Strengthening the Coastal Forest Sector

The coastal forest sector’s performance has been well below potential since the mid-1990s. The average harvest level from public land over the past five years has been more than 20 per cent below the allowable annual cut – 16.5 million cubic metres, compared with the current allowable cut of 21.2 million cubic metres.

By comparison, over the same period, the Interior industry has generally harvested a volume of timber close to its allowable annual cut.

This gap on the Coast has cost coastal forest workers their jobs and reduced revenue for public services like health care and education.

Simple economics explains this gap: companies have not been able to harvest their full allowable annual cuts and cover their increasing costs, let alone sufficient return to allow reinvestment in modern plants and equipment.

But what lies behind the unfavourable economics is more complex.

In a report commissioned by the Minister of Forests, natural resources economist Peter Pearse analysed the problems in the coastal industry. They include cost-ineffective regulation, aging plants and equipment, high costs of logging, underused capacity, a changing composition of timber supply and a stumpage system imperfectly grounded in economics.

Acknowledging these realities will begin the inevitable "rationalization" of the Coast. In other words, the Coast will begin the important task of overhauling the forest sector so that, in the long term, it can once again be a source of opportunity and prosperity for British Columbians.

The policy changes already detailed in this document will address many of these problems by opening the coastal industry to market forces, innovation and new entrants.

Two other policies are particularly relevant to the Coast, given the greater degree of restructuring necessary there: changing Bill 13, and helping forest workers and contractors through the transition to a new forest economy.

Bill 13

In 1991, government made amendments to the Forest Act, commonly known as Bill 13, in an attempt to protect the interests of independent contract loggers in British Columbia.

These loggers often invested heavily in equipment, but depended on major licensees for work. This dependency resulted in an imbalance in bargaining power during rate negotiations.

Bill 13 was intended to establish a more secure contractual relationship between the contractors and licensees by providing contractors with replaceable contracts and establishing a mechanism to settle rate disputes.

The intent was to develop a quick and inexpensive system for resolving contract disputes, and to indirectly contribute to the stability of contractors, their families and communities.

Today, Bill 13 is recognized as one of the most complex dispute resolution mechanisms in the province. Most of those who have used the arbitration process find it time-consuming and costly. It has failed to provide consistency in rate determinations.

This inconsistency had profound effects on contract rates, and in the eyes of many, increased costs and reduced industry competitiveness.

Action: Government will work with contractors, licensees and arbitrators to:

Benefits: The result will be a more efficient and effective dispute resolution process and more competitive contract rates. Over time, this will result in a more successful forest sector.

Helping forest workers and contractors through the transition

Some of the measures to be implemented, while necessary, will result in some painful dislocation. These changes will not always be easy for people who are caught in the transition from the old to the new, stronger forest economy, particularly on the Coast.

Action: The government will establish a $75-million trust fund. This fund will be managed by a board representing workers, contractors, forest companies and government.

Benefits: Funding is expected to be used to help forest workers and logging contractors through the transition. This will assist them and their families in planning for the future, while supporting the start of efforts to build a more economically sustainable, viable forest industry.

Like forest policy changes themselves, transition assistance will be available across the province. However, many of the benefits are expected to apply most strongly on the Coast, where the province’s forest sector has experienced the most serious declines, and where the greatest adjustment may be necessary.

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