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Horgan warns forest industry of possible tenure take-backs

Addressing a timber shortage in B.C. is going to require some give and take, and the taking could include the government taking back tenure from some of the large tenure holders, warns Premier John Horgan.
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B.C. Premier John Horgan speaks at the Council of Forest Industries conference on Thursday.

Addressing a timber shortage in B.C. is going to require some give and take, and the taking could include the government taking back tenure from some of the large tenure holders, warns Premier John Horgan.

“There is too little fibre and we need to do something about that,” Horgan said Thursday in a keynote address at a virtual Council of Forest Industries (COFI) conference.

Even as Horgan and forestry company CEOs were discussing the problem of a shrinking timber supply Thursday, a mini War in the Woods was brewing in the background in Horgan’s own riding of Juan de Fuca.

Earlier this week, Teal Jones received a court injunction against protestors that have been blockading logging operations in the Fairy Creek watershed near Port Renfrew.

Environmentalists say the area should be off-limits to logging due to the dwindling amount of coastal old growth forest.

But forest company CEOs at Thursday's conference said more than 50% of the coastal forest is already off limits to logging in some way, through parks and conservation areas.

Jeff Zweig, CEO, Mosaic Forest Management, pointed out that policies for managing old growth forests have been in place for 30 years and have been subject to revisions.

"The restrictions on harvesting have only grown," he said.

He pointed to a newly released COFI study that estimates the forest industry in B,C, employs 100,000 people directly or indirectly, and urged caution in making changes that could affect the industry.

"Before we make changes to the way in which we manage old forests in B.C., we need to understand what the soci-economic impacts will be," Zweig said.

Horgan did not mention the ongoing opposition to logging in old growth forests, including in his own riding, but his forestry minister did.

"This issue has historically divided British Columbians," said Katrine Conroy, minister of Forests, Lands, Natural Resource Operations and Rural Development. "Today it's no different. We've seen protests in our communities and blockades of our forests, and we've heard from forest dependent communities concerned about their fate.

"One thing both sides have agreed on is that the old way of protecting old growth forests just wasn't working," Conroy said.

Though the industry is currently enjoying a bonanza of high lumber prices, they will eventually come down again, and high operating costs and a shrinking annual allowable cut (ACC) could result in the resumption of a rationalization that saw several sawmills permanently shuttered.

B.C.’s forest industry has been through two years of bust and boom. In 2019, forestry companies were reporting net losses, permanently shuttering sawmills and curtailing shifts in B.C. They blamed high operating costs – stumpage rates being a big factor – falling lumber prices and an ever-shrinking supply of fibre.

In the Interior, the Mountain pine beetle and forest fires have reduced the available timber supply. On the coast, the timber supply has shrunk partly due to conservation, with more than 50% of the forest land base being made off limits through parks and protected areas – the largest being the Great Bear Rain Forest.

Despite a pandemic, 2020 proved to be a banner year for B.C. forest companies, as a demand for lumber – through new housing starts and repairs and renovations in the U.S. and Canada – dramatically increased the demand for lumber, pushing lumber prices to record highs.

"Record lumber prices, they've helped bring dozens of mills back online and thousands of people back to work," Conroy said 

Horgan urged the industry to use any windfalls wisely.

“We all know that this is a cyclical business,” he said. “And we all need to make sure that we're taking advantage of these extraordinarily high prices so when the market starts to stabilize again we're not looking back to governments, or our workers, to make concessions to make sure that the companies can continue to be profitable.”

He reiterated a mantra that B.C.’s forest sector needs to move from “high volume to higher value,” and cited engineered wood and mass timber as an example. On Wednesday, the Horgan government announced $4.2 million in grants to support a dozen mass timber demonstration projects in B.C.

“Secondary manufacturers need access to fibre to get into the promising businesses like mass timber and other high value products,” Horgan said. “We need to make sure they can access fibre.”

Much of the Crown forest tenure in B.C. is concentrated largely in the hands of just a few big players.

Horgan wants to see some of that tenure freed up to smaller opersators that stuggle to access logs. Two years ago, he wrote to the CEOs of B.C.’s forestry companies urging them to work with each other, First Nations, workers and communities to try to free up some of that tenure.

Horgan said there has been a lack of progress in the voluntary redistribution of tenure, adding "I'm disappointed about that.”

He said Conroy has been given a mandate to revise B.C.’s forestry policies. The new policies are expected to be made public in the coming weeks.

“There's no magical solution to the lack of fibre,” Horgan said. “But I do believe there's work that we can do, business to business, to encourage companies and indigenous nations to work together.

“And those who do have tenure and do not want to share it, well we'll have to step in and ensure that there's fair compensation as we move to a more equitable distribution of access to forest products so that we can continue to have the diversity that we all want to see.”

Horgan added that, despite calls to reform the way stumpage rates are charged, the system will not change.

Stumpage rates in B.C. – a fee charged for each tree cut on Crown land – is based in part on the prices established through B.C. Timber Sales, a provincial government agency.

Forestry companies have called for reforms in the way stumpage rates are calculated. But the B.C. government has said moving away from a market-based system for setting prices would only arm the American lumber lobby with stronger arguments that Canadian lumber production is subsidized, which has resulted in American anti-dumping and countervailing duties.

“B.C.’s market based system will remain unchanged,” Horgan said. “BC Timber sales will continue to do the good work that they're doing.”