$145 million and counting in compensation for "lost" timber

Forest industry sweet deal
March 9, 2006

In October 2005, shareholders with one of Canada’s largest forest companies got great news.

As part of a plan to redistribute Crown timber, the British Columbia government paid Canadian Forest Products $62 million in taxpayer dollars for the “loss” of certain logging rights that the company sustained during the provincial reallocation effort.

Under the program, Canfor and other companies saw public timber that they had yet to cut taken away. The trees the companies “lost” were then, according to the province, made available to First Nations, “new logging entrepreneurs” and others.

Canfor’s shareholders were likely ecstatic. The company had recently posted the best financial result in its history – a $420.9 million profit in 2004. It had the world’s largest sawmill in Houston, and was building another behemoth in nearby Vanderhoof, the costs of which would be defrayed by the government’s largesse.

Canfor is not alone in receiving sizeable government payouts for the so-called timber take-back. Since September 2004 when a $32.1 million cheque was cut to Weyerhaeuser, which promptly sold its coastal mills and timber tenures to Brascan, the province has turned over another $83.7 million to forest companies for similar reasons.

Taxpayers may soon see another $52 million or so flowing in a similar direction. And they may be shocked to learn that none of it was necessary.

Quotation marks are placed around words like “lost” for a reason. Consider this. Today throughout much of B.C., logging rates are at record levels. Why? Because at the same time that the province “took away” logging rights from Canfor and others, it gave them back even more in response to the massive beetle infestation then sweeping through the province’s Interior. In the rush to log the attacked trees, the government approved logging increases of 12 million cubic metres per year - far, far more than the 8.2 million cubic metres the companies allegedly lost.

But surely those beetle-attacked trees aren’t worth much? Not a chance. Canfor’s Houston mill gorges on beetle-attacked logs. Soon its Vanderhoof mill will too. Such logs are perfect for lumber production, in some cases even better than their “green” counterparts because they are naturally dry and don’t have to be placed in kilns following processing. Better yet, many beetle-attacked trees trigger the lowest possible stumpage payments to the province.

The idea, then, that Canfor and others “lost” wood is hogwash. And if you still doubt that, consider something else. Imagine that the province actually succeeds in reallocating all the timber that it allegedly took away from the companies. Under nearly 100 agreements that the province has reached with First Nations, those Nations could – if they all jumped through the requisite hoops – log about 3 million cubic metres of timber annually. Very few First Nations have their own sawmills, however. So whom would they sell to? Well, according to B.C.’s Ministry of Forests, 10 forest companies process three out of four logs in the province, Canfor, West Fraser and Tolko being at the top of the list. These companies may “lose” wood one way. They get it back another.

Late last year, I wrote a report for the Canadian Centre for Policy Alternatives called Getting More From Our Forests: Ten Proposals for Building Stability in BC’s Forestry Communities. In it, I suggested that major commodity lumber producers like Canfor occupy an important place at the table, ideally as part of an integrated, healthily diversified forest economy.

But that doesn’t mean we should give them rich and completely unjustified handouts. Especially when other sectors of the industry are hurting. For example, many companies that re-manufacture lumber do not have their own forest tenures. This may partly explain why, as a percentage of all wood products exported from B.C., value-added shipments have stagnated since 1999. Yet increasing value-added production is precisely where the strongest growth opportunities for the forest industry lie.

There was a time not long ago when such a trend would have prompted government action. Twenty years back, a then avowedly “free enterprise” Social Credit government took back a whack of trees from B.C.’s timber barons. Back then, the government was driven by what today seems like an almost quaint notion. It actually believed that social returns ought to flow from publicly owned resources. And it used its timber take-back to stimulate small business activity.

The companies cried foul. They demanded repayment. They got exactly nothing.

The Socreds simply pointed to licence terms - terms which the provincial Liberals axed - that allowed five per cent of timber allocations to be taken back once every five years without compensation. More than one member of that government, if not in a grave today, might fall into it upon learning that we’re paying companies $145.7 million and counting for publicly owned trees that the companies never, in fact, lost.

Ben Parfitt, resource policy analyst with The Canadian Centre for Policy Alternatives’ BC Office, is author of Getting More From Our Forests: Ten Proposals for Building Stability in BC’s Forestry Communities.