Partners in profit

An award-winning logging partnership between the Quatsino First Nation and Western Forest Products on the B.C. Coast is delivering efficiencies—and profits—to the two partners.

By Paul MacDonald

Annual general meetings for Canadian forest companies are usually held in swishy ballrooms in downtown Vancouver or Toronto, with solid attendance by the suits from the financial community.

The annual update meeting for the Quatern Limited Partnership—a logging partnership between the Quatsino First Nation and Western Forest Products—is a bit different and more relaxed: one of the recent meetings was held over a roast beef dinner in the Quatsino Community Hall, near Coal Harbour, on the northwestern tip of Vancouver Island. And it was definitely a casual affair—no suits were in sight.

The Quatern Joint Venture recently celebrated its fifth anniversary and, from the comments of the parties involved, the partnership is working out quite nicely. So much so that Quatern was awarded a B.C. Aboriginal Business award last fall. “Aboriginal entrepreneurship is key to B.C.’s growth and prosperity,” said B.C. Premier Christy Clark, in announcing the awards. Some 15 aboriginal businesses, entrepreneurs, joint ventures and community owned enterprises were recognized at the awards.

The Quatern (the name being a combination of Quatsino and Western) partnership started in 2010, with the intent that the Quatsino First Nation could combine some of its logging operations on forestlands on northern Vancouver Island with Western Forest Products—so that both parties could make a profit and create a sustainable livelihood, while respecting First Nation culture. And so far, that has been the case.

By combining forces, the two partners share the costs of planning, engineering, roads, facilities and logging—and both parties bring local expertise and knowledge to the bush, and to the venture.

Andy Steinke, Quatern’s General Manager, explains that the goal is to “collaboratively work together and achieve some economies of scale because the tenures sit side by side. In fact, one of the Quatsino First Nations’ tenures floats inside of one of Western’s tenures.”

Steinke notes that Quatern is a true 50/50 partnership, with the Quatsino First Nation, through its forestry arm, the Quatsino Forestry Company, and Western contributing equal volumes from their respective tenures. Depending on the year, Quatern will harvest between 40,000 and 60,000 cubic metres, in blocks ranging in size from 20 to 25 hectares.

“Essentially, we pool volumes from these tenures,” he says. “By sharing the volume in an area, we are not running up against each other. And since it is a 50/50 joint venture, everyone has the limited partnership’s interest in mind, rather than their own interests. Developing a mutually beneficial relationship is very important with the joint venture.”

While Steinke is general manager and deals with day to day matters, Quatern has a board made up of two directors from the Quatsino First Nation, and two directors from Western, to provide longer term direction. Board meetings are held at least quarterly.

“It’s been great,” says Steinke. “It’s good to have both company representatives and band members on the board, and to deal with the band on a business to business level. And it was an honour to receive the B.C. Aboriginal Business award—it’s taken a lot of work by everybody to get to where we are.”

In the woods, Quatern works to compress, time-wise, the engineering, road building and harvesting activities. This works much better than spreading out the work over the year—they get people and equipment into the site over a shorter time span. For example, they might start road building in January, with the harvesting wrapped up three months later in the second quarter of the year. Some years, says Steinke, they’ve started things later, with road building in May or June, and production done by the fourth quarter. “Usually, though, we have most of our wood out by the second quarter.”

Steinke, as general manager, oversees the planning, engineering, logging, sorting scaling and sales.

Western’s portion of Quatern is on Crown land, and comes from Tree Farm Licence 6, located in Quatsino Sound. Their portion of Quatern harvesting is done in part by Western crews who are members of the United Steelworkers (USW) union. Contracted equipment on the harvesting end has included a Tigercat 855 feller processor with a 24” Waratah head, a Cat 330 processor with a 24” Waratah head, and John Deere 959K and Madill 2250C feller bunchers. Hoechucker/loaders have included a John Deere 992, a Hitachi 450 and a Madill 3800. Off-highway logging trucks are Kenworth and Hayes.

“It’s been mostly a program where we work with mechanical harvesters,” says Steinke.

The Quatsino First Nations portion of the joint venture can be put out to tender, but Western USW crews have done much of this work to date as its crews offer competitive rates.

Quatsino has its own yarding and loading operation, which does harvesting in other areas of TFL 6, and when the equipment owned by the band is suitable for the terrain Quatern is logging, there is the option to do harvesting for the venture as well. The band has two woodlots either side of Coal Harbour, and as Steinke noted, they have a floating licence in Western’s TFL 6, in their traditional territory. The band has done an assessment of these areas, and has already done set-asides for any spots with cultural features.

All of the log volume harvested in a given year is marketed to generate the highest return. Some of the wood is used domestically, and some is exported directly from Quatsino Sound for markets such as China and Korea.

As the saying goes, this business arrangement with Quatsino First Nation is not the first rodeo for Western Forest Products, or the band. The two have what has been described as a respectful, long-standing relationship that includes a number of business agreements over the years. Quatsino has had a Bill 13 yarding and loading contract with Western Forest Products since 1994, a fixed term yarding and loading contract since 2008 and a salvage agreement since 2008, all of which are still active.

Depending on the year, Quatern will harvest between 40,000 and 60,000 cubic metres, in blocks ranging in size from 20 to 25 hectares. Some of the wood is used domestically, and some is exported directly from Quatsino Sound for markets such as China and Korea.

It’s noted on Western Forest Product’s website that the company operates in the traditional territories of over 45 First Nations. The company’s Chief Forester, Shannon Janzen, sits on the Quatern board and has been involved since the venture was established in 2010. Janzen’s’s involvement in Quatern reflects the company’s commitment, right to the top of the organization, to building mutually beneficial business partnerships with First Nations.

On its part, Western says it respects the historical and cultural interests of First Nations people, and recognizes its responsibility to work with them to conserve and protect those interests. Janzen confirms that the company philosophy includes support for the need to resolve First Nations land claims and create a more certain future for all British Columbians, and of course, the forest industry. Western believes this can be accomplished in a manner that supports its business needs and continues to attract the capital investments that will make the company and those that rely on it stronger.

“It’s our goal to increase the economic benefits from the forest sector to First Nations communities,” says Janzen. “We believe this is possible through a diversity of collaborative and mutually beneficial partnerships that reflect the economic interests of individual communities.”

Like many forest companies, Western recognizes First Nations communities as potential sources of employees. “Increasing the number of First Nations people employed by the forest sector is good for the long-term success of our business. We are faced with an aging workforce and recognize the need to make a concerted effort to attract and train young workers from small communities.”

While Quatern has been a success—and may be a good benchmark for other industry/First Nations joint ventures—Steinke said each partnership will likely be unique. “You can’t really do a cookie cutter approach to joint ventures because each one is different, with different circumstances.” Western has three other ventures, and each one is different.

“Quatern is a good template to use in terms of pooling volume to get economies of scale and for collaborating with First Nations on a business to business basis,” says Steinke. “It’s successful, and it works for this situation, and with the Quatsino First Nation. But we wouldn’t necessarily want to use it as a model for the whole coast because it may not work elsewhere. In a business venture, there is always the challenge of working with any partner and figuring out what each party needs from the venture.”

In other words, each business venture, whether it involves First Nations or other parties, is unique. The other partnerships between Western and First Nations groups—and for that matter, other forest companies and First Nations groups—involve different harvesting volumes, different geographical areas, and may have a different management approach.

The Quatern board has a varied make-up, since it has two Western representatives and two band representatives. Everyone brings something to the table in terms of their viewpoints and experience. “It’s a strong group that makes sound decisions on how business is conducted,” says Steinke.

Steinke added that the Quatsino First Nation has a history with the forest industry, and not just through the band’s involvement with Western on other projects, as mentioned. One of the founders of Quatern, Ralph Wallas, is a band member who came up through the forest industry, and was a hooktender. Wallas was the forestry co-ordinator for the band and was on the Quatern board, to start.

And a current board member, Charles Sheard, also brings industry experience. Sheard, who is also a member of the band’s Economic Development Board, was a faller for 15 years. Sheard says the joint venture is beneficial in a number of ways, including being able to tap into the extensive expertise Western brings in building road, logging, and transporting and marketing the wood. “It’s a good joint venture between the two partners,” he said. Sheard noted there seems to be a lot of interest by forest companies in joint ventures, including Western and other forest companies that operate on the B.C. Coast.

Further opportunities will likely be available in the future in B.C., as the provincial government settles more First Nations land claims.

The success of Quatern proves that the joint venture is a solid, sustainable business model for both bands and forest companies, says Western.

“One of the interesting things about Quatern is that we now have different people involved today than when it was set up five years ago,” says Steinke. “We have a different board and management, but the spirit and intent have remained the same. It’s been a solid business relationship, and it’s been successful every year. It’s been a good relationship for both Western and Quatsino First Nation.”

As for others thinking about setting up joint partnerships with First Nations, Steinke said that it’s important to establish trust. “Trust building is an important aspect,” he says. Western and the Quatsino First Nation already had a long history of business relationships prior to setting up Quatern.

“There was a very good relationship with the Quatsino First Nation to start. That trust was built up over years, and it helped the joint venture. It kind of built the foundation for Quatern. Forest companies can also benefit from getting involved with First Nations communities in general, and working with them on jobs and training,” he added.

And he noted setting up joint ventures can take time. “It can’t happen overnight, that’s for sure. You bring your challenges and opportunities to the table, and the First Nations’ bands bring theirs, and you see what the opportunities can be together.”

Template for joint venture deals varies

From the existing joint ventures such as Quatern, Western Forest Products has made it clear that it is interested in establishing mutually beneficial relationships with coastal First Nations through further joint interests in sustainably harvesting timber. And, as noted, the template for that can vary.

This past October, the B.C. government and the ‘Namgis First Nation on northern Vancouver Island announced a formal forestry funding agreement, which has led to a partnership between the ‘Namgis First Nation and Western about a collaborative effort to harvest timber in an area of Tree Farm Licence 37 that had been previously unavailable due to treaty negotiations. These relationships are expected to provide benefits to the ‘Namgis, greater timber access for Western, and improve future operating certainty, says Western. This year, 2016, will be the partnership’s first full year in operation.