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March 2006 - The Logging and Sawmilling Journal

 

cONTRACTOR PROFILE

 

Salvage in the oilpatch

The grandsons of Canada’s last hereditary First Nations Chief are managing a very modern—and very diversified—logging business in northern Alberta that includes a large component of salvage logging in the oilpatch.

By Tony Kryzanowski

Salvage logging is definitely a growth area for logging businesses located in certain areas of the country, to the point where some companies like RKM Contracting Ltd, in High Level, Alberta are able to serve this industry full time, all the while deciding here the company is headed in the longer term.

RKM Contracting has been in business for over 30 years, deriving most of its income from logging contracts for forest companies, First Nations communities and the oil patch. However, increased exploration activity by many oil and gas companies in the High Level area has given RKM Contracting the ability to both diversify and put more emphasis on salvage logging.

The company is owned by Reg and Kelly McLean, whose grandfather was Dene Tha First Nation Chief, Harry Gabriel Chonkolay, Canada’s last hereditary tribal chief. Kelly is the company’s operations manager and his aboriginal roots have helped him build important contacts within the local First Nations community. Given the number of First
Nations groups in the High Level area and the volume of forest resource they own, McLean has played a key role connecting the people with the resource to area sawmills. First Nations groups prefer to contract the services of an aboriginal logging contractor, and RKM Contracting has responded by hiring many aboriginal workers, in the process of building its business.

The McLeans started the business in 1975 with a single skidder to supplement the family’s farm income from the 1,500 acres they farm near Fort Vermilion, Alberta. Kelly joined the business out of high school and has been operations manager ever since.

The equipment line-up at RKM Contracting includes a John Deere 748G-II (left) as well as a Deere 648G-III.

The company’s current fleet consists of a Prentice 630A feller buncher, a Timberjack 650 feller buncher, a 748G-II John Deere skidder and a 648G-III John Deere skidder, a Hitachi 200 carrier with a 2000 Lim-mit delimber, a 325 Caterpillar carrier with a 622 Waratah processor head, three Caterpillar dozers, two Caterpillar graders, and two Caterpillar excavators. They also own a self-loading log truck, which comes in particularly handy on salvage logging jobs. Kelly says there is definitely a growing demand in the area from the oil and gas industry for salvage logging on public, private, and aboriginal land.

Serving oil and gas customers requires a different approach than most forest industry customers. In fact, many of the differences not only apply to loggers working with oil and gas customers, but also to loggers dealing with customers needing to salvage logs, for example, to install hydroelectric power lines. The logging is often done in straight lines, payment is typically by the hour rather than by volume, and getting the job done on time without interruption is critical. That’s because salvage logging is simply an overhead cost to these customers.

“They don’t want to see you out there working on your equipment,” says McLean. “It has to be moving and productive all the time. Also, when they holler, you have to be ready and available to get the job done for them.”

He says that being seasonal, RKM Contracting is able to bring its equipment into the yard during spring break-up and the slower summer season and they keep it in top running condition. The company has a full-time mechanic on staff, and even if equipment requires maintenance during the busy season, parts delivery is overnight from Edmonton. However, given that High Level is eight hours north of Alberta’s capital, RKM Contracting keeps an inventory of high wear parts in the event of a breakdown.

RKM’s Prentice 630A feller buncher is an older model from 1999 but McLean says he has gotten excellent performance from the machine. He tends to hold onto equipment that hasn’t cost him a lot of money in repairs.

The Prentice line is manufactured in Wisconsin by Blount Inc. The company now has an updated 630B feller buncher featuring a 260 horsepower engine and a D6 size undercarriage. In general, Blount says its approach is to design its equipment for easy service and maintenance, with centralized greasing as well as hydraulic and electric diagnostic centres. Blount also produces a larger 730B feller buncher, with a D7 undercarriage, and offers a line of leveling purpose-built forestry carriers for both select harvesting and clearcutting.

Salvaging logs for oil patch customers sometimes means working seven days a week during the busiest time of year, from mid-November to the end of March. However, with the days being so short in this part of the world—which is near the Northwest Territories border— keeping busy by working long hours helps to pass the time.

RKM’s Prentice 630A feller buncher is an older model, but Kelly McLean says they continue to receive excellent performance from the machine.

The payoff is in summer when the sun barely sets and the oil and gas industry is less active. The focus is on getting the job done in advance of the arrival of drilling equipment.

McLean emphasizes that this year is just a break for RKM Contracting from its many years of logging for forest companies and First Nations communities. The company will re-evaluate its position within the forest industry in the future.

The decision to focus on something else for a short interval actually has many positives. For well-established loggers like RKM, the change helps to keep the business interesting, but without risking a lot of income.

There is considerable oil and gas exploration activity. The demand for salvage logging in northern Alberta and BC is following right along, and is driven by three motivating factors. The first is the high price being paid for oil and gas products. There has also been a shift in exploration activity from southern Alberta to northern Alberta, northern BC and the Northwest Territories because of depleting natural gas and oil reserves in southern locations, where many oil and gas wells were situated on prairie land. The third reason for a strong oil and gas focus in this area is the expectation of the construction of the Mackenzie Valley gas pipeline. Should the five pipeline investors decide to proceed with the $7 billion project by the summer of 2007, this will give oil and gas exploration companies the incentive to build pipeline branch lines and invest more into exploration.

In the oil patch, the logging is often done in straight lines (right), payment is typically by the hour rather than by volume, and getting the job done on time without interruption is critical.“Customers don’t want to see you out there working on your equipment,” says Kelly McLean.

If approved, the Mackenzie Valley gas pipeline will span a 1,200-kilometre route from Inuvik to northern Alberta. Construction of branch lines will create demand for salvage logging in treed areas.

McLean says energy companies tend to favour logging contractors with experience who can provide them with a complete log salvage service. They want someone who is easy to reach and requires minimal supervision.

For his part, Kelly says he stays in contact with his main oil and gas customers almost year round, working mostly through personnel in regional offices as well as keeping in regular contact with field personnel.

“They usually give us a couple days’ notice,” says McLean, “but we have to be ready all the time. If we are working for one company, we make sure to look after those people first. If we are busy doing something else when we get a call, we usually phone a sub-contractor and still get the job done for them.”

Individual salvage logging jobs need to be planned on a case by case basis, and the customer’s requirements will often change. Sometimes there is already a road into the lease site or the client only wants RKM Contracting to handle the logging and not necessarily the site clean-up. McLean says the payment standard that RKM Contracting uses is based on the government of Alberta’s road building rates.

As part of the logging contract, they are responsible for sorting the wood into softwood and hardwood decks. Merchantable timber is salvaged typically down to a four-inch top and a six-inch butt. Non-merchantable wood is piled and burned, although McLean says more companies are looking at mulching as a different way of managing this residual fibre.

Using a self-picker logging truck is important in this type of logging for two reasons. The locations where the logs are decked are often quite tight. And there are usually only two or three loads to pick up per lease. The cost of using a loader and a standard logging truck would be prohibitive. Like many contractors, fuel costs are a great concern. So being able to complete a task with only one piece of equipment provides a cost saving to the customer.

 

 

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