Logging contractors in the BC Interior are being hit hard by industry uncertainties and consolidation.
By Jim Stirling
Boxers have long understood that sending blows to the body slows down and weakens an opponent. The log-harvesting sector in the British Columbia Interior is currently the recipient of repeated blows to the operational bottom line and it's proving as devastating as a single knockout punch. One of the latest jabs to send logging and trucking contractors reeling is the hike in fuel prices. Most contractors have seen their fuel costs spike up around 50 per cent since October 1999, depending on their supplier. They have to-somehow-find ways to absorb that surge unless they have a fuel cost escalation clause in their contract, points out Roy Nagel, general manager of the Central Interior Logging Association (CILA) based in Prince George.
The consolidation effects of Canfor's absorption of Northwood Inc last year are also beginning to take their toll. Canfor is doing everything it can to cut costs and that's understandable from its perspective, notes Nagel. But what that means is more and longer mill closures in response to low lumber prices and US export quota implications. Companies are waiting for an anticipated break in stumpage rates in the next quarter before scaling up log harvesting. All of which mean less work and more uncertainty for loggers and truckers. Blockades by First Nations groups pressing their own interests also keep loggers off the job. Nagel cites one logger whose cash flow dropped by $15,000 a day, made all the more frustrating when neither side in the dispute demonstrated urgency to resolve it. Fuel costs, licensee consolidation and dislocation caused by First Nations all put downward pressure on harvesting sector rates, says Nagel.
Other factors keeping loggers on the ropes include: having equipment for big wood harvesting and being told to switch gears to small wood or vice versa; loggers ending up harvesting less volume than they were promised; and last minute changes in the amounts of winter versus summer logging. The CILA along with the Interior Logging Association and the Northwest Loggers Association recently prepared a discussion paper dauntingly titled The LogHarvest Sector: An Industry in Trouble. It calls for fairer and more equitable treatment for logging and trucking contractors and their subcontractors. The associations' paper says the sector contributes significantly to the stability of about 300 communities in BC, generates $2 billion in cash flow annually and directly employs about 15,000 people. Those stats are deserving of equal stakeholder status for the sector, asserts the paper. The associations list their most pressing concerns and make recommendations to help alleviate them.
Larger contractors have millions of dollars invested in their equipment but face constant business uncertainty about when they'll work, the volumes they will move and the rates they will be paid. Interior operating seasons are shrinking and the Forest Practices Code is partly to blame, state the associations. The forest companies' operating environment and season lengths would benefit from development of a results based code that recognizes regional differences, they suggest. They also maintain harvest sector stability will be better served if stumpage rates were adjusted monthly, not quarterly. It would eliminate the "stumpage bingo" that disrupts log hauling operations. On licensee consolidation, the associations say contractors have seen volumes disappear when the Ministry of Forests takes its five per cent of Annual Allowable Cut (AAC) and reallocates it to small business or other groups. The associations would like to see different forms of tenure and licences for improved business opportunities for contractors.
They feel an assessment mechanism should be used based on economic value and impact before reassigning timber volumes. And if volumes are taken from existing contractors, they should be fairly compensated. The associations believe the Woodworker's Lien Act is outdated and fails to deal adequately with today's harvesting. They are calling for a thorough review of it to better protect contractors when they're not paid for services performed. The associations say there are inadequacies in Bill 13, the Timber Harvest Contract and Subcontract Regulation. The root of the problem is that in the Interior, only 50 per cent of a licensee's annual volume must be put out under renewable five-year contracts. On the coast, 100 per cent of a licensee's volume is awarded in renewable contracts. Having only half of a licensee's timber volume committed to such "evergreen" contracts has generated a "have" and "have not" Interior harvest sector. Contractors with renewable contracts, which are assignable and have measurable market value, have much more bargaining power with banks and equipment dealerships.
Those without such contracts are much more vulnerable to downward pressure on their operating rates, states the associations' discussion paper. The associations contend the bill's arbitration process is costly and time consuming and even if it results in correcting an inadequate logging rate, the contractor is open to licensee retaliation. "A contractor can win the battle and lose the war." As the associations see it, the solutions are: to use replaceable contracts for 100 per cent of a licensee's AAC and remove the "intimidation factor"; to encourage the Ministry of Forests to make sure licensees provide contractors and subs with written contracts, as specified in the Regulation's notification period; and, in special instances when evergreen contracts are not awarded, require licensees to offer longer term no replaceable ones.
The three logging associations have no delusions about the boundaries of environmental activism being extended to the BC Interior. That's one reason why they'd like to see a clearly defined commercial forestland base established. And they want to mobilize forces-now-in preparation to defend the Interior forest industry on every level, from local right through to international. The associations also recommend dislocation and volume loss from areas declared "off limits" to logging be fairly addressed. Aboriginal land claims are a dominant and pervasive issue in BC. The associations believe the potential for serious business damage to the log-harvesting sector is huge. They have considerable reservations about the Nisga'a treaty settlement. "In short, the Nisga'a Treaty and future treaty settlements containing similar provisions will generate a high probability of dislocation for contractors, either because their logging/trucking contracts are cancelled or their volumes are reduced to the point that their businesses will no longer be viable."
The associations want to see the treaty process opened up to more meaningful input from affected third parties. They recommend against a province wide referendum because it would take authority away from the people in the regions most affected by treaty settlement. They support the Treaty Negotiations Advisory Committee's parameters for compensation eligibility and appeal process. The associations urge the governments to treat all British Columbians fairly and equally. They say: "Acknowledge that logging sector contractors and subcontractors have at the same time the highest level of investment and the least amount of protection from the impacts of treaty making."
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