Opening Up New Opportunities for British Columbians

B.C.’s current system of licensing companies and individuals to cut timber on publicly owned land dates back to the 1940s. In exchange for harvesting rights, licensees pay rents as well as fees, called stumpage, for the timber they cut. They are also required to undertake various forest management tasks, such as planning, road building, and reforestation.

British Columbians benefit from the resulting jobs and government revenue, while companies can harvest timber to sustain their business and so are motivated to invest in mills and forest management. However, the system has also shielded industry from market forces and has led to a high-cost structure, especially for the coastal industry.

Furthermore, nearly all of the province’s logging rights were awarded decades ago – about 75 per cent of the harvest from provincial land is allocated to major companies. This makes it difficult for new operators to get involved in the sector, no matter how innovative or efficient they may be. Without their ideas and fresh creativity, B.C. has not always been able to realize the fullest benefit from valuable public timber. Sometimes, for example, timber has continued to be manufactured into simple, lower-value products instead of into new, potentially more valuable ones. This has resulted in many lost opportunities for a strong, diverse forest sector and related benefits for workers, communities and the public.

Tenure reallocation

Under the current system, only small amounts of timber are available to distribute to new participants in the forest sector. Much of this unallocated timber has been returned to the province from licensees as penalties for failing to comply with certain rules, or for transferring parts of their licences. But most other licensees, wishing to avoid such penalties, have complied with uneconomic regulations like timber processing restrictions, contributing to the weakness of the forest sector.

Action: Through legislation, licensees will be required to return about 20 per cent of their replaceable tenure to the Crown. About half of this allowable annual cut will then be redistributed to open up opportunities for woodlots, community forests and First Nations. The other half will be sold at auction to increase the portion of timber going through open markets, and to assist in setting stumpage rates. (For more on timber pricing, see "Setting a Fair Price for the Public Resource.")

Timber will be redistributed only from firms holding or controlling a large amount of timber in replaceable, long-term licences. The first 200,000 cubic metres held by any firm will be exempt from the redistribution plan, reducing the effect on small-scale operators.

Licensees have, over time, invested money and taken risks to develop tenures (for example, they have invested in planning, roads, bridges and so on.) Licensees will be fairly compensated, as the law requires, for harvesting rights returned to the Crown. The determination of compensation will take into account the new stumpage system and changes in regulatory requirements of the Forestry Revitalization Plan. Government has set aside one-time funding of $200 million to reflect the estimated costs of this compensation.

Benefits: Reallocating timber rights will help diversify British Columbia’s forest economy over time, increasing the number of tenure holders and expanding the variety of economic uses to which B.C.’s public forest lands are directed. This will open up opportunities for new entrants with innovative ideas for forest management or processing. This will create jobs and spinoff benefits for communities over the longer term and help reinvigorate the forest sector as a whole. A stronger, more diverse forest sector will be better able to compete in today’s global markets, better able to offer new hope for communities and workers, and better able to make long-term contributions to the public treasury and serve as a source of prosperity for British Columbians. New entrants will help keep B.C. a world leader in forestry and also ensure our province remains a supplier of first choice to customers around the world.

Along with other policy reforms, reallocation of tenure will help ensure that more public logs flow to open markets, where they can be directed to the highest value and best use within the province.

This change will also help create a more sensible pricing system for public timber, ensuring British Columbians receive fair value for the use of their forest resources.

Woodlots and community forests

Area-based woodlots and community forests are small- to medium-scale tenures typically operated by individuals, First Nations, or municipal or regional governments. Frequently characterized by innovative approaches, these operations often hire locally and ensure local management and development of forest resources. They can also be a source of timber for value-added manufacturers. However, there are relatively few of these tenures available under the current system.

Action: Through the reallocation of replaceable tenure, more timber will be available to woodlot and community forest licensees, and the programs will be expanded.

Expanding the volume of timber available to these small-scale tenures will create more opportunities for small business and community-based economic development, allowing communities to diversify their forest economies.

Benefits: Allocating more timber to woodlots and community forests will provide communities with a more diversified economic base. They will thus be better able to adjust to other changes in B.C.’s forest policies and play a direct role in providing forest sector opportunities for local residents.

Value-added sector

The secondary manufacturing sector, often called the value-added sector, comprises those mills and manufacturing plants that make products from timber or lumber, including log homes, trusses and other construction materials, finished products like windows and doors, and objects like furniture, fine art and components of musical instruments.

Many of these manufacturers do not hold long-term logging rights; they buy wood from others, including major tenure holders and woodlots. However, because of how B.C.’s tenure system developed, and because those who have the most access to timber usually concentrate on serving their established customers, the value-added sector has had difficulties getting the wood it needs.

Previous governments tried to address this issue by creating a system to increase the flow of timber to the value-added sector. Section 21 of the Forest Act, for example, allocated some wood exclusively to the sector through a program managed by the small business forest enterprise program (now the B.C. Timber Sales program). That timber was awarded to applicants on the basis of a company’s location and a range of other non-commercial criteria.

These applications are known as bid proposals. And even though they rely on the use of public timber, revenue to the Crown is not a major factor in awarding them. Even with Section 21, the value-added sector has not had access to as much timber as it says it needs.

Action: Over time, policy changes designed to promote the freer flow of timber will provide B.C.’s value-added manufacturers with more access to timber. These policy changes include reallocation of tenure to market loggers, and removing timber processing restrictions. As well, the value-added sector will be able to bid on the increased volume of wood sold at auction through reallocation.

Since increased volumes will take several years to come fully into effect, government will maintain Section 21 through this transition. This will see a portion of B.C. timber set aside for the value-added sector, but awards will now go to the highest bidders.

Benefits: These measures should result in a more competitive, more dynamic value-added industry. Maintaining Section 21 during the transition will ensure fair returns to the Crown while also ensuring the most competitive value-added companies have access to the timber they need to build healthy, job-creating businesses.

Small-scale salvage

Small-scale salvagers recover fallen and standing timber left unused by licensees or logging operators. Currently, small-scale salvagers register with BC Timber Sales to get access to this timber. Many small-scale salvagers argue that the program is overly bureaucratic, inefficient, and costly for salvagers and government alike.

Action: The Ministry of Forests will introduce a salvage-based non-replaceable forest licence, which will not require registration with BC Timber Sales and which will be awarded for longer terms than past licences. These licences will be competitively awarded and will entitle the highest bidder to do salvage logging in a particular timber supply area, with other licensees continuing to have overall cutting rights in the same area. As part of a one-year transition, a formal small-scale salvage program will continue to be managed by the Ministry of Forests.

In addition, government will create a tenure that will allow interested communities to participate in management of small-scale salvage. It will also encourage major licensees to be more involved in managing small-scale salvage. A committee of MLAs has also been set up to explore new options for small-scale salvagers.

Benefits: These changes will help small-scale salvagers move to a more businesslike, efficient salvage system, allowing them to work to recover more timber and open up more opportunities.

The longer-term salvage-based forest licences will allow more certainty. A competitive bidding process will ensure taxpayers get the fairest return for the use of their public timber, and the new community tenures will allow communities interested in small-scale salvage management to be involved.

The transition period will give salvagers time to develop stronger business relations with licensees, increasing the likelihood that major licensees will turn to small-scale salvagers to help with salvage in the licensees’ tenure areas. This will also give small-scale salvagers time to adjust to identifying, planning and scheduling salvage opportunities while government scales back its costly involvement in those activities.

First Nations

British Columbia’s First Nations people have historically had limited participation in the forest sector despite their cultural and historic ties with the land. The province is committed to redressing this situation, as there are strong social and economic reasons for doing so.

In B.C., treaties were not negotiated with the majority of First Nations, which has created uncertainty over land ownership and timber rights. In the absence of treaties, court rulings have identified that the government and industry have an obligation not only to consult with First Nations on decisions that may affect their rights, but also to seek accommodation of their interests.

Parties have increasingly turned to the courts to resolve differences about land use and forestry issues. Considerable time and money have been spent, and opportunities have been lost.

As a result, some companies are reluctant to invest in B.C., fearing that their ability to operate and generate fair profits may be affected by ongoing legal battles and uncertainty.

While tenure has been provided to several First Nations under government’s direct awards legislation, and some interim measures agreements have already been signed, it is in all British Columbians’ interests that we do more. Increasing First Nations’ access to timber will open up opportunities for them to develop local forest resources, create more jobs, and bring more timber to markets.

Action: A portion of the allowable annual cut that is reallocated from existing tenures will be targeted to First Nations who enter into accommodation agreements with the province. These agreements may be negotiated where there are unresolved aboriginal rights and titles issues, as an interim step towards a comprehensive treaty or other form of settlement; they will be pursued where forestry activities on Crown land could affect First Nations’ interests.

Ultimately, about eight per cent of the total provincial allowable annual cut will be made available for such arrangements.

As well, the province will develop mechanisms to share a portion of forest revenues with First Nations who wish to enter into these accommodation agreements. Revenues will continue to be generated through the stumpage paid by all licensees.

Benefits: With improved access to timber and forest revenues, First Nations can expand their ability to earn income through forest development on the same terms as other licensees. In addition, the province will continue to work with First Nations to build their forest management and development capacity by:

Increasing First Nations’ participation in the forest sector will allow them to apply their knowledge and increase their skills in creating economic and job opportunities and improving social conditions in communities across the province.

Over time, their forestry operations are also likely to return benefits to non-aboriginal communities, potentially opening up employment and other opportunities.

In addition, these measures will help reduce tension and build investor confidence in the province, and will help to resolve long-standing issues that have hindered economic certainty for all British Columbians.

What is forest tenure?

Most forested lands in B.C. are publicly owned. Under the Forest Act, the Crown is able to grant specific rights to use its forest land via tenure agreements to private interests, called licensees.

Each agreement is unique and may vary in form, extent and duration, as well as in the forest management duties required of the licensee. Tenures may be replaceable or non-replaceable.

Non-replaceable tenures are for a fixed term and are granted to achieve such goals as stopping the spread of beetle infestation by cutting affected trees.

Replaceable tenures, like tree farm and forest licences, have terms ranging from 15 to 25 years, providing licensees with the long-term security to invest in such things as business planning, forest management and manufacturing. Every five or 10 years, these licences must be updated, or replaced, so they can reflect current government policy. Generally, the replacement licence confers the same rights and obligations as the existing licence.

When a licence is replaced, it is extended for the term of the original licence. If it is not replaced, the existing licence continues to be in effect until it expires.


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