Policy Tracker: Future of the Forest Industry and It’s Importance to British Columbia’s Economy 

Where is this policy/position currently at?

The forest industry continues to be an important contributor to the province’s economy:  2018, total economic output for the sector was $33 billion; total Gross Domestic Product (GDP) from the forestry sector was $12.9 billion; employed 140,000 British Columbians in 60,000 direct and 81,000 indirect jobs; generated 8.6 billion in wages to workers; consisted of more than 7,000 businesses, 83% of which employed less than 20 employees; approximately 250 primary and 1,525 secondary manufacturing facilities; and 4,737 forest management businesses primarily small independent contractors and family-owned businesses.^[1]  

A study from 2017 confirmed the importance of the industry to BC showing that it generated 1 out of every 17 jobs in the Province.  The forest industry contributed approximately 1.4 billion (federal), 2.6 billion (provincial) and $200 million (municipal) government revenues.  Approximately 40% of BC’s regional economies are forest dependent – directly involved in harvesting and processing of forest products. 

There are, however, challenges that are hampering forest industry competitiveness, stability and growth.  For example: 

Timber Supply 

The supply of economically viable fibre is declining due to , among other factors, beetle infestations, wildfires, and  decreases in the provincial timber harvesting land base due to  other uses, including environmental set asides. Many primary manufacturing facilities rely on log supply from third parties such as auctioned timber from BC Timber Sales (BCTS) and purchases from other sources such as community forests and Indigenous peoples tenures.  A vibrant secondary manufacturing sector in value-added wood products, pulp and paper and emerging bio-products industry, depends on a productive primary manufacturing industry to provide raw materials and residual fibre.  Including purchases from other sources in the AAC apportionments hampers the secondary sector. 

Transportation 

Transportation of raw and processed products by Rail and Truck have issues not being addressed.  Rail carriers are not being held accountable for a transport schedule or to provide regular transport of products.  Trucking companies without a stable stock of product are not investing in equipment and are often hampered for the lack of available drivers. 

Timber Quality 

The Spruce and Fire beetle infestations and vicious fire seasons of recent years has created an economic challenge for good fibre. While the industry has been salvaging damaged timber for several years, and will continue to do so profitably, time is of the essence in terms of recovering this deteriorating resource while forest products can still be made of it. 

Markets and Trade 

The Softwood Lumber Agreement has increased the cost of shipments to Canada’s largest market, the United States, which has greatly affected the industry’s competitiveness and ability to grow into other global markets.  

The amount of uncertainty in the Forest Industry today, curbs growth throughout the sector.  Investments in mills, equipment, logging efforts and market growth are challenged to the point that suppliers are not taking the chance on increasing their assets. 

THE CHAMBER RECOMMENDS 

That the Provincial Government: 

1. Provide Access to Economically Viable Fibre 

• Secure access to an economically viable fibre supply and identifies the timber supply that will be available given Indigenous peoples and stewardship allocations. 
• Provide all manufacturing facilities with the ability to secure volumes required to maintain these facilities in the face of: 

• a declining annual allowable cut; 
• decreasing provincial land base (environmental and Aboriginal rights and title reserves, fires and beetle infestations); and 

• expiring non-replaceable forest licenses. 

• Develop strategies to take advantage of relationships with Indigenous peoples to increase access to fibre. 
• Land use commitment to ensure access to timber to the full level of land use plans. 
• Communicate to industry what level of AAC will be available for harvest so that business can plan its operations, then support access to that timber supply.  Timber supply projections are based on a land base that has not been curtailed by subsequent local decisions to place constraints on practicing forestry. 
• Reviewing and revising staffing in the Ministry of Forests, Lands, Natural Resource Operations & Rural Development who are responsible for issuing timber harvesting permits to ensure that decisions respecting access to fibre meet revenues will significantly contribute towards ensuring an adequate timber supply.  Ensuring there is a commercial forest land base for forestry purposes must become a priority at both the provincial and local government levels; and 

• Sell BCTS apportionment volumes consistently.  BCTS is an important supplier of timber to BC’s log markets and must continue to sell its apportionment over the business cycle to get the full forest profile into log markets. 
• Indicate that the forest industry’s costs to manage non-timber values is adequately recognized and that the forest industry pay to manage other forest resource users and values unless there is a direct cost recognition in the timber pricing system.  This could include residual fibre deliveries, Indigenous people’s consultation, and range management costs among others; 
• Provide direct cost recognition in the timber pricing system for consultation with Indigenous peoples communities.  The scope, level and cost of consultation has increased as Indigenous peoples’ communities increase their assertion of indigenous rights and title interests.  Until agreement exists over indigenous strength of claim, and unless and until the Government of British Columbia effectively manages their obligation for consultation and accommodation, these costs will accrue to industry.  Direct cost recognition will provide an important opportunity to improve industry competitiveness until the issue reaches an equilibrium and an appropriate cost variable can be determined. 

2. Commit to Improving Forest Health 

• Early and aggressive action is required to control and contain the current and growing Spruce and Fir Beetle infestations to keep this infestation from turning into a similar situation as the mountain pine beetle outbreak; 

• Consider harvesting activity inside of fire perimeters for more immediate salvage opportunities within the economic shelf life of useable timber thus avoiding unnecessary waste. 

3. Provide Secure Transportation Opportunities 

• Commitments to hold rail carriers accountable and ensure capacity to move timber to the export market. 
• Without investment certainty, there are a limited number of truck haulers who would commit to their fleet if they had commitments. 
• Driver training through post-secondary institutions and financial support to make this happen. 

• Continue investment in important infrastructure programs by improved road, rail, bridge and port structures; and 
• The application of several provisions in Bill C-49 to help ensure the best results from this bill, specifically: 
• Interim performance reporting requirements taking effect 6 months from now, on November 23, 2019. 
• Railways submitting their performance data within 5 days and the Agency publishing this information within 2 days. 
• The option of extending the results of the Final Offer Arbitration decisions up to 2 years. 

4. Ensure Market Access 

• Continue investments in offshore and U.S. market development activities by organizations such as Forest Innovation Investment, as well as policies such as the wood first program.  These initiatives provide necessary market diversification and will only strengthen our global competitive position; 
• Continue working co-operatively with industry and the Government of Canada to address tariff and non-tariff barriers to the global export of BC forest products. 
• Eliminate market barriers that will prevent an efficient re-alignment and/or consolidation of forest industry assets.  In other words, match supply to demand and logistics from tree to market.  Industry rationalization is inevitable as the forest industry adjusts to decreased timber supply resulting from the mountain pine beetle infestation.  Allowable annual cuts will decline in the short to medium term. Industry requires flexibility to organize effectively; 
• Continue investments in offshore and U.S. market development activities by organizations such as BC “WoodWorks!” programs and BC Forest Innovation Investment, as well as policies such as the wood first program.  These developing markets are important bailiwicks in providing market diversification and opportunities when the U.S. market is challenged.  Unfettered access to other markets for forest products will only strengthen our global competitive position. 

5. Provide Investment Certainty 

• Use a competitive tax environment to encourage investment in, and transformation of, the BC forest industry; 
• Support policies and incentives for capital manufacturing investments that increase the use of innovation and process technology to modernize facilities.  This also includes incentives for new market entrants, such as investment tax credits, employment incentives, support for new technologies and creating small business opportunities for facilities aimed at products made from non-saw log fibre and logging residue; 
• Increase the scope of the current Provincial Sales Tax (PST) to include investments in non-harvesting heavy machinery within the definition of Logging Activities, when these assets are used primarily in logging operations.  This would streamline the PST act regarding logging operations and increase investment in road building and earth moving machinery; 
• Support policies and incentives to support safety and environmental upgrades required under the BC Sawmill Code of Practice and other legislation; 

• Support clarity and efficient administrative processes regarding permit applications and reporting requirements; 
• Promote and fund labour force and skill training applicable to the forest industry to an equal level with other resource-based sectors. 

Download the PDF 

[1] Forestry Innovation 2019 Key Sector Data – https://www.bcfii.ca/files/2019_FII_Key_Forest_Sector_Data_and_Stats.pdf