paid to areas around water, to fisheries, wildlife habitats and species at risk. And, of course, native concerns

and aspirations must be front and centre in the land management process.                                    None of these objectives is intrinsically wrong from a forestry perspective. Much of it is common sense. The forest industry has long been forced to abandon its “King of the Forest” days when it alone managed the resource for its purposes. And that’s just as well.                                   

But what ecosystem based management means—however it’s defined— equates to higher costs for licensees and log harvesting companies. It means designing different logging methods (read expensive) to harvest small patches (reduced volumes) in widely scattered areas (increased transportation costs). And that assumes all the constituents’ agendas can be divined into a harvesting strategy in the first place. It’s open to speculation what—if any—vision the provincial government has for a sustainable coastal forest industry.                                    It was in 1998 that then forestry giant MacMillan Bloedel announced a high cost switch to a partial and selective cut system rather than clear cuts on its tenured forest lands. MacMillan Bloedel, of course, no longer exists.                                   

In 2007, Husby Forest Products Ltd, a successful market logger with about 90 employees in the Queen Charlotte Islands, questioned its survival there if proposed land use agreements and standards for ecosystem based management are implemented. Extra costs cannot be infinitely absorbed. Perhaps the only group that can afford to operate in the future will be native run- or fronted-organizations, heavily subsidized by government through its multi-tentacled relationships with First Nations.  

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