Letter to the Forestry Minister:
Some reform has taken place since this letter was sent, but more is needed.
Over
the course of my lifetime, I have worked in the forest industry, interfaced
with it while involved in the tourism industry and gained some insight into its
administrative side via participation at the Kamloops LRMP. This exposure has
formed a perspective I think is worthwhile, and may be of use to you in some
way.
As
Minister of Forests you’ve inherited a policy framework that has been forged
over fifty years, by what I refer to as the Unholy Trilogy – big business, big
labour and big government. Political pragmatism in relating to the two primary
special interest groups has created an industry that has perhaps underserved British Columbia , or
left potential un-accessed. The weak US market and resulting waning of
the forest industry presently may offer a juncture where many of the interests
that may have inhibited reform in the past, are now muted – companies gone or
contracting and labour expectations reduced due to the stark realities
presently facing the industry. The areas wanting attention from my perspective
are tenure reform, bug kill utilization and non-United States market development.
When
one examines the forest industry, a glaring aspect that comes to view is the
present domination by Volume tenure allotted to companies and then loosely tied
to production facilities. The present policy has; failed to facilitate “the
support of communities expected” in any real way, failed to facilitate the most
effective use of timber assets, siloed lumbering functionalities in a manner I
believe to be undesirable, and perhaps, most importantly, generated a log
market that offends our best customer. A transition to an area-based, long-term
tenure format may address these issues.
I
envisage area-based tenure taking a form similar in nature to our present Woodlot
tenure or Tree Farm tenure, existing completely separate and distinct from
milling facilities (the actions of individuals may include milling activities
but policy considerations would have milling separate and distinct). Tenure
size would be moderate, perhaps in the order of an average annual timber volume
accretion, in the context of long run sustainable yield, sufficient to generate
net revenues in the order of $500,000 annually for proprietorship (based on
historical data). The term of tenure (tree farming rights) would be ad
infinitum, facilitating the future trade of tenure or perhaps intergenerational
transfer. The industry would then be supported by an open log market that would
immerge in much the same fashion as the cattle industry or other markets have.
Government revenues would be garnered from the initial sale of these long-term harvesting
rights and then a royalty structure at the point of log sale. There are many
issues that arise in designing tenure to meet the best interests of British
Columbia, such as the nature of ownership of these tenure units, while these
issues are extensive they are outside the scope of this communication. This
brief outline of the created tenure type will, hopefully, serve to provide
context and support to the points made with respect to tenure reform.
Forest
companies in the past have been able to secure the rights to harvest a given
volume of timber; where, when and how has been at the discretion of the Ministry of
Forest (MOF), and this right seems to be let often on the bases of a milling
facility requiring timber. By observation, often the milling facility is closed,
as production is concentrated to a more productive facility somewhere else or
as the result of some other dynamic. Again by observation, the Forest company retains the volume, often at the expense
of local industry. This rationalization of action may be necessary to garner
maximum efficiency under present industry conditions; however, the premise for
the company’s garnering the tenure is no longer valid. This reality is
unconducive to healthy public perception of government action and is breeding
resentment, as evidenced by press coverage often referencing this occurrence in
local media. An area-based tenure format would extend to proprietors' long-term
tenure based solely on harvesting and sale of timber to a free market. While
area-based tenure may fail to guarantee the logs will be milled locally, area-based tenure and the related open log market will guarantee the opportunity for them to be milled
locally. Additionally, the premise for tenure will always hold policy integrity
as a policy is executed, allaying the valid public perception that local trees
are unduly being milled in other regions. The pure physicality of the
circumstance will extend the advantage to local purchasers due to transportation
advantage and local association.
The
development of area-based tenure, with tenure being focused on harvesting and
growing trees, serves to fracture the tree farming tenure ownership from the
milling function. This is desirable, as it extends greater influence to the
tree farming process in the logging industry as a whole, by bringing “business”
focus to tree-farming process. Presently, the logging function is performed
under contract to an entity absent long term interest for a specific area of
operation and then the silviculture function is performed by another contractor
who is overseen by the government; the government of course being largely
isolated from incentives associated with long term ownership and most certainly
absent any real attachment to a profit motive. The management of resources by
“macro” entities, as is now the case, results in the siloing of activities in a
manner that is both unnatural and unproductive. The present circumstance is
analogous to the government owning all the farmland and functioning as the
monolithic manager of agricultural lands; the person milking the cows with no
attachment to the cow’s long-term health or wellbeing. The present circumstance
then is absent the incentives that drive success generally in other sectors of the economy;
the ownership and interest in the profitable utilization of an asset. By
designing the tenure in a manner that integrates the management perspective,
resources will ultimately become better utilized. The tenure structure that
provides an incentive to proprietorship by integrating the profit motive with the
full spectrum of tree farming activity, silviculture to logging in the context
of long-term ownership and appropriate logging practices, will surely result in
better outcomes over time.
A
by-product of broad-based “proprietorship focused” tenure will be an emergence
of an open log market and a Royalty system for government revenues. This means
of government interface with resources and revenues is commonplace and widely
accepted by governments the world over. Our present mode of governance over the
province’s timber resources is both an anomaly and an irritant to the United States .
While I am uninformed as to the exact cost or benefits of our present stumpage
system relative to an open market system, our industry’s reluctance to embrace new
and more agreeable operational modalities indicates to me the industry may be
deriving benefit that is structurally related to the stumpage system. If this is
the case, this is distorting industry participant conduct and very likely
resulting in timber trading at prices that are different than if the prices
were determined by market forces alone.
The
utilization of bug kill is critical and time sensitive as dead standing timber
falls in value. The solutions of chipping and burning wood, and similar
strategies seems to concede a lot of value to the present market circumstance,
as cutting and milling the wood (the highest and best use) is presently
hampered by a temporary market conditions. There is an apparent roll for
government here to intercede by becoming the “purchaser of last resort”. The
government could simply purchase lumber milled from bug killed stands at a per
thousand price that offers companies an adequate return to provide an incentive to
harvest, and mill at a fast enough rate to ensure the timber is utilized before it
reaches a point of decay that will only allow burning or just leaving it to
rot. The government would then acquire a large inventory of milled lumber to
hold and to sell later as market conditions improve. While this is “capital”
intensive, over time it offers a net positive revenue opportunity for the
government. This action is justified in the context of managing a disaster.
Potentially, lumber that has found existence under this type of policy could be
used to seed new markets. While I process some ideological encumbrance to
measures of this nature, given this circumstance it seems prudent.
Additionally, the British Columbia
government could promote this policy to the public and the federal government as a
stimulus measure. In all, while quite a strong intervention, it seems to
warrant consideration.
One
last point, regarding the forest industry, with respect to our efforts to
diversify markets for our lumber products. While I realize that it is in the
interest and is the responsibility of the industry to find markets, the US market has
been so dominant for so long, that apathy amongst industry participants has
precluded the aggressive pursuit of other markets. Our present situation, with
the industry effectively in a state of collapse, is a product of the absence of
strong leadership in this regard. British
Columbia is grossly underperforming in non-US markets as regions
like Scandinavia take market share, as has
been reported they have in Japan .
This criticism is toward the generalized culture, as opposed to the present
government – which I view favourably and support. Substantive investment in
market diversification is justified.
I
hoped to offer a less “industrialized” perspective than you’re apt to be
exposed to as Minister of Forests, a perspective I can proudly state has found
its origins in being a farmer’s son and the desire to produce a societal
circumstance well-populated with independent people – well-designed forestry
tenure reform offers the opportunity to create such a circumstance. Thank you for
your consideration of the contents of this letter and I hope the election
outcome gives you some extended tenure!
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