Recent History – 2002-2003
By Mark Nielsen, Daily News Staff
B.C.’s forest industry will need to go through some big market-based changes to remain viable in the international market, a Ministry of Forests official told those who attended a Northern Forest Products Association community dinner Thursday evening.
Doug Konkin, assistant deputy minister for the field services and timber sales program, said the province’s forest industry, which directly accounts for six per cent of B.C.’s jobs, is in rough shape.
“The status quo isn’t working now,” he said. “In terms of being competitive in the world, we are not the top producer. We’ve slid in the last few years.”
More wood is coming on to the market, to the point where the world is facing a “wall of wood” thanks to fibre from the southern hemisphere, where trees become harvestable in 20-30 years, a surplus in Europe and emerging Russian production.
Meanwhile, B.C. has excess capacity. Mills are capable of processing 84 million cubic metres per year while the annual allowable cut adds up to 71 million cubic metres.
The average return on capital in the B.C. forest industry is just 3.3 per cent compared to 7.1 per cent for the Canadian economy as a whole — although Interior mills tend to generate better returns than those on the coast.
“Without reform, we believe the trends of the ‘90s will continue,” Konkin said. “Clearly, we have to do something on the Coast right now. In terms of the Interior, things are healthier here, but I think if we try to stand pat, the problems will grow.”
He made a comparison between the poorly-managed, entitlement-ridden coastal fishery and the successful, market-based Alberta oil and gas industry.
“Over the last 25 years, we’ve moved in the direction of the coastal fishing industry,” he said. “We have a stumpage system that has the least connection to the value of the resource, we have forest policies that are increasingly directed at restraining market forces over the last few years, and allocation of the resources is facilitated and directed to a large degree by social and political criteria.”
Affecting change will be a challenge for various reasons, Konkin said, but the government is committed to taking the forest industry in a new direction.
“The bottom line is we can’t keep going like this,” Konkin said. “We have to allow market forces to work.”
Specifically, Konkin said there is intense pressure on the Coast to reform the stumpage system. The government is looking at both a system based on the price of logs in the open market and one based on timber sales, also in the open market.
Getting rid of the minimum cut over one year and five year periods is also in the works to allow companies to react quickly and decisively to changes in the marketplace.
Eliminating requirement that wood be processed in specific mills is also being considered to ensure flow of wood to where is can be best used.
Other possibilities include chopping section 71, the penalty for closure, which has never been used, and ditching the five per cent takeback penalty for subdividing tenures.
“The bottom line is whether we like it or not change is going to be forced upon us,” Konkin said.