West of the oilsands, another sector suffers its own ’existential crisis’
If a tree falls in a forest and no one is around, it doesn’t much matter if it makes a sound, except to philosophers. But if a sawmill closes in a remote British Columbia town, where the internet is patchy, the impact is all too real even if no one outside hears about it.
That’s about what retired forester Jerry Canuel was thinking to himself in September when an annual logging show rolled into his hometown, Merritt, B.C., also known as Canada’s country music capital, where a once thriving forestry sector has been slowly disappearing.
At the show, axes were thrown, logs were sawed and Canuel bumped into so many out-of-work loggers and millworkers that it spurred an epiphany for him and some friends: If they all descended on Vancouver, about three hours southwest of Merritt, it might bring some attention to the troubled state of the province’s forestry sector.
There’s just nothing being said and a lot of people don’t know the significance of what’s going on in the Interior
retired forester Jerry Canuel
“There’s so much silence,” said Canuel, who remains an adviser to Aspen Planers Ltd., which operates the lone sawmill in Merritt. “There’s just nothing being said and a lot of people don’t know the significance of what’s going on in the Interior.”
At least nine sawmills in B.C. this year have been shuttered while an estimated 47 others have cut shifts or curtailed production, leaving many remote communities economically stranded. The Ministry of Forests, Lands, Natural Resource Operations and Rural Development estimates about 8,000 people, or roughly 15 per cent of those employed in the sector in B.C., have been touched by the cuts, a massive blow to the province, which produces about half of Canada’s lumber with an annual export value of $14.2 billion.
“Everyone thinks about the sawmills, and the people who work there, but it’s also contractors and people who deliver wood to the mill, mechanics, equipment sellers,” said Todd Chamberlain, president of the Interior Logging Association. “In the smaller towns, it’s right down to the people who cut your hair.”
Unfortunately, forestry, like oil and gas in Alberta, is another major resource sector experiencing an intense bust cycle, and it’s also one where the largest companies are seeking growth opportunities outside Canada, mainly in the U.S., further fuelling the sense of discord in the West.
The B.C. Interior, where most of the wood is cut, has been particularly hard hit by a mountain pine beetle epidemic, which peaked around 2006 and left huge swathes of previously wooded areas bare. But the rest of the province has not been spared, as record forest fires and a long-running trade dispute with the U.S. have taken their toll.
Now, with the timber supply projected to shrink until 2025, and a recovery expected to take decades, companies are “rationalizing” their operations in B.C., consolidating mills to gain efficiencies of scale.
That some of B.C.’s largest timber companies are also investing in a rapidly growing timber basket in the U.S. South, while some of the smaller companies are feeling the squeeze, has not passed unnoticed.
The weekend following the logging show in Merritt, a convoy of big rigs snaked out at 9 a.m. and headed for Vancouver, where mayors from around the province had gathered for a conference.
“We thought we would have like 50 trucks at the most,” Canuel said. “Well, my goodness, I think we had in the neighbourhood of 267.”
Along the way, people huddled on overpasses and the sides of the road, holding up signs and cheering on the convoy, which continued to grow along the way until it stretched for several kilometres by the time it reached the city.
Canuel felt strongly the convoy shouldn’t be deemed a protest or confrontational. After all, who could be blamed for the mountain pine beetle and fires that wiped out the trees?
Basically, five big companies own most of the harvesting rights in British Columbia, and they’re not investing in B.C.
Al Bieksa, president of the United Steelworkers Local 2009
But with 95 per cent of B.C.’s timber located on public land, there has been a populist backlash against the largest companies including Canfor Corp., Interfor Corp., West Fraser Timber Co. Ltd., Tolko Industries Ltd., Western Forest Products Inc. as well as others.
“The consolidation of volume into these four or five companies in the province is taking out all these small companies,” Canuel said. “What we’re trying to say to the government is, goodness gracious, what do you want in this province? Do you want multinationals, five of them, controlling all of this province?”
Even on the coast, where the mountain pine beetle has had less impact because of the different tree species, there is a similar hostility toward the largest companies.
For example, Interfor in September closed its Hammond mill in Maple Ridge, saying a lack of fibre meant it was operating on one shift even though it’s designed for two shifts. The company tied the closure to a “reconfiguration” of its coastal operations, saying it wanted to sell the real estate and “repatriate” working capital.
But Al Bieksa, president of the United Steelworkers Local 2009, accused the company of doing the opposite of repatriation.
“They took advantage of the fact they could sell this land,” he said. “We know what they’re going to do with that money; they’re going to invest it back in the states.”
Interfor has said it is investing in its Canadian operations, for instance, by adding “dry kiln” to a mill in the Interior.
But the Vancouver-based company now produces more wood in the U.S. south than anywhere else, and its multiyear strategic plan focuses on $240 million in investments there.
Given the flight of capital, Bieksa said he wants a jobs commissioner with the authority to stop mill closures under certain circumstances.
The clash against the largest companies is intricately tied to the way B.C.’s forestry sector evolved. Under a decades-old system, companies control licences, known as tenures, to harvest timber from public land.
Originally, the government granted tenures to companies under the premise that the wood be processed at a local mill. But in 2003, during a bust cycle, the province removed those conditions and allowed companies to buy and sell tenures.
With B.C.’s timber supply projected to shrink 14 per cent over the next five years, many companies are closing mills and making deals to sell tenures as part of an industry-wide consolidation.
But as communities and unions watch the job losses mount, they also note that these companies are still harvesting trees from public lands.
“Basically, five big companies own most of the harvesting rights in British Columbia, and they’re not investing in B.C.,” Bieksa said.
Earlier this year, the B.C. legislature passed Bill 22, allowing Minister of Forestry Doug Donaldson to reject any tenure transfer if he finds it doesn’t support the public interest.
One transfer under review concerns Canfor, which closed its mill in Vavenby and arranged in June to sell its tenure for $60 million to Interfor, which plans to haul the wood to a mill about 120 kilometres away. Five months later, the deal still hasn’t closed amid strong local opposition.
“I find it highly offensive almost that this is a cash deal,” said Merlin Blackwell, Mayor of Clearwater, which is next to Vavenby, “that somebody’s going to benefit from something that was gifted away by the government.”
Last week, Chief Shelly Loring of Simpcw First Nations, whose territory overlaps with the tenure land in question, said in a press release that she was close to finalizing a deal with Canfor and Interfor that would protect against “the monopolization of forest resources.” But she said the deal is not economically viable without support from the province.
Donaldson, a former councillor in Hazelton, a remote community with a shrinking forestry sector, said there’s a lot of anger that the government is not managing timber “first and foremost” for communities’ benefit.
“I find that sentiment widespread throughout the province,” he said.
The minister declined to comment on how he would rule on the Vavenby tenure transfer, but said Bill 22 “is not a mechanism for the government to redistribute tenure.”
Since Bill 22’s passage, Donaldson has approved just one tenure transfer: in October, Conifex Timber Inc. sold a tenure to Hampton Lumber for $39 million. He passed along a letter sent to a local First Nations chief that stated the government required Hampton to build a mill in Fort St. James within 36 months as a condition of the transfer.
It’s not clear how much more the province is willing to do to help the forestry sector. In August, the government announced a $69-million package that provides early retirement incentives, temporary funding for fire prevention jobs and skills training for forestry sector workers.
Canuel and Bieksa also said the formula that the province uses to determine the fair market value of timber on its land, known as stumpage, which has risen steadily since 2009, is not responsive to the market: when lumber prices are high, stumpage rates are low, and vice versa.
Donaldson said he didn’t want to tinker with stumpage rates to avoid any risk of further enflaming a dispute with the U.S., which is claiming in front of the World Trade Organization that Canada subsidizes its softwood lumber market.
“Anything that could be construed as a political intervention into stumpage would make matters worse at this sensitive time,” he said.
Still, there are changes afoot.
In October, the B.C. Legislature introduced Bill 41 to implement the United Nations Declaration on the Rights of Indigenous People. If passed, it could create a framework for recognizing First Nations’ legal rights, including their claims to traditional territory, which could change where timber is harvested.
Clearwater Mayor Blackwell predicted the bill would pressure the government to pony up money for First Nations, such as Simpcw, to purchase part of the tenures being transferred.
Blackwell said he would support anything to help the forestry sector in Clearwater, a town of about 2,200 people located five hours from Vancouver that wants to diversify its economy, but is having trouble doing so.
“We have entire subdivisions within the town that don’t have any internet at all,” he said.
Gary Bull, a forestry economist at the University of British Columbia, said the sector is transitioning.
Climate change has played a role in the industry’s woes to this point, as scientists believe the mountain pine beetle population exploded because of unseasonably warm winters, and all the dead wood the bugs left behind made recent forest fires even worse.
But as governments seek to decarbonize the economy, Bull said there will be opportunities to use trees to make recyclable packaging and mass-timber buildings as well as energy.
As the timber supply shrinks, he said companies will need to look to this bio-economy to add value to the wood.
“I think (the industry) is in the middle of an existential crisis,” said Bull. “It’s like a midlife crisis: think of someone who just got divorced, wants a really hot sports car and then is like, ‘What the hell am I doing?’ I think that’s where we’re at.”