John Brink is right.  That said, it is encouraging to hear Minister Ralston acknowledge that the latest reduction of Category 2 from 1.1 million m3 to .6 million m3 is temporary and will be substantially added to.  It is clear that Minister Ralston realizes that specialty and secondary processing is the way for the BC public to get the greatest socio-economic benefit per cubic meter harvested from their resource.

Here is why I think John is right.  45 years ago, the Government of BC (GOC) recognized that non-tenured mills and remanufacturers required access to a share of the BC public’s forest resource.  In 1978, 13% of the AAC was set aside through the Small Business Forest Enterprise Program (SBFEP) for non-tenured companies.  No company with more than 10,000 m3 of renewable tenure was permitted to bid for this SBFEP timber just as no company of any kind is permitted to bid on timber on the renewable tenures.

In 1986, 3.1 million m3 of the approximately 10 million m3 that was in the SBFEP was partitioned for use by non-tenured wood processors as Section 16.1 that later came to be known as Category 2.

The objectives were:

• Opportunities: the program provides opportunities for individuals and firms in the forest industry to acquire timber for their existing operations, and for individuals and firms to enter the industry and establish new businesses.
• Diversification and employment: timber will be sold to promote and stimulate the production of specialty and high-value forest products, and to generate employment. The establishment of new sawmills will not be encouraged.

As of December 31, 1995, a total of 240 bid proposal sales were awarded to 150 different firms.  The Cat 2 program was highly successful for non-tenured remanufacturers and small sawmills, although 3.1 million m3 was found to be insufficient volume.

And then came the Forest Renewal Act of 2003 (FRA 2003).  GBC sought to overhaul BC Forest Policy to mitigate allegations of subsidy by US interests.  The FRA 2003 resulted in the loss of the SBFEP, the loss of Appurtenance, the loss of Ministerial approval on tenure transfers, and the introduction of a new method of pricing the non-competitive harvest on the replaceable tenures. 

The new system was and is called the Market Pricing System (MPS).  The theory is that if 20% of the BC annual allowable cut was sold competitively, it would provide data points for pricing the 80% that is sold with no competition. 

Here is where it really goes sideways.  Whose 20% was going to be used to get the data points necessary to price the non-competitive timber?

Logically, if GBC wanted to price the tenured timber, they could have competitively sold 20% of it to price the rest.  But instead of that, GBC decided to use the SBFEP timber that had been allocated to non-tenured producers and loggers.  But for the data points to be statistically valid, they had to let the tenured companies bid on it too.  From that point on, the SBFEP ceased to exist and it was rebranded as BC Timber Sales with a volume of about 14 million m3.  Believe me, there is no way that a community-based Mom and Pop remanufacturer is going to successfully bid against a big tenured company on a Category Any timber sale.  They don’t have a VP overseeing a forestry department.

And by the way, all these FRA 2003 changes had no noticeable affect on US allegations of subsidy and dumping and the CVD and ADD cases and resulting duties proceeded as if nothing had been changed.

The only bright spot in FRA 2003 for BC’s non-tenured producers was that then Minister de Jong, promised to keep the 3.1 million m3 of restricted bidding Cat 2 timber intact for them.

But by 2005, BCTS had concluded that it was not getting enough data points to satisfy the required 20%.  To get the data points, they needed to take Cat 2 volume away from the non-tenured companies so that the tenured companies could bid on it too. 

Dozens of little non-tenured value-added and specialty mills that relied on that fibre squawked, so GBC did not change the 3.1 million m3 number.  They simply never acknowledged what the number was after 2005, but the actual volume of Cat 2 sold in millions of m3 over the next 11 years was:

2005 – 1.7          2006 – 1.6          2007 – 1.1          2008 – 1.1           2009 – 1.1

2010 – .9             2011 – .6             2012 – 1.1          2013 – 1.0           2014 – 1.1

2015 – .9

In 2016, Minister Thomson officially reduced Cat 2 to 1.1 million m3 to reflect what they were actually selling to non-tenured producers.  And now the same timber is being rebranded as a new 600,000 m3 Category. 

John’s point is that Cat 2 by any other name is still being reduced from a woefully inadequate 1.1 million m3 to 600,000 m3.  John is just pointing out the reality.

I believe the non-tenured wood processing sector appreciates what Minister Ralston is trying to do for them under very difficult circumstances, but I also believe that it may be an impossible task as long as MPS data points need to be gathered from anywhere other than from auctioning a portion of the renewable tenures that they are trying to price.

Just get rid of MPS and go back to the CVP system or invent something new.  The MPS is hugely problematic in any case.  The delay in collecting and processing data points to set the price has always lagged the real time market by some months.  This results in profit motivated behavior whereby it makes sense for a tenured company to run like crazy when the notoriously variable lumber market is high, but the stumpage is still low, and then shut down when the market drops and the stumpage rate based upon a lumber market that no longer exists catches up.  It makes sense to fill your pockets on the way up, but no sense to empty them on the way down when all you have to do is shut down for a while.

Better fix it now.  The ability to modify BC Forest Policy in response to unintended consequences of FRA 2003 was lost when SLA 2006 froze Forest Policy in an “as is” state for the next 9 years.  Unless we get a Quota based Agreement, this will no doubt be the case again if and when we ever reach a new Softwood Lumber Agreement with the USA.  This would not be a good time to have BC Forest Policy frozen again.

Russ Cameron