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October 2005  - The Logging and Sawmilling Journal

 

SPOTLIGHT

Wanted: Access to affordable timber

A group of independent, non-tenured sawmills in BC is working to get access to timber at affordable prices, and is looking to move the mills from being an endangered species to healthy, cutting-edge innovators.

By Jim Stirling

 

Does the BC Liberal government’s vision for the province’s forest industry include a mix of enterprises: the large, mid-size and small, each filling their respective roles and responsibilities inherent with the utilization of a public resource? A group of independent, non-tenured sawmills in BC fear the answer to that question is no. And they’re out to change the perception. The group says a spate of recent changes to forest policy in the province has made the non-tenured sector an endangered species because it can’t access the timber it requires at affordable prices.

The group, under the banner of BC Independent Sawmills (BCIS), is taking its case to Rich Coleman, the newly minted provincial forest minister. The group wants the minister to understand what’s happening in the fibre supply marketplace and how the policies creating it are jeopardizing the future of its members. The group goes further, with a threepoint policy for government consideration, a policy it believes will alleviate the situation and level the playing field for the independent sawmilling sector.

Recent changes to BC forest policy have made the non-tenured sector an endangered species because it can’t access the timber it requires at affordable prices, says BC Independent Sawmills (BCIS).

BCIS contends the root of the problem is the rapid consolidation that’s taken place among the tenured forest companies in BC. The government has listened to the major licensees and created a more flexible climate in which they can consolidate, cut costs,
improve competitiveness and satisfy shareholders. But the smaller operators have found themselves cut adrift in the process, unable to compete for fibre.

The BCIS emphasizes it’s not taking a swipe at the major licensees; indeed, developing a workable trading relationship with the majors is germane to the independent’s survival. BC Independent Sawmills represents more than two dozen operations in the province and says it enjoys the support of others, including those served by replaceable and non-replaceable forest licences.

Appointed spokemen for the group are Andrew Powell with Paragon Wood Products, with four plants in BC’s southern Interior, and Warren Carter from North Enderby Timber. Powell explains that in a resource industry like forestry, geography is very important. BC’s forest revitalization policies permit major licensees to swap tenures and allows them to focus on large geographical areas, he points out. “The independents don’t have a range of tenured mills to choose from to access their fibre.”

Coupled with licence consolidation is the government’s removal of the independent’s life rafts, including the elimination of the small business program— which sustained many of the non-tenured companies—and changes to Category 2 processing requirements.

The mountain pine beetle epidemic exacerbates the independents’ plight. Uplifts in AAC to speed harvest of the stricken timber—the latest being a 1.2 million cubic metre boost in the Okanagan Valley—is not generally available to non-commodity lumber product players.

The concentration on pine means the full forest profile is not being harvested. Mills with a species requirement—like cedar—face a downturn in potential fibre availability. “Now more than ever before, we need to establish trading relationships with the majors,” says Powell.

The BCIS group’s three-part proposal is presented as a package, not as a trio of alternatives. The first point is to encourage the Ministry of Forests to issue tenure to larger scale independent sawmills processing upwards of 100,000 cubic metres per year. The group says that despite the ministry’s best intentions, consolidation has resulted in the absence of a competitive environment to acquire or market timber. Other government policy changes have made it increasingly difficult for larger scale independents to acquire timber. The group cites: the elimination of cut control has jeopardized supply of specialty logs like cedar; the elimination of Category 2 processing requirements has resulted in increased surrogate bidding; opening BC Timber Sales to the majors places independent companies in direct competition with their timber trade customers; and Section 21 bid proposals have been eliminated.

The BCIS feels only about a half dozen mills would qualify for the new tenure they suggest. The group says the fibre could come from Section 21 volumes, accumulated undercuts, the 20 per cent timber take back on licensees with cuts more than 200,000 cubic metres per year, uplifts from intensive management and from Category 2 volumes. Newly tenured companies would be banned from future Category 2 timber sales.

The group points out that Alberta has implemented a similar tenure re-allocation system for smaller scale mills. The BCIS says the Alberta precedent was introduced to: increase competition on bid timber; level the playing field between large and small operations; increase the competitiveness and viability of small manufacturers; and reduce the amount of government administration.

The second point in the BCIS proposal calls for the creation of a protected category of market timber for nontenured sawmills with less than 100,000 cubic metre/year capacities. “These midsized operations require two things: an increased number of licensed trading partners and a protected band of timber which can only be accessed by licensees through the mid-sized operations. Surrogate bidding on these volumes by the licensees must be discouraged strictly,” says the BCIS.

The third leg of the group’s proposal is to allow off-quote trades from small operators. The group explains the intent here is to provide an incentive to licence holders to deal with companies whose needs for round logs are both specific and small volume—operations like log home builders, hardwood manufacturers and white pine veneer companies.

“These smaller producers also require two things: a greater number of licensed trading partners and an incentive for those licence holders to supply specific logs,” says the group. It calls on the ministry to provide a mechanism for large and small licensees to provide logs to the small operators and have those volumes replaced.

BC Independent Sawmills has a policy that it has put forward for government consideration which it believes will alleviate the situation regarding affordable timber and level the playing field for the independent sector.

“The competition for BC’s timber is dead or dying,” declares the BCIS group. “Unrestricted consolidation of the majors and elimination of programs designed to help the independents have together resulted in a climate that has practically destroyed many independent log users.

“The forest industry in British Columbia is in imminent danger of losing its entrepreneurial edge as the companies that grew up under the former small business program now find it impossible to source fibre.”

The BCIS says its three-part proposal is viable and makes sense. Failure to implement the changes will only result in continued decimation of the competitive element in BC, the group concludes.

 


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