Capitalist Co-op

Faced with a severe industry downturn, a group of loggers in northwestern BC have banded together to form a co-op.

Survival is proving to be a powerful motivator for logging contractors and log haulers in the Stewart area of northwestern British Columbia.

The regional forest industry was and is suffering from the notorious financial melt-down of Skeena Cellulose Inc. in Prince Rupert and its affiliated companies. Regional licencees are faced with some of Canada’s highest wood delivery and operating costs, reduced and restricted markets and a predominantly decadent working forest. Loggers have only had sporadic work at best for more than two years—going broke seemed inevitable.

Then, at a Stewart town hall meeting held to solve the crisis, Brian Downie, manager of the Kalum Forest District with the Ministry of Forests in Terrace, suggested a local group might be able to acquire a fibre source.

The loggers took the bit between their teeth and ran with it. They created the North Kalum Community Forest Corp. and, so far, it’s worked. The loggers man-aged, through some imaginative negotiations, to access wood while preserving jobs and sustaining the local economy.

The co-op has also redefined tradition-al relationships with forest company licencees and the Ministry of Forests. There are now fewer opponents and more partners. And the Stewart group’s desperation- driven initiative offers a lesson in self-help and co-operation for other suffering forest industry-dependent communities in BC.

"Our motive, what we have in common, is that we have to work," explains Mark Edgson, president of the North Kalum Community Forest Corp. "A company is profit-motivated, but we are work-motivated. We’re a bunch of capitalists working together to better our community and we’re prepared to take a risk to do it."

The corporation has about 85 logging contractors and log haulers as members and is a direct employer of 130 out of a population of about 700 people in the Stewart-Meziadin area. Initially, each member kicked in $500 to provide a pool of working capital. Membership was available to contractors with a historical working relationship with licencees in the region.

Along the way, the co-op hired Andy Andersen of Emporium Investments for management expertise and engaged broker All West Trading to market the wood the co-op’s members produced. Both have proven to be keys to the co-op’s success, says Edgson.

The group also receives continued guidance from the forest ministry’s Downie and field people in Stewart and Terrace, support from the mayor and council in Stewart and assistance from the recently formed Northern Commissioner’s Office in Prince George.

"We have to know we’re going to make it," declares Edgson. "This is our livelihood. This is it. We can’t afford to be shut down." The corporation has no delusions that it has created an ideal situation and every day remains a challenge.

"We’re not a special group of people, we’re just a together group of people," says Edgson, who is modest about his spokesman role. "But our future looks quite good, if a little bumpy. We’re still jumping from rock to rock. I believe we have the right motive. We’re not looking at the co-op as a cash cow but a survival model, and in the global economy survival is a good thing."

The co-op received a 100,000 cubic metre licence for the 1997-98 logging sea-son to harvest predominantly hemlock stands ravaged by a green striped looper infestation. That was made possible with help from Forest Renewal BC and through persuading the Ministry of Forests to build roads and do the layout. The corporation grossed $4.5 million, paid all its members and was left with $22,000 in the kitty, says Edgson.

In the spring of 1998, the corporation took a different tack. It looked at developed blocks, some half logged, belonging to other licencees. The wood trilogy of terror—high operating costs, a marketing crunch and low value—made continuing to work these blocks hopelessly uneconomical. The co-op told the government and the licencees it had the solution, says Edgson. They maintained their members could afford to log the areas, but the government and licencees took some convincing.

The co-op benefited from a stumpage break to reflect the highly inflated percent-age of sawlogs estimated from the region’s decadent forests. It suggested licencees make a deal with the ministry to allocate compensatory wood volumes in another area at a future date, continues Edgson.

"We logged the areas," says Edgson. "Production was fair and what we made we put back into block roads in the bug kill." That means reducing Ministry of from page 21Forests development costs per cubic metre by about half compared with the previous winter’s logging. The licencees and ministry have now seen what the co-op can do. "We’re working on the same kind of deals for the future," adds Edgson.

The Stewart co-op has a major built-in cost advantage. "Our management costs are $1.70 per cubic metre. Traditionally, management costs have been $15 to $20 per cubic metre," says Edgson. "We don’t have to be looked after." Survival and self-reliance are incentive enough to get the job done. "We have to do it right. The licencees can see their wood moved to market more efficiently."

The North Kalum Community Forest Corp. took a close look at a forest licence offered by the Ministry of Forests last summer. It was a 15-year renewable licence with an annual volume of about 68,000 cubic metres. It was tied to the establishment of a value added plant. The co-op would have had to build and complete the plant and pay for silvicultural costs upfront, recalls Edgson. "We’re running at about one per cent profit. Where’s the room?"

The co-op would have to trade for good wood for the plant and the licence stipulated that if the plant shut down, so did the logging. The co-op took a pass and the licence was withdrawn. Edgson is hopeful it might be re-offered with more ministry participation and flexibility, recognizing the overall cost/benefits. A realistically conceived and operated value added plant would be of immense benefit to Stewart and the province. "First you have to re-establish the flow of fibre," says Edgson. "We’re willing to take risks we need for work. We’re not willing to lose because we can’t afford to."

The bureaucratic system within all governments can be frustrating. The mechanisms are there, but it’s a problem getting the beast moving. "I commend our provincial government on responding to our pressure. But they need to be reminded that was a wake-up call. They seem to have pushed the snooze button,’’ says Edgson. "In the first six months of 1998, forest companies in Alberta and eastern Canada made a profit of $192 million. In BC, we lost $171 million. We’re competing with our neighbours. I think our provincial government is now paying attention to that."

Edgson believes the potential is there to significantly increase the volume of wood harvested by the co-op’s members. This past winter, the group expected to log between 130,000 and 140,000 cubic metres. "If the wood were made available and in advance, we could have logged 400,000 cubic metres," he estimates.

The co-op pays its members logging and trucking rates about the same or less than licencees, says Edgson. The first winter it had to reduce the trucking conversion rate, he recalls. "We sat down and said, ‘here’s the issue, what can we do about it?’ I have three logging trucks and it cost me more but I managed to make it through. No one in this town has gone bankrupt.’’