Policy recommendations to support sustainable, value-added, second-growth forestry jobs in BC

BACKGROUND

While the vast majority of industrialized nations, including the USA, Europe, Japan, and the rest of Canada, are logging 50- to 100-year-old stands, including second and third-growth forests, the status quo of old-growth liquidation is still underway across large parts of British Columbia. BC must also complete the transition to a second-growth forest industry for environmental and economic reasons. If the BC government were to promote policies that support greater processing and value-added manufacturing of second-growth logs in the province, the total number of forestry jobs could be sustained and even increased while old-growth logging is quickly phased out.

Over the past century, the overcutting of the biggest, best, and most accessible stands of old-growth redcedars, Douglas-firs, and Sitka spruce in the lowlands that historically built the wealth of the forest industry – and for which coastal sawmills were originally built to process – has resulted in diminishing returns as the trees get smaller, lower in value, different in species profile, and harder to reach higher up the mountainsides and in the valley headwaters. Today, according to BC Forest Service data, 75% of the productive old-growth forests on BC’s southern coast have been logged, including well over 90% of the most productive old-growth stands in the valley bottoms where the largest trees grow.

In the last two decades, more than 100 major BC mills have closed and employment levels in BC’s forestry sector have declined dramatically, from 99,000 jobs in 2000 to 65,000 in 2015, constituting a loss of one-third of all forestry jobs in that time.[1] As old-growth stands are depleted and harvesting shifts to the second-growth stands which now dominate most of the province, B.C.’s coastal forestry jobs are being exported as raw logs to foreign mills due to a lack of government incentives and regulations to ensure the retooling of old-growth mills to handle the smaller second-growth logs and to facilitate new investments in related manufacturing facilities.

At a critical juncture in 2003, the BC Liberal government removed the local milling requirements (through the misnamed “Forestry Revitalization Act), known as appurtenancy, thus allowing tenured logging companies to shut down their old-growth mills instead of being forced to retool them to handle the changing forest profile of second-growth trees (and smaller old-growth species, such as hemlock and amabilis fir). At the same time, the BC Liberal government failed to enact any major incentives or regulations in lieu of appurtenancy to attract new manufacturing investments. With the closure of many BC mills, most logs became surplus to the domestic milling capacity, thus paving the path for BC’s logging companies to undertake the mass export of raw logs to foreign mills in nations willing to pay higher prices for BC logs.

That being said, in many cases, existing BC mills continue to need domestic logs that are intended for export. Unfortunately, independent mills are typically hesitant to bid on the logs for fear of being excluded from future, long-term direct sales agreements with the same logging companies that have tenure or land, as most mills require a secure log supply through direct sales contracts. Bidding on raw logs (or “blocking”) is therefore a secondary source of logs in relation to direct sales contracts and is potentially risky, as it could jeopardize their relationship with one of the few major companies with logging rights. The resulting inaccessibility and uncertainty of wood fibre for many mills helps to continue the marginalization and decline of BC’s coastal wood manufacturing sector.

Forestry unions and conservationists are calling on the BC government to enact the needed regulations and incentives to instead bolster the secondary, second-growth wood manufacturing sector. The Private and Public Workers of Canada (PPWC) and Unifor, two major forestry unions representing thousands of BC forestry workers, have been working closely with environmental groups to upgrade environmental standards and forestry employment. In 2017, the PPWC passed a resolution calling on the BC government to end the logging of Vancouver Island’s old-growth forests, while ensuring a sustainable, value-added second-growth forest industry, an end to raw log exports, and support for First Nations sustainable economic development.

  1. promised to “work with industry, local governments and First Nations to expand wood manufacturing capacity and create new jobs” and to “find fair and lasting solutions that keep more logs in BC for processing.” The 2017 Confidence and Supply Agreement between the BC Green and the BC NDP caucuses states that the government will “reinvigorate our forest sector to improve both environmental standards and jobs for local communities.”

The following set of policy recommendations is designed to help the provincial government fulfill these commitments. They involve applying a system of incentives and regulations to support a vibrant forest industry, ensuring good paying jobs for working families through the sustainable harvesting and value-added manufacturing of second-growth stands.

Note: As our agenda calls for an industry-wide shift to second-growth forestry before the province’s old-growth resource is completely depleted, an important first step is to create a distinction between old-growth and second-growth forests in the province’s Annual Allowable Cut. This will ensure the following second-growth forestry and value-added manufacturing policies are geared toward the right wood source and will allow the BC government to more effectively manage the rate of old-growth logging.

The set of policy recommendations is as follows:

  1. Provide fiscal incentives, such as eliminating the PST for new second-growth milling equipment, reducing property taxes on private managed forest lands and reducing tenure licencing fees on Crown lands for companies that invest in second-growth manufacturing. Conversely, increasing stumpage fees or the fee in lieu (log exports tax) can generate a pool of funds that can be used to offset new manufacturing investment costs.
  2. Curb raw log exports through regulations and by increasing the fee in lieu (log exports tax).
  3. Expand the geographic scope of log export regulations and the fee in lieu (log exports tax) to include private managed forest lands that were previously encompassed within Tree Farm Licences managed by the province.
  4. Help market sustainable, value-added second-growth forest products using proceeds from stumpage fees or other sources.
  5. Support First Nations to engage in sustainable, second-growth forestry through conservation financing and skills training.
  6. Support high-end, value-added wood working training in post-secondary institutions, including apprenticeships.
  7. Undertake structural changes, such as tenure diversification (Community Forests and First Nations tenures) and establishing regional log sorts.

POLICY RECOMMENDATIONS

1) Facilitate Value-Added Manufacturing through Fiscal Incentives

The province should implement financial instruments as powerful incentives for companies to retool old-growth mills to process second-growth logs and to develop new value-added facilities. Such incentives could include allowing companies to forgo the PST on new second-growth milling equipment (which is part of the Green Party platform), reducing property taxes on private managed forest lands, or reducing stumpage fees and/or tenure licencing fees (e.g. for TFLs and FLs) on Crown lands for companies that invest in second-growth mills and value-added facilities.

As stumpage fees are tied to BC Timber Sales prices and reductions in stumpage fees may result in further challenges by the US softwood lumber industry, conversely, an increase in stumpage fees could instead be implemented, with the surplus fees collected from the increase to be used as a funding source to offset the cost for companies investing in second-growth manufacturing facilities.  

Similarly, an increase in the “fee in lieu of manufacture” or log exports tax will not only dissuade log exports, but the funds collected from the increase can also be redirected to help offset the cost for companies investing in second-growth manufacturing facilities.

We recommend the BC government also incentivize the development of second-growth engineered wood products, including laminated veneer and gluelam products and thermally treated second-growth, through 1) similar fee incentives as mentioned above, 2) increased financing for R&D, and 3) increased markets development for engineered second-growth wood products, which match old-growth wood products in strength, stability, durability, and aesthetics and are largely at a lower price point today.

2) Curb Raw Log Exports through Regulations and by Increasing the Fee in Lieu of Manufacture (i.e. log exports tax)

Between 2013 and 2016, nearly 26 million cubic metres of raw logs valued at more than $3 billion were shipped from B.C to foreign mills in China, the USA, Japan, Korea, and other nations. The nearly 6.3 million cubic metres exported from B.C. in 2016 is enough wood to build 134,000 houses – roughly half of Vancouver’s standing detached housing stock. [2] Using a conservative estimate, more than 3,600 B.C. workers could have been employed processing that wood. The massive export of raw logs has been driven by a combination of the BC government’s deregulation of the forest industry and by the industry’s unsustainable depletion of the biggest, best old-growth trees at lower elevations. The depletion has caused a shift in the profile of the forest, which increasingly features smaller second-growth trees and old-growth “hem-bal” (hemlock and amabilis fir) stands that coastal mills generally have not been retooled to handle.

The previous BC Liberal government facilitated log exports via numerous policies, including the removal of the local milling requirements in 2003, which allowed tenured logging companies to shut down their mills and export raw logs. They also issued vast numbers of log export permits throughout the coast, provided a general exemption from log export restrictions for companies on the North Coast, and removed Tree Farm Licences from vast areas of coastal private managed forest lands (which removed the Crown restrictions on log exports from them). These destructive policies must be remedied with corrective policies by the NDP government.

In 2018, a group of environmental organizations and unions, including the Ancient Forest Alliance, Wilderness Committee, Sierra Club of BC, Public and Private Workers of Canada, and Unifor, together with the Canadian Centre for Policy Alternatives, proposed a ban on all old-growth raw log exports and an increase in the fee in lieu of manufacture (i.e. the log export tax) for second-growth raw logs to curb their export and to encourage domestic processing. It is therefore recommended the BC government phase in an increase in the fee in lieu to match the price differential for international log sales to dissuade log exports, and as mentioned in point #1, redirect the extra funds to help offset the expenses for companies investing in new second-growth manufacturing equipment.

3) Expand Log Exports Regulations and the Fee in Lieu to Include Private Managed Forest Lands previously within TFLs

In 1998 the NDP government allowed TimberWest to remove over 300,000 hectares of private managed forest lands from their Tree Farm Licences, while the BC Liberal government did the same in 2004 for over 90,000 hectares of Weyerhaeuser’s lands (now owned by Mosaic) and in 2006 for 28,000 hectares of Western Forest Products’ private lands. All told, this massive deregulation, which removed both the general prohibition against log exports that existed in the former TFL lands and the application of the fee in lieu (log exports tax), has resulted in the greatest exodus of raw logs from the province from these private managed forest lands. Given the province has had a long history of regulating these private lands – and continues to do so through property taxation and by regulating the lands under the Private Managed Forest Lands Act – it is well within the legal right of the province to re-extend other regulations to these lands to restrict raw log exports. This is particularly true for the Island Timberlands (now Mosaic) and Western Forest Products lands, as those companies weren’t required to compensate the province despite receiving a windfall increase in the financial value of their lands through the removal of the environmental regulations and log export restrictions via the TFL removal.

4) Help Market Sustainable, Value-Added Second-Growth Forest Products

Just as the BC government has spent major funds from stumpage fees on repeated, high-profile trade missions since 2008 to establish markets in China for BC old-growth lumber and raw logs, the NDP government could instead use stumpage fees to expand markets for sustainable, value-added, credibly certified (i.e. Forest Stewardship Council) second-growth forest products in various international jurisdictions, such as the US, Japan, Western Europe, and other parts of Canada, while discontinuing the marketing of old-growth and raw logs.

5) Support First Nations to Develop Sustainable, Second-Growth Forestry

Almost all of BC’s forests are located in the unceded territories of BC’s First Nations peoples. In the last several years, logging rights to old-growth forests across the province were allocated to numerous First Nations communities, who had been largely excluded from reaping the economic benefits of BC’s forest industry previously. As a result, today most First Nations communities now generate significant employment and revenues from old-growth logging – either directly through their own forestry operations or through employment and revenue sharing agreements with forestry companies operating within their territories. Many of these communities lack a range of alternative sustainable development opportunities that would support their local economies into the future and allow them to transition away from old-growth logging, should they wish to. Therefore, as part of the transition to a sustainable, value-added second-growth forest sector in BC, the provincial government should commit adequate funds to help support sustainable economic opportunities of First Nations communities, a model known as “conservation financing”.

Conservation financing includes a variety of innovative financing mechanisms designed to protect ecosystem values for the long term, while also providing a financial return. This might include financing for ecologically sustainable business ventures (including value-added second-growth forestry, sustainable seafood harvesting, non-timber forest products, and tourism), ecosystem services (for example, carbon storage), funding for environmental research projects, or a combination of initiatives.

Funding for First Nations conservation financing solutions in BC (not including the Great Bear Rainforest and Haida Gwaii, where such solutions are already being implemented) could be made available through carbon related revenues, funding recently set aside for the Forest Enhancement Society by the previous government, increasing/redirecting stumpage fees, or through other resource taxes.

The BC government should also support First Nations to acquire training for high-end, value-added wood manufacturing at post-secondary educational institutes and associated apprenticeships in order for their communities to reap the full benefits of their logging tenures by creating jobs and commanding higher prices via value-added forest products.

6) Increase support for High-End Wood Working in Post-Secondary Institutions and for Apprenticeships

In many northern European economies, governments play a more active role in matching and supporting post-secondary skills training in educational institutions to the economic sectors that require a skilled work force. If the BC government wants to develop a high-end, value-added wood manufacturing sector, it can also play a more active role in providing financial support for the development of value-added wood products technical training and foster subsequent apprenticeships through post-secondary institutions. Combined with the aforementioned policies to help develop a value-added wood manufacturing sector, support for post-secondary skills training and apprenticeships for both Indigenous and non-Indigenous men and women will help build both the skilled labour force and a generation of entrepreneurs in BC to develop a higher-end, value-added wood manufacturing sector that can employ far more workers per volume of wood harvested.

7) Enact Structural Changes

These can include:

Establishing Regional Log Sorts

Many smaller mills and value-added facilities have complained about a lack of access to BC logs, as most logs are sold on a large scale to large mills, or as raw logs at a higher price in international markets. Mandating that BC logging companies with tenures must sell a significant portion of their logs on the open market through regional log sorts (where logs are sorted by species, grade, and in different-sized bundles, from one log to thousands of logs) will help to make wood available to enhance the diversity of BC wood manufacturers, from small to large, from specialized artisans to conventional sawmills. The BC Forest Service ran a regional log sort in Lumby and Vernon in the 1990s, and the BC NDP government could establish similar log sorts across the province.

Diversifying Tenures to Include More Community Forests and First Nations Tenures

Community Forests are run partly to provide revenues for municipal services, such as libraries and community centres, but also to provide local jobs, and are not driven by a mandate to enrich shareholders, unlike most of the corporate logging in BC. Hence, there can be a greater emphasis on supporting local manufacturing jobs associated with the logs harvested from Community Forests.

Similarly, First Nations communities typically have a significant interest in expanding employment opportunities for band members, and therefore may also have an interest in developing wood manufacturing opportunities. Moving from corporate to greater community control over second-growth forestry resources, in general, can facilitate the expansion of a value-added industry due to community interests in maximizing local employment, and should be combined with old-growth forest protection and more sustainable forestry practices. It is recommended the BC Government expand the issuance of community forest licenses and various replaceable First Nations forest licenses.


[1] Statistics Canada, https://cfs.nrcan.gc.ca/statsprofile/employment/bc

[2] Canadian Centre for Policy Alternatives, 2017, https://www.policyalternatives.ca/sites/default/files/uploads/publications/BC%20Office/2017/03/ccpa-bc_BCSolutionsNewsletter_March2017.pdf

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