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      December 1996 - January 1997 Past Issue

Evans cited as first code victim

Soaring stumpage fees and Forest Code-inflated logging costs forced Evans Forest Products to its knees. Other mills could be facing the same fate.

By Jim Stirling
Copyright 1996. Contact publisher for permission to use.

When Evans Forest Products of Golden, British Columbia closed down in October, throwing hundreds out of work, most of the fingers in the industry were firmly pointed at the province's Forest Practices Code, introduced two years ago, as a factor. The Code was the last knot in a tapestry of pressures mounting on Evans and small and medium-sized companies like it for the last 25 years.

It adds undreamed-of costs and restrictions that are putting this segment of the industry in serious jeopardy. The Evans shutdown has been hard on the people in the Kootenays, especially on the town of Golden. Five hundred people are directly dependent on the company for their livelihoods. At this writing, a rescue plan was being hammered together with temporary wage cuts, rescheduled credit payments, deferred stumpage, a government loan and financial help from Forest Renewal BC. Although not yet finalized, the hope is that the mill would be back in full production some time in the new year.

EB Eddy was severely affected by this sawlog restriction, reducing their previous level of five million board feet of pine sawlogs annually, to one-fifth that amount.

But Evans has been in financial crunches before. It's logging costs are high — much higher than in some other areas of the province; a deferred stumpage plan hasn't helped. Whether it can survive long-term may depend on whether the government is willing to make some fundamental changes in the way the company must operate under the Forest Practices Code.

Other mills around the province are watching all of this with more than passing interest. Evans is simply the weakest of a number of companies that could go on the critical list, with high logging costs and stumpage part of the problem. Creditors are becoming increasingly nervous about these firms and credit lines are being tightened. Evans' problems came to a head because creditors were losing confidence in its ability to work its way out of trouble on its own. This was compounded by the abscence of an assured log supply.

OSB

When the Mica Dam was built in 1973, it flooded a valley containing some very high-quality timber that would have served as a source for Evans. Nobody gave much thought to the trees when the dam was built, as in those days the possibility of a timber shortage was never imagined.

As readily accessible timber dwindled, the company was forced further afield and higher into the mountains. The best of these areas has already been high-graded.  Roller coaster prices for lumber and pulp logs have compounded the company's weaknesses.

But blame for much of the mill's current trouble is being laid on the Forest Practices Code, an ambitious government attempt to codify logging procedures and sustain the resource. The burdens of the Code fall on everybody but are harder to bear for smaller and medium-sized companies operating under financial pressure in a rapidly changing industry. Another problem is that the Code is a general charter that does not fit all situations. It especially does not fit the kind of expensive, steep-slope logging conditions that companies like Evans face.

They developed central delivery locations, the largest being Nairn Centre just east of Espanola, and organized two way transportation where sawlogs went to Sault Ste. Marie, and pulpwood returned to Espanola.

Harvesting on steeper ground is increasingly done by cable systems, a more environmentally friendly approach than ground skidding, but also a more expensive one. Either way, cut blocks under the Code are now smaller, forcing companies to move more often and build more roads. This is especially costly in the mountains and even more so under the environmental standards set out in the Code. All roads must also be deactivated following harvesting again, at a cost. Helicopter logging is an alternative, but it is at least as expensive.

Then there are the Visual Quality Objectives (VQO), which constrain or restrict logging in certain situations to preserve aesthetic slope vistas. More cost. The current Clark NDP government is aware of the expense VQO rules impose and has been lobbied to make them more economically achievable without changing the basic concept. But when anyone suggests easing the rules, Greenpeace, the Sierra Club and other environmental lobbies whip out pictures of ugly clearcuts from the past and Victoria's heart skips a beat. The Code is supposed to convince Europeans susceptible to simplistic environmental campaigns that logging in BC is now ecologically sound.

These days, steep slope logging is increasing in BC as allowable cuts in more accessible timber are being reduced. Some estimates put steep slope harvesting at about 40 per cent of total production. How much is the Code costing? Price Waterhouse calculates that it adds $1 billion a year to forestry costs. The Council of Forest Industries (COFI) estimates that the extra paperwork to comply with Code requirements adds up to 650,000 pages to describe some 30,000 operating plans. This alone, says COFI, adds $2.50 to $3 per cubic metre to wood costs.

COFI vice-president Brian Gilfillan says that although the industry does not want the Code eliminated, it does want it modifed to make forestry more rational. One of the areas that needs to be addressed, he says, is steep slope logging, including the current highly detailed pre-harvest planning and reporting requirements, and stumpage. “If a company has to address the Code and increased stumpage in low-quality timber on hard-to-get-at sites, then the combination is brutal.''

Stumpage fees have been raised several times in the last few years, first to feed cash-hungry governments, and then to try to placate the Americans, who thought they were too low. There is also the NDP's “super fee'', imposed in addition to other hikes specifically to fund the controversial Forest Renewal BC program. In 1995 alone, stumpage went from $816 million to $1.76 billion.

Many in the industry want to see stumpage rates reduced. They argue that companies like Evans would have a better chance at long-term survival if this was done. The trouble for the Clark government is that it currently faces a $750 million to $1 billion deficit. Clark needs the money and forestry is still his biggest revenue source. In any event, any stumpage reduction would be closely scrutinized south of the border, and Victoria would not relish another expensive fight with the Americans.

As far as amending the Code, consider that it is the heart and soul of the government's forest policy. Painstakingly put together, it has the support of environmental groups (and keeps those lobbies off its back) and reflects in a basic way its view of the way logging should be done. It would be very difficult to backtrack significantly now. The Code was also, it should be noted, implemented with a surprising amount of support from the industry's corporate boardrooms.

The government is, however, undertaking an "operational review'' to see if the Code can be made to get the same results with less process and paper. When this will be completed isn't clear.

December 1996 / January 1997 Table of Contents

Evans cited as first code victim
Soaring stumpage fees and Forest Code-inflated logging costs forced Evans Forest Products to its knees. Other mills could be facing the same fate.

Timber Sales Fund Innovative Harvesting Training Program
Eighteen people are learning new harvesting techniques.

Riding the OSB boom
Hedging against a downturn, Weyerhaeuser invests $16 million to improve recovery at its OSB plant at Slave Lake, Alberta.

Cost conscious cut-to-length
Setting up a new CTL show in remote northern Manitoba, Art Riemer wanted dependable equipment - but not at a price that would turn his accountant surly.

Sticking in a Tough Market
At Fort Nelson, the world's largest chopstick plant produces eight million units a day for demanding Japanese buyers.

CCMC Furthering Aspen as a Commercial Species in BC
CCMC is a pioneering company making exclusive use of high-quality aspen.

Tech Update: Cable Yarding Systems
A review of the different cable yarding systems that are available on the marketplace

Helicopter Logging Capability Guide
Heli-logging remains a practical harvesting alternative in many of British Columbia's mountainous regions.

The Eagle Flies
At the site of an abandoned chip mill in Miramichi, Eagle Forest Products turns the key on a new $100 million OSB plant.

New Centre Targets Value-Aded Training
With an estimated 30,000 skilled workers needed in the value-added sector in BC by 2001, the industry has moved to address a potentially serious training shortfall.

Haliburton: A Multi-Use Model
Ontario's Haliburton Forest, a popular recreation site, also hosts extensive forestry research and education programs - and a unique 'one stem at a time' selective logging program.

Yard Handling and Storage Critical to Aspen Quality
Few mill yards contain a fridge for wood, a fibre source to keep a manufacturing plant in business when green production is curtailed.

Northern Mills Address Need for Added Kiln Proficiency
The added market value of kiln-dried lumber is driving a push for new technology and added training for operators.

Supplier Newsline
Trade magazine ads pay off.


Return to the December 1996 - January 1997 Table of Contents

Last modified 2/09/97

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