Northern Rockies Regional Municipality

Forestry Rejuvenation Plan Update

Forestry Rejuvenation Project Update – August 8th, 2016

As a high priority, NRRM has continued to work toward the re-establishment of a sustainable forest industry in the Regional Municipality, on a number of fronts. The following is a summary of activities, events and arrangements related to these efforts.

Community Forest Agreement (CFA)

The establishment of a Community Forest under local control and with sufficient timber volume to be economically viable and to attract and sustain industry interest is an important component of the Forestry Rejuvenation Plan.

  • Facilitating an NRRM application for  a CFA has been designated as a priority project with dedicated staff by local Ministry of Forests, Lands and Natural Resource Operations (FLNRO) office
  • Meetings have taken place between NRRM staff and FLNRO to determine details
  • 100,000 m3 of timber annually is potentially available and will be initially applied for
  • The volume of a Ministry offer is yet to be determined but a minimum of 50,000 m3 is expected
  • A meeting is planned for Sept. 14th with FLNRO staff from Prince George to discuss details of the CFA
  • Letter of invitation for formal application expected thereafter pending briefing of Minister
  • Areas to be included in application currently being finalized by NRRM

Canfor Discussions

As a major tenure holder and the owner and former operator of major forest products mills in the NRRM, Canfor was invited by Regional Council to meet to discuss a variety of topics related to the re-establishment of a forest industry in the Northern Rockies. The company agreed to meet on a confidential basis.

  • Council met in Closed Session with Canfor representatives on July 8th
  • Company representatives displayed an awareness of the community’s economic circumstances
  • Discussion included:
    • The issue of social license of the company
    • Possibilities for the NRRM and Canfor to engage in ongoing discussions on topics of mutual interest
    • The company’s immediate and longer term plans as they applied to the Regional Municipality
    • Current tenure arrangements
    • The disposition of Canfor’s property holdings in Northern Rockies
    • The issue of the removal of unprocessed timber from the NRRM
    • Canfor’s approach to the proposed Boreal Caribou Implementation Plan (Revision) (BCIR)
    •  Follow-up Discussions
  • It was agreed that a working group would be formed to advance discussion on the issues raised with follow-up discussions to begin in August

 

Tenure/Cutting Permits
Staff discussions with industry decision makers make it clear that Canfor’s current tenure arrangements pose a deterrent to others who need a secure long-term supply of timber with sufficient volume to justify any investment

  • The process to “replace”  Canfor’s Forest License Agreement (FLA) 17001 is in progress
    • The additional term would be for an additional 15 (fifteen) years
    • Staff is preparing a response to the renewal for Regional Council approval
    • Investigations around FL A17001 indicate that there are no legal impediments to the renewal given that:
      • the company continues to meet technical requirements
      • the Forest Act contains no other provisions for the Minister to refuse to renew a license in good standing
      • there is no “social license” provision in legislation which could affect the renewal
      • Canfor is within its legal rights to apply for cutting permits within the Fort Nelson Timber Supply Area (TSA), including wood to be harvested for processing elsewhere

 

FPInnovations/ Aspen Initiative

Dealing with issues around the means of making use of the aspen, that makes up a significant component of the forest resource in the NRRM, continue to be identified as a key element in potential investment decisions. As such, the NRRM has enlisted the assistance of FPInnovations in a preliminary project to begin to scientifically establish the quality of aspen in the TSA to inform and attract potential investment.

  • A 50/50 grant proposal for the support of Phase 1A of the Aspen Study has been submitted to the Northern Development Investment Trust (NDIT) and has initially been favourably received
  • Staff has maintained communication with the provincial official responsible for the allocation of funding for FPInnovations’ projects and advised him of progress and the potential for a grant request for the 2017 budget year
  • Communication with FPInnovations staff has already identified a number of potential outlets for NRRM aspen for more detailed examination to support a marketing case to attract investment

 

First Nations Engagement

  • Staff has maintained communication with area First Nations regarding Forestry Rejuvenation activities:
    • Information exchanged has included that to do with:
      • The CFA application
      • The Provincial plan on Boreal Caribou regeneration
      •  Forest tenure
      • Potential interest in joint activities and positions on forestry matters of common interest
      • The NRRM hopes that area First Nations will agree to participate in joint discussions on forestry between the Province, First Nations and the Regional Municipality, with a view to enhancing local influence over decision making in the TSA

 

Engagement with FLNRO and the Minister
The NRRM has had regular communication with the Ministry on a number of levels in efforts to further the goals of the Forestry Rejuvenation Project. This communication includes contact with:

  • The Minister (Honourable Steve Thomson)
  • In an April 11th meeting between a NRRM delegation and the Minister, he agreed to support the Forest Rejuvenation Project with a view to expediting communication between the Northern Rockies and his office, and the designation of resources to the Project
  • As yet no written reply has been received to the Mayor’s letter (June 8th) expressing concern to Minister Thomson over issues around the pace and levels of support by FLNRO for the Forestry Rejuvenation Project, and reminding of his commitment to visit the NRRM
    • As a result of the Mayor’s direct contact with the Minister on the lack of response, Associate Deputy Minister Jason Fisher became engaged directly with the NRRM
  • Associate Deputy Minister (Assoc. DM)
  • Assoc. DM with responsibility to report directly to the Minister participated in a phone call with staff and the Mayor (July 14th)
  • The discussion:
    • Reviewed the NRRM’s circumstances and emphasized the urgent need for action
    • Raised issued around:
      • the slow pace of progress on the part of FLNRO in engaging with the NRRM as committed to by the Minister
      • inadequacy of communication with the Minister’s office
      • apparent lack of capacity of the Fort Nelson FLNRO office to address the range of priority work needing to be accomplished
      • the importance of arranging a visit by the Minister (Sept. proposed)
      • The Assoc. DM committed to:
        • Communicate with the NRRM directly on issues of importance
        • Contact the NRRM “within 2 weeks” with an update on items raised
        • Subsequent contact with the Assoc. DMs office when no contact had been received by July 29th prompted a response
          • A response indicated that the Minister had been briefed but that there was no news to report, and that the Minister’s availability to visit the NRRM was still in question
          • The urgency for action was again reinforced
  • Regional Executive Director (RED)
    • New Regional Director Karrilyn Vince met with NRRM Staff on July 28th
    • Discussion included those items raised with the Assoc. DM
      • The issue around FLNRO capacity was given particular emphasis and acknowledged for attention by the RED
      • The RED committed to make regular visits to Fort Nelson with the possibility of a meeting in the fall to include additional regional staff
  • District Office (Fort Nelson)
    • Regular/frequent contact has been maintained with the District office with regard to all ongoing business
      • Recent focus has been on the BCIP and the CFA application
      • Lack of human resource capacity continues to be an issue in the local office
      • Cooperation between the District office remains very good despite capacity limitations

 

Boreal Caribou Implementation Plan (Revision) (BCIP)

Given the potential this item has to significantly affect the forest industry it has remained a focus for priority attention

 The Provincial intent is to have a submission for Cabinet approval by September, 2016

  • NRRM activities include:
    • Collaboration with FLNRO in formulating a response to the proposal with reference to:
      • Issues related to the scientific/research justification for the plan
      • Flaws in the baseline data/assumptions used as foundation for the Plan
      • Coordination of efforts and arguments being used to generate a reply
      • Consultation with Canfor specifically regarding the Plan
        • Staff participated in a conference call (July 13th) with Canfor representatives including their Chief Forester Chris Stagg-the company’s lead on the issue
        • Discussion included:
          • A reassurance that Canfor takes the matter seriously and is committed to pressing the Province to adopt a Plan that does not unduly disadvantage the access to timber
          • Within days of this conversation it was discovered by staff that Mr. Stagg had left Canfor to work with FLNRO, apparently leaving the company with no Chief Forester to address the proposed BCIP
        • Mackenzie County (Fort Vermilion, AB)
          • Staff recently became aware of efforts headed by Mackenzie County to ensure a balanced approach in the formulation and implementation of a BCIP equivalent in Alberta
          • Contact with staff there determined that the County was attempting to bring together a number of Counties and First Nations in Alberta and others in the NWT and BC on which a plan would have a significant impact
          • As a result of an ensuing phone conference with Mackenzie County staff and a consultant took place
          • The County shared its goals and strategy, and relevant documents
          • Discussion took place around the NRRM entering into a “no risk” Memorandum of Understanding (MOU) as part of a multi-jurisdictional northern coalition to address the issue at the Federal level
            • A further conversation will be scheduled to explore areas of common interest
            • Subsequent to this conference call staff will provide Regional Council with additional information and any recommendations related to it

 

Timber Supply Review Four (TSR4)

Legislation requires that a Timber Supply Review be conducted every 10 years. TSR 4 is currently underway for the Fort Nelson TSA to establish an Annual Allowable Cut (AAC) for the next 10 years.

  • Baseline Data expected for review and comment is significantly overdue with no “hard” availability date set
  • Information received from FLNRO indicates that while the BCIP will be treated as a “sensitivity” factor, it will not be a major determinant in the setting of the new AAC
    • Any reduction in the AAC necessitated by the BCIP will be accommodated subsequently
      • Concern has been expressed locally that rather than such a reduction being distributed across all elements with a claim on the AAC, existing licenses (i.e. FL A17001-Canfor) will be protected with the reduction being absorbed by unallocated harvesting rights, etc.
      • Staff will include this concern among those raised in  discussions around TSR4

 

Consultation with Industry Contacts

Local Contacts

  • Staff consulted with individuals with a history of involvement in the forest industry in the region
  • Outcomes of those discussions:
    • Supported an earlier estimate that that the cost to restart the dormant PolarBoard mill  would be in the range of $45-55 million provided that there were no “surprises”
    • Support for the idea that the local forest resource could sustain a forestry operation provided that an outlet for aspen fibre could be established
    • That sustainability of the forest resources required “harvesting the profile” (i.e. harvesting both softwood and hardwood in the proportion in which they exist in our forest)
    • Reluctance to commit to an arrangement reliant on Canfor as a key driver (e.g. where Canfor’s need for conifer determined the affordable availability of deciduous fibre)
    • Canfor’s dominant control over tenure posed a problem around certainty of fibre supply and the wisdom of investment in any new operation
    • Mixed perceptions on the viability of an OSB mill restart related to:
      • Cost factors
      • Certainty of fibre supply (an assertion that the mill, if transferred, should be accompanied by a suitable fibre allocation)
      • Current market prices and potential for profitability long-term
      • There was no identifiable investor/distributor (sales & marketing) for the product currently

External Contacts

  • Continuing contact with industry players and potential investors establishes:
    • That the Northern Rockies is being monitored for potential opportunities for both manufacturing and as a source of timber
    • Certainty of access to a fibre supply with an equal footing to that of the current major license holder is a crucial consideration
    • The predominant interest is in the coniferous timber supply
    • The inability to determining a viable outlet for the collateral deciduous harvest is a significant impediment to investment
    • A concern over the supply of trained forestry industry workers to support an operation exists
    • There is wariness Canfor’s dominant control over forest tenure
    • Senior forestry union contacts indicate:
      • Concern over additional mill closures as the supply of timber in Central BC dwindles due to the playing out of the Pine Beetle epidemic (potential for layoffs/employment uncertainty)
      • That experienced forest industry workers remaining in Fort Nelson, and others located elsewhere but willing to relocate here for secure employment exist in sufficient numbers to support even pre-2008 levels of production and that a supply of labour would not inhibit renewed forestry activity in the TSA

 

Wood Market – Current and Trends
Potential investment decisions in the forest industry are directly linked to market conditions and long-term outlook. In this vein the following are noted:

  • Forecasters continue to predict steady, if modest, growth in new residential construction in 2017 and beyond. Minimal 7% increase in US housing starts in 2016
  • Demand for OSB has been in balance with or slightly ahead of production increases over the past 2 years, mainly due to steady increases in US housing starts.
  • The OSB Composite Price is in the midst of another strong run. It has gained $39 over the past 4 weeks. 7/16” OSB (North Central Price) is $310 (US) vs. $192 a year ago
  • Solid order files in Western S-P-F coupled with a 0.768 Cdn /US $
  • Canfor had a strong Q2-2016 (Net Income $36 Million / $62 Million YTD) and expects an even better Q3-2016
  • Discussions with Canadian and US Governments regarding the Softwood Lumber Agreement (SLA) continued through Q2-2016. The one-year stand-still period, during which no trade actions may be imposed, expires in October 2016. Still uncertain about the possibility of a new SLA prior to October 2016
  • All the wood market signs are positive and support the potential for forestry to return to Fort Nelson

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