May 2000 - Logging and Sawmilling Journal

When the smaller forest tenure holders in Ontario's Kirkland Lake District decided to move ahead with a new partnership to manage the forest base, they more than likely took a deep breath.

In setting up this partnership, they would be sitting down with representatives of some of the giants of the industry- Tembec, Domtar, Norbord, Grant Forest Products-and combining their relatively small tenures with the large operations of the big companies.

In the end, though, the five independent tenure holders decided to take the plunge to set up Timiskaming Forest Alliance Inc. (TFAI). But they were motivated by some pretty attractive benefits, including the promise of less bureaucracy. That's music to the ears of any logger.

"These guys are loggers, not paper pushers," says TFAI general manager Allan Foley, speaking of the independents. "It's hard for the smaller operators to keep up with all the ongoing changes and the legislation and policies around these changes.

These guys were getting really beat-up by the bureaucracy and everything that it takes to produce wood in today's world.

"Some loggers in the industry have quit because the process became more overwhelming than the logging operation itself," adds Foley.

These loggers appreciated the fact that the alliance would take over the nuisance, but key function, of "paper pushing", providing the Ministry of Natural Resources (MNR) with all the necessary plans, applications and documentation. "We do all that for them," explains Foley. "When they started to realize that they could once again focus their efforts on their operation under this new arrangement, they really bought into this quickly ."

Besides the five smaller local shareholders- Foster Marshall, Greg Woollings, Harry Block, Rosko Forestry Operations Ltd and W Paiement & Sons Ltd-TFAI also has six member forest products producers. These include the forest giants mentioned above as well as the local independent sawmill operations of Cheminis Lumber and Liskeard Lumber.

"Our first step was to get all these players sitting down together," says Foley. "Being competitors, it was almost like getting the Hatfields and the McCoys together," he jokes.

The overall goal was to see if there was common ground between all the players in putting together a larger body to jointly apply to the Ontario government for a Sustainable Forest Licence (SFL) in Kirkland Lake District-a massive one million hectare piece of land in northeastern Ontario. The annual harvest level for the district generates about 500,000 cubic metres of spruce/pine/fir and about 350,000 cubic metres of poplar.

This move was all part of a bigger picture, that being the Ontario government's decision in the mid1990s to restructure its business relationship with the forest industry. The end result was the industry's timber licence holders took on the costs and responsibilities for forest management planning and forest renewal and maintenance, with MNR focusing on policy development and direction, information management and compliance monitoring and control.

The application for an SFL was approved and the Timiskaming Forest Alliance has now been operating full-bore for four years. And while the process and operations have hit the occasional pothole in the road, it looks like it's one of those rare win-win situations for all parties involved.

Over the past few years, a number of "forest management partnerships" have been set up by companies in Ontario to deal with the government shifting forest management responsibilities to the industry. But Foley says Timiskaming is unique in some respects.

"What sets this cooperative apart from most of the others is that all the companies involved completely surrendered their traditional individual licences to harvest timber. Some of them have had these rights for 50 years, so that was not an easy decision to make ." Other operations in Ontario have opted for an overlapping licence arrangement, where an SFL is issued to an overseeing company, but the shareholders still have their own individual "overlapping" licences. Foley describes the alliance philosophy as "in for a penny - in for a pound", where each member is exposed to discrepancies of their partner, who in this case is also their competitor.

"We are only as good as the weakest link in our chain, and because nobody wants to be labelled as the weak link, the successful arrangement is basically self-driven". Ownership of TFAI is fairly straightforward. Originally, they were looking at one cubic metre's worth of harvest rights contributed to the alliance equaling one share in the coop. But because the annual allowable harvest could and does vary from planning period to planning period, this would mean the number of shares would go up and down. In the end, they decided that the shares allotted to each individual or company would be translated into a harvest level percentage value, rather than an absolute volume commitment. The shareholders thereby share the pain or share the gain.

"They were motivated by some pretty attractive benefits, including the promise of less bureaucracy. That's music to the ears of any logger ."

While the decision to join forces might have been difficult for the smaller operators, it wasn't necessarily a slam-dunk decision for the big companies. They, too, would be sitting down with competitors and sharing information, not exactly a common occurrence in the very competitive harvesting and sawmill world.

Overriding all this, however, was the strong conviction of the benefits that would come from joining together and operating from a common larger structure that would be more effective and cost efficient. "They felt that this would be far more efficient than each company having its own operations ."

With the shift in forest management responsibilities to the companies, the pieces of the forest would have been just too small to manage in any kind of cost-effective manner. Economies of scale suggested working together. "It was inefficient to divvy up the land base for forest management," says Foley, "but certainly no one was about to leave the land base. Joining together was the obvious way to go ."

Just like all organizations, though, there are rules that have to be followed by the members. Essentially all timber production within the SFL has to be sold within the coop. Foley says that mills have seen a lot of timber leave the area for processing at facilities in other regions, much of it going to mills in Quebec.

"One of the incentives in putting this together was to try and control that loss of wood flow. With six member mills, the independents can still get a competitive price ."

And the end user, rather than the logging operator, is billed directly for the stumpage and the per cubic metre operating costs of the coop. "The independents essentially negotiate the price for their wood, FOB the mill. They don't have to worry about handling the stumpage payments or administration fees because we take care of that ."

For the mills, the costs of the timber, stumpage and administration are now much more up front and transparent. There are, however, a number of regional mills outside of the coop that have traditionally bought timber from the independents on this land base. AbitibiConsolidated in Iroquois Falls, for example, has historically bought small spruce pulpwood from the land base. Such traditional nonmember purchase opportunities have been recognized as mutually beneficial and are being maintained by the coop.

While the coop may take away some of the bureaucratic headaches for the bigger and smaller shareholders, its largest long-term responsibility is clearly sustainable forest management.

"We are responsible for the entire forest management program for this 10,000 square kilometre area," says Foley. "The Ministry reviews and approves it, but we are responsible to develop and prepare the 20 year forest management plan ."

The coop inherited the forest renewal program from the Ministry, a program which sometimes saw planting stock being grown out of the region and, sometimes, even out of the province. "The trees were being grown from seed collected from this land base, but some of them were even being grown in nurseries in Quebec. Now, all of our trees are grown locally. We have four nurseries on our land base. We are confident that we are getting a competitive price for the seedlings, and the expertise and benefits are kept local ."

They have also beefed up the number of trees being planted annually from the 1.9 million the Ministry was doing four years ago to the current level of eight million trees scheduled to be planted this year.

While a management forester focuses on the silvicultural side of the operations, a company compliance coordinator works with an operational committee at the Timiskaming Forest Alliance. This committee is made up of the main frontline foreman for each of the major companies and a representative from the independents. "These are the guys who are responsible for coordinating the entire harvesting operation in the bush ."

These frontline in-the-field people were instrumental in developing the standardized operating practices for the land base such as utilization and environmental impact standards. "We basically built our own Timiskaming Forest operations rulebook on how we are going to operate and meet the provincial regulations ." The rulebook was taken to the coop's directors, who then signed off on it. They are now taking the system they used to develop the logging guidelines to develop guidelines covering other areas, such as occupational health and safety, forest fire prevention and environmental protection.

"For us, compliance is more than just having a harvesting policy," explains Foley. "We have to ensure due diligence in a number of areas. It's the people from the companies, with our help, who have been building on these rules and developing these internal manuals. We want to build them from the ground up, rather than the top down. We want to show continuous improvement and we'll make sure we keep raising our own bar ."

Over the past four years, there have been some difficulties as TFAI and the provincial Ministry have struggled at times with their new roles and responsibilities. Foley characterizes most of it as growing pains. "That changeover in staff and responsibilities was in some cases a painful exercise. History changed quickly in a short period of time and it was hard to let go of the past in some respects ."

The Timiskaming Forest Alliance seems to have proven itself-so much so that it has been approached about taking on management responsibilities for the Temagami District to the south. The members of the alliance have considered the proposal and have agreed to pursue the concept-discussions have already started with the Ministry of Natural Resources. Plans are to combine the Temagami land base-which would represent an additional 400,000 hectares- and the Timiskaming land base under one umbrella company.

There was some thought about whether they wanted to get involved with the high profile and controversial First Nations and environmental issues in the Temagami area-it has been a contentious area and the scene of disputes with environmentalists and cottage owners. Many of the latter are from urban areas in southern Ontario and don't understand the importance of the forest industry to this part of the province.

"Our first knee-jerk response to the Temagami proposal was 'we don't want to bring those issues north to Timiskaming'," says Foley. "But the second thought was that issues are a fact of life and instead of worrying about bringing issues north, why don't we focus on the positive aspects of bringing good forestry south ."

Amalgamation delivers benefits

A more recent development at the Timiskaming Forest Alliance has been the amalgamation of forest management units, which should result in a better overall forest management system. Forest land in the Kirkland Lake District used to be divided into three separate management units, with three separate Ministry of Natural Resources management structures. The alliance has since negotiated the amalgamation of the three units into one and is currently writing the forest management plan for the new defined forest area, which will be implemented next April.

"We noticed some real positive impacts on wood supply as a result," said TFAI general manager Allan Foley. "Within the confines of the three smaller parcels of land, we inherited isolated shortages of timber within certain age classes, which was not necessarily representative of the entire forest. Once we eliminated those administrative lines between the management units, the age class gaps were mitigated to a large extent ."

They also found that the tracking of forest lands was not completely up-to-date. They invested a good deal of money over the last two years surveying 88,000 hectares of land that was inventoried as Not Satisfactorily Regenerated or Barren and Scattered land on the maps. But they discovered that 75 per cent of this land was forested and at the free to grow stage. That was surprising in one way, but not in another, says Foley. "We know that good forestry has been practised in this district in the past. It has a history of solid forestry management practices led by some topnotch individuals. The discrepancies were primarily a function of the poor record keeping and documentation control that occurred during the Ministry's reorganization period ."

A further example is that 90,000 hectares of balsam fir had been basically written off when the black spruce budworm went through the area. "It was likely that those stands were arbitrarily written off in the inventory as Barren and Scattered. When we surveyed them, we often found that although the balsam component was gone, the residual species volume had not been dramatically knocked back. What is left is some white birch and a lot of big spruce, some of which are eligible for harvesting now ."

One other positive aspect that TFAI is realizing as the result of unit amalgamation is an increase in flexibility and an enhanced ability to deal with the issues and concerns of other forest users. There is a clear benefit to the general public, says Foley, because a larger area means less confinement and therefore, reduced potential for conflict and confrontation.

Main Page

Forest Alliance

A group of smaller forest operators have joined forces with some large forest products companies to create a cooperative forest management alliance in Ontario.

By Paul MacDonald

"They were motivated by some pretty attractive benefits, including the promise of less bureaucracy. That's music to the ears of any logger ."

Amalgamation delivers benefits