cited as first code victim
stumpage fees and Forest Code-inflated logging costs forced Evans Forest Products to its
knees. Other mills could be facing the same fate.
By Jim Stirling
Copyright 1996. Contact publisher for permission to use.
When Evans Forest Products of Golden, British Columbia closed
down in October, throwing hundreds out of work, most of the fingers in the industry were
firmly pointed at the province's Forest Practices Code, introduced two years ago, as a
factor. The Code was the last knot in a tapestry of pressures mounting on Evans and small
and medium-sized companies like it for the last 25 years.
It adds undreamed-of costs and restrictions that are putting this
segment of the industry in serious jeopardy. The Evans shutdown has been hard on the
people in the Kootenays, especially on the town of Golden. Five hundred people are
directly dependent on the company for their livelihoods. At this writing, a rescue plan
was being hammered together with temporary wage cuts, rescheduled credit payments,
deferred stumpage, a government loan and financial help from Forest Renewal BC. Although
not yet finalized, the hope is that the mill would be back in full production some time in
the new year.
EB Eddy was severely affected by this sawlog restriction,
reducing their previous level of five million board feet of pine sawlogs annually, to
one-fifth that amount.
But Evans has been in financial crunches before. It's logging
costs are high — much higher than in some other areas of the province; a deferred
stumpage plan hasn't helped. Whether it can survive long-term may depend on whether the
government is willing to make some fundamental changes in the way the company must operate
under the Forest Practices Code.
Other mills around the province are watching all of this with
more than passing interest. Evans is simply the weakest of a number of companies that
could go on the critical list, with high logging costs and stumpage part of the problem.
Creditors are becoming increasingly nervous about these firms and credit lines are being
tightened. Evans' problems came to a head because creditors were losing confidence in its
ability to work its way out of trouble on its own. This was compounded by the abscence of
an assured log supply.
When the Mica Dam was built in 1973, it flooded a valley
containing some very high-quality timber that would have served as a source for Evans.
Nobody gave much thought to the trees when the dam was built, as in those days the
possibility of a timber shortage was never imagined.
As readily accessible
timber dwindled, the company was forced further afield and higher into the mountains. The
best of these areas has already been high-graded. Roller coaster prices for lumber
and pulp logs have compounded the company's weaknesses.
But blame for much of the mill's current trouble is being laid on
the Forest Practices Code, an ambitious government attempt to codify logging procedures
and sustain the resource. The burdens of the Code fall on everybody but are harder to bear
for smaller and medium-sized companies operating under financial pressure in a rapidly
changing industry. Another problem is that the Code is a general charter that does not fit
all situations. It especially does not fit the kind of expensive, steep-slope logging
conditions that companies like Evans face.
They developed central delivery locations, the largest being
Nairn Centre just east of Espanola, and organized two way transportation where sawlogs
went to Sault Ste. Marie, and pulpwood returned to Espanola.
Harvesting on steeper ground is increasingly done by cable
systems, a more environmentally friendly approach than ground skidding, but also a more
expensive one. Either way, cut blocks under the Code are now smaller, forcing companies to
move more often and build more roads. This is especially costly in the mountains and even
more so under the environmental standards set out in the Code. All roads must also be
deactivated following harvesting again, at a cost. Helicopter logging is an alternative,
but it is at least as expensive.
Then there are the Visual Quality Objectives (VQO), which
constrain or restrict logging in certain situations to preserve aesthetic slope vistas.
More cost. The current Clark NDP government is aware of the expense VQO rules impose and
has been lobbied to make them more economically achievable without changing the basic
concept. But when anyone suggests easing the rules, Greenpeace, the Sierra Club and other
environmental lobbies whip out pictures of ugly clearcuts from the past and Victoria's
heart skips a beat. The Code is supposed to convince Europeans susceptible to simplistic
environmental campaigns that logging in BC is now ecologically sound.
These days, steep slope logging is increasing in BC as allowable
cuts in more accessible timber are being reduced. Some estimates put steep slope
harvesting at about 40 per cent of total production. How much is the Code costing? Price
Waterhouse calculates that it adds $1 billion a year to forestry costs. The Council of
Forest Industries (COFI) estimates that the extra paperwork to comply with Code
requirements adds up to 650,000 pages to describe some 30,000 operating plans. This alone,
says COFI, adds $2.50 to $3 per cubic metre to wood costs.
COFI vice-president Brian Gilfillan says that although the
industry does not want the Code eliminated, it does want it modifed to make forestry more
rational. One of the areas that needs to be addressed, he says, is steep slope logging,
including the current highly detailed pre-harvest planning and reporting requirements, and
stumpage. “If a company has to address the Code and increased stumpage in low-quality
timber on hard-to-get-at sites, then the combination is brutal.''
Stumpage fees have been raised several times in the last few
years, first to feed cash-hungry governments, and then to try to placate the Americans,
who thought they were too low. There is also the NDP's “super fee'', imposed in addition
to other hikes specifically to fund the controversial Forest Renewal BC program. In 1995
alone, stumpage went from $816 million to $1.76 billion.
Many in the industry want to see stumpage rates reduced. They
argue that companies like Evans would have a better chance at long-term survival if this
was done. The trouble for the Clark government is that it currently faces a $750 million
to $1 billion deficit. Clark needs the money and forestry is still his biggest revenue
source. In any event, any stumpage reduction would be closely scrutinized south of the
border, and Victoria would not relish another expensive fight with the Americans.
As far as amending the Code, consider that it is the heart and
soul of the government's forest policy. Painstakingly put together, it has the support of
environmental groups (and keeps those lobbies off its back) and reflects in a basic way
its view of the way logging should be done. It would be very difficult to backtrack
significantly now. The Code was also, it should be noted, implemented with a surprising
amount of support from the industry's corporate boardrooms.
The government is, however, undertaking an "operational
review'' to see if the Code can be made to get the same results with less process and
paper. When this will be completed isn't clear.