The B.C. forest industry is sliding into a crisis and a new law on the books has many observers worried it could make things worse, while others are hoping it has the exact opposite effect.
In recent weeks, some saw mills have permanently closed while others have curtailed operations. The list of these disruptions is already a lengthy one and it will continue to grow.
While last year was a strong one for the industry (Canfor’s net income in 2018 was $439 million), this year is shaping up to be an economic disaster. Not a single forest company expects to turn a profit this year or next.
The number of mill closures is expected to be as high as 11 or 12 when the five forest companies that own most of the public timber tenures in B.C. settle on winners and losers. Hundreds of people could lose their jobs and small resource-dependent communities could see their local economies decimated.
There are several reasons for the looming closures, but a shrinking timber supply appears to be the main culprit. However, there are other factors at play as well.
For example, the 20 per cent duties on softwood lumber shipments to the U.S. will begin to take their toll as lumber prices fall. As well, the NDP’s embrace of UNDRIP (which greatly strengthens First Nations’ power on land use decisions) has created uncertainty for forest companies, as the rules of the game have yet to be clarified.
Also creating uncertainty is Bill 22, which amended the province’s Forests Act. The key change gives the government the power to stop forest companies from selling their logging rights to each other following a mill closure.
This practice is known as “swapping tenures” and in the past, it has allowed the companies to move timber supply to other, economically healthier mills.
Most recently, Canfor announced it was permanently closing its mill in Vavenby (about 150 kilometres northeast of Kamloops) and would sell the cutting rights tenure tied to that mill operation to Interfor, another major forestry company.
Interfor says the tenure swap would allow it to shift supply to its Adams Lake sawmill, thus saving jobs there.
So far, Forests Minister Doug Donaldson has not indicated whether he will veto the swap or allow it to proceed, but he has insisted in the past that communities and First Nations must receive benefits from publicly owned timber. It is the first big test of the legislation, and it has forest companies nervous.
One major forest industry official recently told me the forest companies are best positioned to work out the inevitable “rationing” that is coming and think the government should stay out.
“Everyone is trying to figure out rationalization,” the official told me. “Government is saying you can’t decide how to restructure. But we’re struggling trying to understand under what condition the government would approve a transfer.”
One clue to what the NDP has in mind is its commitment to respecting First Nations’ interests in whatever happens on land use decisions and changes to forestry operations.
That much was apparent in the botched process that was supposed to result in a consensus-forged solution to protect the mountain caribou, as mandated by the federal government.
However, communities in the Peace River region cried foul and claimed only local First Nations were consulted by the NDP government, further raising suspicion that UNDRIP could give First Nations a de facto veto over land use decisions.
The whole process is now being revisited but it is hard to see an outcome that does not have the support of local First Nations, no matter how the towns of Fort St. John and Dawson Creek feel about things. There is a clue there for the forest companies.
Unless I am reading things wrong (wouldn’t be the first time), forest companies would be wise to accommodate local First Nations’ interests when embarking on the “rationalization” that must inevitably occur (perhaps to the point of taking them on as business partners).
In any event, as a series of mills begin to close and hundreds of people lose their jobs, it will be interesting to see what action – if any – the NDP government takes. Meanwhile, Bill 22 waits in the wings.