Fifth Session, 41st Parliament

(2020) REPORT OF PROCEEDINGS

(HANSARD)

COMMITTEE OF SUPPLY,

SECTION A

Virtual Meeting

Friday, July 31, 2020

Morning Meeting

Issue No. 19

ISSN 2563-3511

The HTML transcript is provided for informational purposes only.

The PDF transcript remains the official digital version.

CONTENTS

Committee of Supply

Proceedings in

Section A

Estimates: Ministry of Forests, Lands, Natural Resource

Operations and Rural Development (continued)

J. Rustad

Hon. D. Donaldson

FRIDAY, JULY 31, 2020

The committee met at 9:33 a.m.

[R. Leonard in the chair.]

Committee of Supply

Proceedings in

Section A

ESTIMATES: MINISTRY OF FORESTS,

LANDS,

NATURAL RESOURCE OPERATIONS

AND RURAL DEVELOPMENT

(continued)

On Vote 29: ministry operations, $489,126,000

(continued) .

The Chair: I want to recognize that I am participating today from the

homeland of the

Lək̓ʷəŋin̓əŋ-speaking peoples,

known as the Songhees and Esquimalt Nations. We extend our

appreciation to them for the opportunity to undertake the work

before us on this land.

We are meeting today to continue consideration of the

estimates of the Ministry of Forests, Lands, Natural Re­source

Operations and Rural Development.

J. Rustad: I hope everybody is buckled in for 7½ hours of estimates today on

the Forests, Lands and Natural Resource Operations. Today we’re going to

focus, from my perspective, primarily on forestry issues, although

there’ll be a few other things that need to be brought into the

conversation.

Yesterday we had a pretty extensive conversation with regards to

wildlife management. I just want to put one last question on wildlife

management before we start off into forestry. The minister can provide

this information in writing, if he so chooses.

[9:35 a.m.]

The minister had stated yesterday that there were no LEH permits

outside of the two areas, in particular, in areas that many First

Nations have expressed interest in. I have one example, I think,

particularly of the Thompson-Nicola region 3, where there are 18, which,

of course, some of the First Nations that have written to the minister

had an…. The request to the minister, if he could provide a breakdown of

the LEH for moose cow-calf hunting opportunities across the province by

the various regions, that would be helpful.

The second piece, once again, if the minister could just provide

this in writing. The minister talked at length yesterday about science

and making of the decisions for wildlife management based on good

science, which I fully support. If the minister could provide me with

the science behind the decision to ban the grizzly bear hunt.

Grizzlies, of course, are predators. They have an impact on

caribou, as well as other ungulates like moose. As a matter of fact,

it’s often said that when a cow is giving birth that it’s considered to

be a dinner bell to a grizzly bear. Obviously, as grizzly bear

populations increase, there will be more predation to caribou and to

other ungulates. So if the minister could provide that information in

writing — I don’t need it at the moment — that would be

helpful.

I want to move on to talking about the working forest. We talked

yesterday at length about the area that has been set aside for caribou

management, the reduction in the available forests for forestry

activities.

To start off with, I just want to ask: can the minister confirm,

out of the 700,000 hectares, how much annual allowable cut will be

reduced from the working forest up in the northeast region?

Hon. D. Donaldson: Yes. From our modelling, the annual allowable cut impact from the

areas in the partnership agreement that are temporarily now set aside

for caribou protection will be 284,000 cubic metres per year. Once the

area becomes permanently protected for caribou habitat, then the chief

forester will be making a partition in order to ensure that that 284,000

cubic metres is removed from the annual allowable cut for the

area.

J. Rustad: It’s an interesting number in terms of the Peace country. I’ve

heard numbers fluctuating, particularly estimates from industry, but it

is what it is, I suppose, in terms of the…. I won’t quite go into the

arguments of whether it’s 540, 270 or 280. It’s still a

reduction.

[9:40 a.m.]

This past fall there were…. I believe the number was in the

thousands of people on Vancouver Island that came to the Legislature and

delivered a petition the minister. In particular, they had been talking

a lot about the working forest and the need for a designation of the

working forest.

Does the minister support the petition — and the efforts that have

been going on by the people in the forest sector on Vancouver Island, as

well many right across the province — that there should be a designated

working forest dedicated to supporting our forest sector?

Hon. D. Donaldson: I distinctly recall the representation that was made to the

Legislature by those concerned about their future employment in forestry

in the province. I met with some of the organizers.

I would say, in answer to the member’s question, we have the

timber-harvesting land base in B.C. That is the area in the province

that the primary activity and the primary value considered is timber

harvesting for support of workers and support of communities, from the

economic benefits that derive from that.

I’d also say, because he did start off by mentioning the Peace

country and the impacts in that area of the partnership agreement, that

one way we defend the timber-harvesting land base is epitomized by what

we were able to accomplish in the partnership agreement. If we hadn’t

been able to sign that agreement with the federal government and with

the Saulteau and West Moberly First Nations, then we could have been

subject to a

section 80 Species at Risk Act order by the federal

government.

That would have unilaterally taken control out of our hands,

without any socioeconomic considerations, and impacted immensely the

timber-harvesting possibilities in the forest industry in the Peace

country. So we took that one on. We were able to sign the partnership

agreement and that enabled us to have a made-in-B.C. solution rather

than made-in-Ottawa.

J. Rustad: Let’s go back, then, a moment. I think the minister just said that

the timber-harvesting land base is what he supports, but of course, that

timber-harvesting land base is subject to change based on policies and

approaches and decisions made by the government of the day.

Clearly, that timber-harvesting land base has eroded in the

efforts on caribou up in the Peace country. It’s debatable as to whether

the feds’ threat would have been implemented or not. Obviously, when we

were in government, the feds threatened as well. We worked with the

federal government on policies to recover caribou, and as we saw from

recent reports, those efforts actually saw some increase in the caribou

populations in Peace country.

Across the province there are, I think the number was, 54 — I may

be wrong about that — various areas of potential caribou habitat.

Obviously, the minister has struck various groups, and I believe — the

minister could confirm this — is in discussions with First Nations

throughout those other areas that have potential caribou habitat and

caribou herds.

[9:45 a.m.]

The example of the Peace country seems to have set the tone as to

the approach this government will take. Has the ministry done any

analysis in terms of how much additional habitat may be required or will

be protected or could potentially be protected to further try to secure

the future of caribou? I guess it’s a very convoluted way of asking a

question. How much more of the timber-harvesting land base is

potentially to be put under protections to support efforts to recover

caribou?

Hon. D. Donaldson: We have, definitely, under the

section 11 agreement with the

federal government, been engaging on herd management plans for the

remainder of the herds in B.C. So the member is right on

that.

As far as an analysis of how much additional protected areas might

be necessary for caribou habitat, we, through our scientists, are

looking at the southern groups. There’s already large core habitat

protected. There’s nothing being contemplated on the scale that was

witnessed in the partnership agreement in the northeast.

There might be some subtle changes, some boundary changes

required. In some instances, that might mean changing boundaries based

on best available science and removing areas that are under protection

now and other circumstances. It might mean expanding those boundaries

slightly, depending on the science that we’ve been able to accumulate in

the last number of years. So nothing on the scale that was in the

partnership agreement — subtle changes.

It’s important to remember that in the areas that are protected

right now, there are habitat restoration activities ongoing, because, as

we canvassed yesterday, there are many areas, especially in the

Tweedsmuir area, within the caribou habitat protection lands that are

heavily impacted by circumstances like wildfires. So habitat restoration

efforts are underway.

Just to the comments the member made on the efforts in the

northeast and the imminent threat by the federal government. Yeah. It

wasn’t until 2018 that the federal government actually issued an

imminent threat order and that caribou were at the risk of extirpation

in many of the herds. When we had been working towards, with the federal

government, since 2017…. Obviously, the efforts previously weren’t good

enough.

[9:50 a.m.]

We weren’t going to roll the dice with the federal government. The

potential risks were just much too great to the timber-harvesting land

base and to the communities that were dependent on forestry.

J. Rustad: The minister talked about the timber-harvesting land base and the

potential impact in the southern range as being minimal. Industry has,

of course, expressed some significant concerns that it may be more than

that.

I guess the question to the minister…. First of all, I guess, is

the ministry engaged with the First Nations, and what role will the

First Nations play, and their local knowledge, in determining areas that

may need to be set aside?

Hon. D. Donaldson: Yes, we’re definitely attuned to the concerns of industry in these

COVID times. I’ve been making regular check-ins with the CEOs of not

only all of the major forest companies in B.C. but also associations

that they’re part of and the smaller licensees as well.

As far as how the engagement process works under the

section 11

agreement….

Section 11 is a

section under the Species at Risk Act

federally, and that allows for a process to unfold and to be transparent

around herd planning. We’ve undertaken that work. The

section 11

agreement with the federal agreement was only signed in February, so we

began the herd planning work, and then COVID-19 hit, especially in

mid-March. With First Nations, that has had a significant impact in

their resources and ability to engage.

Within the

section 11 agreement, it’s clearly outlined that First

Nations have an important role to play with the local knowledge that

they have of the herds in their areas. But it’s also important to know,

in the

section 11 agreement, that industry has also got a very important

role to play in how we arrive at herd plans for these caribou

populations. So we regularly touch base with industry in regards to

that.

We’ll be re-engaging more vigorously in the herd planning come the

fall, dependent, of course, on how we’re doing with the COVID-19

pandemic.

J. Rustad: Well, I’m happy to hear that all groups are being engaged,

including industry. It’s a shame that industry wasn’t engaged until the

deal was done already in the Peace country. But that’s a debate for

another issue, I suppose.

[9:55 a.m.]

Of course, there are other potential herd areas, potential habitat

areas. There are some areas, for example, where there are no caribou at

all that have potential habitat that have been defined as desired to

protect for the future of potential caribou herds.

Also, noting the Telkwa herd, the areas in there, there’s some

discussion around potential protection measures in those areas as well.

I’m wondering if the minister can confirm that areas that currently do

not have caribou herds or areas such as the Telkwa area are also being

considered for land protection measures?

Hon. D. Donaldson: To the member: thank you for the question more specific to an area

we both share, almost. We have a boundary quite close to the Telkwa

herd.

First I’ll talk about areas in the province that currently do not

have caribou that previously had caribou, where the herds have recently

become extirpated. It’s taken a long time for that to happen, but

unfortunately, that has happened.

In those areas, they are covered by the

section 11 agreement.

Under that agreement, there’s a joint science committee, federally and

provincially. We have scientists from both our province and the federal

government sitting on that. They are conducting an analysis around how

climate change will impact the habitat that has been set aside in those

areas where the herds are extirpated.

The question they’re addressing and considering is: is it possible

to recover the habitat, in light of climate change, that supports

caribou? That’s work that’s ongoing, and obviously, the answers to those

questions will be the basis of decision-making about whether to continue

protection in those areas or whether, due to climate change, we’ll never

be able to recover the habitat that’s required for caribou populations

in those areas.

It’s important to note that in the meantime, because of the

extirpation, access for winter-mobilized vehicles has temporarily been

reinstated in those areas. That’s an action we’ve been taking in the

meantime.

As far as the Telkwa herd is concerned, there’s no additional

protection being considered at this time for that herd. Right now the

protection of the caribou habitat for the Telkwa herd covers 90 percent

of their core habitat. Also important to note that even though 90

percent of that core habitat is protected for caribou, 70 percent of it

is disturbed. So it reinforces and re-emphasizes the restoration work

that needs to occur.

[10:00 a.m.]

J. Rustad: The reason for asking the questions about that is….

The next topic I want to go on to, which is talking about old

growth, is…. Obviously, over the years, our timber-harvesting land base

has been reduced, with decisions made for a variety of reasons — habitat

protection being one of them, environmental protections, protection of

old growth, etc. — that have continually reduced the area which

contributes to our timber-harvesting land base.

Right now, of course, there’s a significant effort by many groups

to protect additional old growth on the coast in particular, but really,

across the province, forests that are considered old growth. The

minister has a committee, I believe, or has asked for a report. My

understanding is that initial report might already be done for the

minister.

Looking at the issue of old growth, can the minister confirm that

there will be no additional loss of area contributing to the

timber-harvesting land base through changes that he may be considering

to old growth management?

Hon. D. Donaldson: I welcome a discussion around old growth. I’m looking forward to

it in these estimates debates.

Yes, what the member is referring to is our old growth strategic

review panel that was appointed in the fall of last year or so. Al

Gorley and Garry Merkel — very well respected within the forestry

industry and with those who have interests in the forests — were the

panel members. They undertook four months of very in-depth consultation

and public engagement. I believe they visited 45 communities, had

thousands of submissions to an online survey, as well as more thorough

submissions, canvassed academics and reviewed over 400 papers, many of

them peer-reviewed.

They have worked and amalgamated all the information that they

received into a report, and yes, we received it in government in early

May. We’ve been reviewing it and plan to release that report very soon.

With that, we will be announcing an engagement process on the

recommendations that are in the report.

We convened the panel and convened the review because it was

apparent that there were differing views and very strong differing views

on the management of old growth in B.C., and our policies, our

decisions, around that hadn’t been reviewed in a very long time. We

wanted to make sure that any future decisions were based on this kind of

strategic review.

[10:05 a.m.]

As the terms of reference stated, the first step is a

government-to-government engagement consultation with First Nations

before any decisions are made on the recommendations in the report,

which I said, once again, will be released in the near

future.

I’m not going to unilaterally make any declarations until we

fulfil our obligations and our very clear obligations around

reconciliation with First Nations. The first step in that will be a

government-to-government engagement with First Nations before taking any

action on the report.

J. Rustad: Just for some background information…. The minister can commit to

getting this to me in writing, or if he has the numbers available, he

can do this right away.

If the minister could provide information — I think this is likely

readily available on the ministry websites already — on the area that is

considered to be old-growth forests on Vancouver Island, the south coast

and the central coast, in those areas; the percentage of our forested

land that is old growth, or considered to be old growth, and the

categories; and the percentage of those areas, or that old growth, that

already has protection measures and will not see industrial activity. If

the minister could provide that information, that would be

helpful.

One of the things the minister had talked about, as well, is a

potential of redefining what old growth is. I’m wondering if the

minister could perhaps shed a little bit more light into what he meant

by potentially redefining the definition of what old growth

is?

Hon. D. Donaldson: We do have some numbers for the member. We can also supply them in

writing, because perhaps he’s not able to write as fast as I speak.

Also, we know that they’ll be recorded in Hansard , but we can

provide them in writing as well.

[10:10 a.m.]

Old growth is generally defined as trees over 250 years old on the

coast and over 140 years old in the Interior. Based on those

definitions, in the province, about 57 million hectares, or 60 percent

of B.C.’s 95 million hectares of land, is forested. That’s how much is

forested. About 13.7 million hectares, or 23 percent, of forested lands

are old forest, depending on those two

definitions. Of that, about 3.75

million hectares, or 27 percent, of old forested lands may be

harvested.

The member had some questions specifically about Vancouver Island

and the coast. The west coast region — which includes Vancouver Island,

the entire Great Bear Rainforest and Haida Gwaii — has about 7.55

million hectares of forested area, with 3.15 million hectares, or 42

percent, consisting of old growth. And 33 percent of the west coast

region is protected or reserved. So that’s 1.27 million hectares of old

growth plus 1.22 million hectares of non-old-growth forest being

recruited for future old growth.

Vancouver Island is comprised of 73 percent Crown land and 27

percent private land. And 24 percent of the Crown forest is protected or

reserved. That includes 17 percent of old forest and 7 percent of

non–old forest. So 810,000 hectares, or 39 percent, of Vancouver

Island’s Crown forest lands are old-growth forests, nearly half of which

are protected or reserved. That would constitute 344,000 hectares.

There’s a whole array of numbers.

As far as the member’s question about redefining what old growth

is, I have not considered that. I am supportive of the generally defined

as trees over 250 years old on the coast and 140 years old in the

Interior. Of course that’s dependent on site specifics, but that’s the

general definition, and that’s the definition that I am supportive

of.

Perhaps the member was alluding to comments around defining what

the actual timber-harvesting land base is, as far as old growth and how

much is protected. There have been various scenarios around that

presented, but I have presented him with the scenario that we have as a

ministry and as a government.

J. Rustad: It was just a comment that I had picked up on that I thought was

attributed to the minister with regards to that definition. But that’s

fine.

One last question on old growth that I think is an important

question to get on the record. There has been a lot of interest,

obviously, in the report that the ministry has done and the engagement

that will be happening, obviously, as the minister just talked about,

with First Nations. Then, of course, what comes after that in terms of

the recommendations.

There is a movement afoot by many individuals asking for a

moratorium on any harvesting in old-growth areas until such a time as

that report is released and decisions are made by the government. Is the

minister considering a moratorium on any old-growth harvesting until

such time…? Well, a short-term moratorium on old-growth harvesting?

Maybe I’ll just leave it at that.

[10:15 a.m.]

Hon. D. Donaldson: Again, I believe that the member might have inadvertently

described the report as a government report. It was a report conducted

by an independent panel, two well-respected individuals in the forest

sector, and there was no government influence over how they conducted

their business or what their conclusions or recommendations were in the

final report.

I have never used, and we’ve never used as a government, the word

“moratorium.”

I would have to reinforce what I said in an earlier answer that

before any actions are taken, we will…. We have committed and we will

undertake government-to-government discussions with First Nations, many

of whom have interests in the forest sector. Before any actions are

taken, we’ve committed to a full engagement with those groups that have

an interest in the forests, such as industry, such as labour, such as

communities and such as environmental organizations.

J. Rustad: I think I’m going to move on to another topic at this point. In

particular, I’m curious about….

The minister and the Premier have on numerous occasions talked

about cross-laminated timber, mass timber construction in B.C. They’ve

held out the examples of the rebuild of the Royal B.C. Museum and, I

believe, the Royal Jubilee Hospital. Or is it St. Paul’s? I can’t

remember. It might have been St. Paul’s that the member had talked about

in terms of the desire to utilize these mass timbers as part of those

constructions.

Can the minister confirm if there are any other projects that

government is considering for the utilization of mass timbers or

structural laminate, along the lines that the ministry has been

promoting?

[10:20 a.m.]

Hon. D. Donaldson: To the member, yeah, a very exciting topic — the focus that we

have placed on mass timber engineered wood products. The background to

that is to try to get more value out of the timber that’s been harvested

in the province on the timber-harvesting land base. “Value over volume”

has been a phrase that we’ve been using a lot, and it’s true.

As the member well knows from the area in which he lives, the

annual allowable cut is decreasing because the mountain pine beetle

infestation has now run its course, and the merchantable timber has

largely been extracted. We’re dropping back to pre-mountain-pine-beetle

harvest levels, so in order to extract the highest value out of the

publicly held resource, we need to focus and try to focus industry on

producing higher-value products. One way we can do that — there are many

ways — as the member pointed out, is to display and showcase the use of

mass timber products in public infrastructure projects, especially

public buildings.

He mentions the renewed rebuild of St. Paul’s Hospital and the

Royal Museum of B.C. Yes, those are two projects that we have discussed

publicly and that will be highlighted. There are other projects where

we’re turning our attention. Part of that is that the parliamentary

secretary for this ministry has been appointed to lead a new initiative,

advancing the engineered wood opportunity for B.C. mass timber products.

He received a new mandate in his letter of appointment from the Premier

just recently to do that.

Also, to show how seriously we’re taking this, we have established

a new assistant deputy minister role in the Ministry of Municipal

Affairs and Housing, and that position has just recently been filled.

The new position, the ADM, will be assembling to lead a cross-government

team. And that office, housed in that ministry, will partner with our

ministry and with the Ministry of Jobs, Economic Development and

Competitiveness, as well as the climate action secretariat.

I know there are a number of areas where our government has

undertaken a very strong capital project on public buildings. I know

that it holds a lot of promise, especially senior care facilities. That

office will be advancing all of those publicly built infrastructure

projects and have a close look at how we can incorporate mass timber

into it.

J. Rustad: We have seen one announcement by Kalesnikoff, with regards to

building one of those facilities out. We’ve got, I believe, Structurlam

that has one in British Columbia. With Structurlam, when they looked at

doing an expansion opportunity, of course, they went south of the border

and built a facility south of the border.

What does the minister see as the potential for more facilities

providing this kind of a product in British Columbia? Obviously, I mean,

I’m not asking you to speculate about corporate decisions as to where

and what they want to do. But, you know, for example, even with the

potential of expanded utilization of mass timber in British Columbia,

it’s probably estimated that Kalesnikoff’s plant could more than meet

just what is going to happen in British Columbia by itself.

[10:25 a.m.]

Doing more and getting more value out of timber is a good thing,

but the question becomes: what is the potential of that? Obviously,

there are a lot of challenges in our forest sector right across the

province, and it’s going to take more than just one initiative to be

able to drive the kind of value that’s going to be needed to create

those sector jobs. I’m just wondering about the minister’s thoughts

around what the potential is for more of those plants, other types of

plants and what initiatives the minister might have in mind to try to

encourage those kinds of investments coming here in British

Columbia.

Hon. D. Donaldson: The member mentioned a couple of companies. I didn’t want to leave

StructureCraft off the list, which is another company producing mass

timber products right now in B.C.

Obviously, the market, domestically in B.C., is a limited market,

even though we are intent on a $20 billion spend on public

infrastructure projects in the next three years. There is a limit to

that market when it comes to mass timber. What we are doing and intend

to do is showcase the great use of mass timber in public infrastructure

projects and make sure that the world knows and other jurisdictions know

that we can produce these products and use them economically within

public infrastructure buildings.

The other things we can do, though, and what we are doing, are to

facilitate — that’s in the member’s words — and to amend regulations to

encourage the use of mass timber. A great example of that is we led

Canada in the building code amendments to allow tall buildings to be

constructed out of mass timber products. That required a lot of research

and increasing the comfort level of builders and developers around the

safety aspect of building with mass timber.

[10:30 a.m.]

In previous examples…. Brock Commons, for instance, required

specific permits just for that site. But by changing and being a leader

in building regulations now, that specific requirement is no longer in

place. As a result, we’ve seen a number of private developers creating

mass timber–supported buildings. On the North Shore and in Langford,

there are a couple of examples of apartment buildings going up. That is

how we can support the private sector in creating the market.

We also have undertaken research initiatives with FPInnovations on

the use of mass timber. That’s another way we can support the

development of the sector. Also, through Advanced Education, Skills and

Training, the workforce that’s needed, because creating a large, tall

timber structure, mass timber structure, requires a different skill set

than a typical carpentry and engineering in traditional buildings. We

have a number of ways to facilitate it.

The member is right. The market for the use of the material in

public buildings in B.C. is limited. We want to capture more of it. But

it is limited. So we turn our attention towards how we can support the

use of this lumber, this material, in the private sector.

I just want to finish off by saying that CleanBC, our plan and our

actions to reduce greenhouse gas emissions, is another way that we are

encouraging the use of mass timber products. It’s storage of carbon over

the long term, and, of course, the forests we grow to support that

product sequester carbon as well. So not just the storage of carbon in

wood products but the replacement of higher greenhouse-gas-emitting

materials and by-wood is something that really resonates, especially

with the younger demographics in B.C. and across the world. Across the

world, we’re seeing an increase in markets, and we want a share of that

as well.

J. Rustad: I’m happy to see the government is continuing the previous

government’s wood-first initiative with many of these things. Obviously,

that’s an important piece of what has been going on in the

province.

I want to move to softwood lumber just for a few moments. We lost

a case. The challenge that we have goes on — the legal challenges, the

legal fight, still going on that Canada has with the United States.

There have been some attempts by other jurisdictions in Canada to try to

form some coalitions, try to build support.

Could the minister detail the efforts that the British Columbia

government is taking to help build coalitions, to help to build support

for ending this softwood lumber dispute and for moving forward B.C.’s

position?

[10:35 a.m.]

Hon. D. Donaldson: This is a topic that’s very front and centre within the ministry I

represent. The member might know that my current deputy minister was a

lead on this file when he was outside of government, before we recruited

him into the ministry, so has a long history and a very deep

understanding of the topic.

We disagreed with the NAFTA injury panel final report — strongly

disagreed. That report and that finding that the member referenced is

only one piece in the ongoing softwood lumber dispute, and we are

continuing to aggressively pursue litigation on all of the fronts that

are available with our legal team in Washington. And that’s in

collaboration, in cooperation with the industry here in B.C. and with

the federal government.

As far as efforts to support our position, and when it comes to

the federal government, within this year alone, I’ve had conversations

with Deputy Prime Minister Chrystia Freeland, who, under her new role,

still carries the softwood lumber file; with the Minister of Natural

Resources, Seamus O’Regan, who is my direct counterpart in the federal

government; and with Minister Mary Ng, the Trade Minister

federally.

I’ve expressed the strong need for continued federal assistance to

support our workers, not just for our efforts in Washington, with the

United States on the softwood lumber disagreement, but also the need to

support workers and communities through the difficult time that we’re

facing with the softwood lumber tariffs.

J. Rustad: I’m going to move on from softwood. Softwood, actually, deserves a

much longer discussion, but given that there is so much litigation work

going on, I’m not sure we could get into too many more details without

it being just very superficial answers, and I don’t know if that would

be a useful expenditure of our time here in estimates.

From that perspective…. Not to diminish the importance of the

softwood lumber file and the impact that it’s having, certainly on our

forest sector and our competitiveness of our forest sector, but there

are a couple of other topics I want to try to touch on here this

morning, for sure. I want to talk about…. The ministry has been

undertaking a review of the private managed forest land. My

understanding is that review is, I believe, complete. It is in to the

ministry.

Could the minister provide me with some details as to when that

report could be expected, what they have heard from that review, and

when the sector may be able to anticipate any kind of recommendations or

action by this government?

[10:40 a.m.]

Hon. D. Donaldson: First off, thanks to the member around his comments on the

softwood lumber file. I think he used the word “superficial.” I know

that he wasn’t depicting my answers as superficial, but that we would

have to only skim the surface because of potential implications on the

legal case and that the U.S. Department of Commerce and interests in the

United States follow our proceedings here quite closely. I appreciate

that he’s not pursuing that topic, because of that, in any great

depth.

Private managed forest lands. Yes. We launched a review of the

private managed forest land program as a result of concerns that had

been forwarded to our ministry from the public as well from members of

the private forest managed land community. It hadn’t been looked at in a

long time, this topic, so we have completed phase 1, which was a wide

public consultation process on this topic of private managed forest

lands. We have summarized and brought together all of the submissions in

a what-we-heard document that was posted publicly on the ministry

website, the government website.

The next phase will be the development of an issues

summary and

recommendations. That work is underway within the ministry. Once that’s

completed, we’ll be taking that out for a targeted engagement with the

members of the private managed forest land association and a targeted

engagement with identified public groups that are interested in this

topic. The final report is expected in November of 2020, so November of

this year.

J. Rustad: One of the things in that report that kind of stood out to me was

the number of respondents who disagreed that the regulatory framework

was effective in supporting achieving the management objectives. That

raises significant questions, obviously, for the sector, as well as for

the public, about what options may be considered.

[10:45 a.m.]

Now, obviously, there’s a process going on and a final report that

will be coming out — as the minister, I think, has just said — in

November. I’m curious, though, what options government could consider

with regards to addressing that concern or if the minister has anything

more specific that he’d like to add in terms of how that issue may be

able to be managed.

Hon. D. Donaldson: Yes, the member is correct. Reflected in the What We

Heard document was that people from a number of different

perspectives didn’t necessarily agree that the current regulatory

framework, which we inherited, was the best framework for the management

of private forest lands.

It’s an issue that is of interest, of course, and is also complex.

This is private land, and there are elements of provincial legislation

that apply to that private land — things like forest practices or

impacts to water quality that those practices might cause. We’ve heard

from a number of communities, especially at the Union of B.C.

Municipalities convention last year and the year before, about concerns

about their watersheds.

Generally, I won’t presuppose the development of the issues

summary and recommendations, because they haven’t been completed yet.

But I think it’s clear from what the member has seen in the What We

Heard document that ways to encourage more participation and

membership by those who have private managed forest lands in the Private

Managed Forest Land Council is important, because that’s a

self-regulating body for those who have private managed forest land to

set forest practice standards and enforce compliance and those types of

issues that the public are interested in.

The more we can encourage people to join that council and be

members of the association, the better. I think that’s part of the

thrust of what the What We Heard document outlined.

J. Rustad: There’s so much detail to go into through this ministry. There are

a lot of topics that we need to get covered off, so I’m going to

actually move on from that report to another report that I think was

pretty critical for a lot of logging contractors, which is the

contractor sustainability report and issues associated with that. I know

the minister took some steps and was engaged, obviously, with the TLA on

this report.

There are many recommendations in the report. Does the minister

plan to implement any further recommendations to help contractors be

more sustainable?

[10:50 a.m.]

Obviously, through the strikes, through B.C.’s longest forestry

strike on the Island, through the downtime of various companies,

particularly Mosaic, but really through the continued curtailments and

other issues throughout the province that have happened over the last

number of years, contractors are really squeezed and have big concerns.

What steps is the minister looking at to further contractor

sustainability and the recommendations from the report?

Hon. D. Donaldson: I live in a community of logging contractors. I know the member

does as well.

In numerous meetings I’ve had with not just the Truck Loggers

Association but the Interior Logging Association and the North West

Loggers Association, they make a good point — that if it isn’t for the

people doing the work with the iron in the forests, there are no logs

coming into the mills, and those jobs and the communities depend on

that. So the health of that sector is extremely important, and the

health of the contracting sector to the overall industry.

We had the contractor sustainability review. We launched it in

2017, and in 2019, recommendations were endorsed — January of 2019.

Those January 2019 recommendations have been agreed to by the parties to

improve transparency between parties on the rate models; to improve work

predictability, so around scheduling, especially, and looking out ahead

around the work that contractors can depend on; to establish a timely

and effective arbitration process; to have mandatory data collection by

the contractors, as well as industry; and to develop a best practices

guide. Those are all elements of the contractor sustainability review

that have been agreed upon between the parties.

The plan, in answer to the member’s question, is to move forward

with amendments to the act, through regulation, in 2020. Before the end

of the year, we’ll have the regulations in place, and that’s very good

news. The contractor community is looking forward to that.

[10:55 a.m.]

Just to finally do, I guess, an example of our commitment to and

understanding of how important the contractor community is, the member

will recall that we established…. He mentioned a long labour dispute on

the coast.

In response to requests by the Truck Logging Association and

others, we established the contractor stabilization trust, the Coast

Logging Equipment Support Trust. That was for contractors who were

potentially going to lose assets to the bank because of the ongoing

labour dispute, and it set up a trust in order for them to not lose

those assets and be in a position to work again and respond quickly when

the markets and the labour dispute turned around, which it has, I’m

happy to say.

J. Rustad: I mean, that, obviously, was a very challenging time for the

sector on the coast. It is a shame that government didn’t step in

earlier to help resolve that issue. The pain, quite frankly, that has

been undertaken within some of the communities, particularly on the

north Island, was unprecedented, in many ways, from the results of a

strike.

Obviously, permanent closures and other types of things would have

similar types of effects. But I know the community is still reeling, and

it will take a long time for the folks up there to be able to

recover.

Sustainability, in terms of the contractors, is critical. Often,

they feel left out and they feel squeezed between various other parties,

various other interests, that are associated with this. So it’s

important to raise the topic and to see that there is still some

progress being made.

I know there’s more that they would like, which I’m sure they will

adequately bring forward to government, as they do to opposition, in

terms of their requests and components that they want to do. But it

leads into the next topic, which is really the overall cost structure in

British Columbia.

Contractors pay one piece of that, in terms of their component of

harvesting and the competitiveness, and the fact that they need rates

that are sustainable and can support their ability to be able to earn a

living and pay off their equipment. But British Columbia, obviously, has

a cost structure problem, in terms of its overall structure.

Maybe I could start just by asking the minister: how does British

Columbia compare to other jurisdictions in North America and in the

world, in terms of our competitiveness in our cost structure for, I

guess you could say, the net wood costs associated with our forest

sector?

[11:00 a.m.]

Hon. D. Donaldson: I’m happy to discuss this topic.

To be succinct, in the Interior sector of the province, we’re

about in the middle of the pack, compared to other jurisdictions, as far

as pricing and competitiveness goes. On the coast, it’s one of the more

expensive jurisdictions compared to our competitors. That’s why we’ve

undertaken the cost-driver initiative with industry over the last six

months, and also the Pulp and Paper Task Force, to look at where we can

mutually agree on costs that can be addressed while still deriving the

revenue that should be derived from a publicly held asset in the

province: the forests of B.C.

I imagine the member might be wanting to discuss stumpage. We’ve

actually had quite a discussion, I believe, in the last year, in

question period and elsewhere, on stumpage. He knows that we will not

politically intervene in the stumpage system, because of the

implications that that would have on the softwood lumber disagreement,

and we believe in the integrity of the market pricing system that was

established under his government.

It’s just interesting to note, to finish off this part of the

answer, how the market pricing system has reflected that the cost of

logs and stumpage have decreased year to year — on July 1 on the coast

by 18 percent and, year to year, by approximately 35 percent through the

Interior. There’s that, reflecting the previous three months’

activities. That helps when it comes to the economic viability of many

of the forest activities in the province.

J. Rustad: I’m not quite sure. I suppose the minister and I are looking at

different information. Out of the 29 jurisdictions that produce forestry

products, British Columbia basically ranks last overall when it comes to

cost structure.

The question I’ve got for the minister is…. Since the minister has

been in power, now for around 3½ years, what we have seen is, in the

Interior, an increase of 33 percent in the cost and, on the coast, an

increase of 69 percent in the cost. This is from the Forest Economic

Advisors report. Could the minister explain what factors have happened

within this government that have led to those increases in cost

structure in British Columbia?

[11:05 a.m.]

Hon. D. Donaldson: Again, just to allude to the previous answer and the contention by

the member that we’re closer to or at the bottom of the competitiveness

spectrum, we don’t agree with that assertion. With the numbers we have,

it puts us in the Interior, as I said, around the middle of the pack

with our competitors in jurisdictions around the world. On the coast,

yes, we’re one of the higher-cost jurisdictions.

In relation to the question at hand, some of the factors that have

resulted in increased log costs and costs of operating are factors that

the member alluded to in his previous questions. For instance, on the

coast, the labour disagreement between Western Forest Products and the

United Steelworkers, combined with the shutting down by Mosaic of their

forestry operations, really resulted in a decrease in volume available

to the mills. It’s basic economics: when there’s scarcity on one hand

and demand on the other, prices go up. Those two events led to the

increase in log costs, because more facilities were bidding on less

available volume.

As far as the Interior goes, the member refers to the number of

years we’ve been in government. He will no doubt recall that when we

inherited the forestry file from the previous government, it was in the

midst of the worst wildfire season in the history of the province —

2017, outdone by the 2018 wildfire season. Millions of hectares together

in those two years were consumed by wildfire. That resulted in the

volume being harvested decreasing.

That was compounded by the fact that the pine beetle salvage wood

was no longer available to mills and licensees that were looking for

that wood. As a result, they’ve had to go farther to acquire harvesting

for their facilities and go farther up mountainsides. That increases

costs as well. All those factors together have created higher

competition for logs and, therefore, the bidding up of log prices by

those who are looking for wood for their mills.

[11:10 a.m.]

As I said before, we’re aware of this situation. We’re aware of

the scarcity. We’re working with industry on other ways that we can

assist in reducing costs while, at the same time, ensuring that the

public gets the fair return for a publicly held natural resource, the

forests of B.C.

J. Rustad: Well, what I found very curious in the answer from the minister

was what he didn’t say. That was the myriad government policies,

legislation and approaches that this government has taken to driving up

costs. He pointed at everything else that went on and did not address

one of the core issues, which is the added layers of cost and the

challenge of operating in the jurisdiction of British

Columbia.

When you look at the similar demand in cost structures, at some of

the things right across all other jurisdictions…. It wasn’t isolated to

British Columbia, what the minister talked about. There is one big

difference in British Columbia compared to those other jurisdictions,

and that is policy challenges.

Now, I know industry has engaged the minister and the ministry

directly. For example, on the coast, they were looking for a $30

reduction in the cost structure, excluding stumpage. They were looking

for that because costs have continued to be added on to the point where

the sector is not competitive. In the interior, they’re looking for a

similar type of reduction, not at the same level but a comparable

reduction, and engaging with the ministry on these cost

reductions.

Can the minister provide some information on what components he is

considering, in that work with industry, to reduce B.C.’s cost structure

and to make us more competitive, excluding stumpage? We’ll get to

stumpage in a little bit.

[11:15 a.m.]

Hon. D. Donaldson: I want to make sure it’s clear, and clearly stated, that we have

done nothing policy-wise to add to the cost of delivered wood. In fact,

we’re taking this topic on with industry.

We’ve been engaged with them since January on a cost-driver

process to look at where we can mutually agree to reduce costs. The

three main topics that we’ve been able to arrive at, in consensus with

industry, are around concerns and ideas and actions around utilization,

around cruising and scaling design and around cutting permit

administration.

I want to make sure the member knows there are no quick fixes or

easy fixes. We are taking this on, hand in hand, with industry around

how we can help reduce log costs. That’s through the systems that are

currently in place.

We’ve taken measures since January. We took measures, for

instance, to streamline the scaling process around pulp logs and sawlogs

so that there is an easier ability to do a one-pass system, especially

on the coast, and to remove and harvest pulp and sawlogs at the same

time off the land base, which is more cost-effective in providing

furnish to pulp mills.

We’ve adjusted the fibre recovery zones that we put in place based

on economic data that we’ve received from companies. We’ve delayed and

deferred the variable fee-in-lieu regulation that we have put in place,

in understanding the situation that’s being faced by companies, the

uncertainty, especially with COVID and not being able to collect data

off the BCTS sale. [Audio interrupted] had a variable fee-in-lieu in

place. These are actions we’re taking to address the topic that the

member has raised.

I want to point out the reality of the situation. The spot lumber

price today was $635 per 1,000 board feet. This is what really enables

companies to decide whether they’re economically viable.

Because of actions that we’ve been taking and because of global

markets, this week West Fraser reported an operating profit, at its most

recent quarter, that was more than six times higher than the previous

three months. West Fraser Timber, on the second quarter, reported

earnings of $83 million, more than six times the $13 million that they

reported a quarter earlier.

West Timber and other companies are turning a profit. Their share

prices have rebounded from the decline that they saw immediately due to

COVID, in mid-March, back to the levels that were apparent and were in

place at the beginning of the year.

[11:20 a.m.]

To address the concerns that the member raised about log costs and

attempts to reduce that…. I mentioned three areas that we’re in

agreement with industry to focus on. The CIBC capital markets report

from this week estimates — it’s not spot price — for the next year, SPF

prices of $415 per 1,000 board feet. So at that level, it is anticipated

that most licensees should be able to turn a profit.

Of course, what we are also concerned about is ensuring that the

forests of B.C. are managed first and foremost for communities and

workers and return a revenue to the province that holds this natural

resource on behalf of the people of B.C.

J. Rustad: I now understand the frustration of forest companies across the

province. With the minister’s answer, it’s hard to know just where to go

on this topic. Maybe I should just ask a simple question.

When you look at mill curtailments, not closures because of

reduced fibre supply…. When you look at curtailments, when you look at

the downtime that has been taken by mills in British Columbia compared

to every other jurisdiction in North America, why is it that the

companies are having such a difficult time staying open here when they

aren’t everywhere else?

We’re looking at a situation where, whenever there is a blip in

prices, B.C. goes down first now. It’s not because we’re in the middle

of the pack in prices. It’s not because of variables on trade and other

things. It’s because we are not as competitive as other

jurisdictions.

Perhaps the minister could explain why so many mills took

curtailments in British Columbia compared to all other jurisdictions.

I’ll just add to that, because the minister added the financial reports

for West Fraser. When you look at the financial reports of both West

Fraser and Canfor, in particular, it’s well worth noting where the

revenue, where the profits are coming from, because the majority of

those profits are from their operations outside of British Columbia, not

from operations within British Columbia.

Perhaps the minister could explain why British Columbia’s forest

sector has taken so much curtailment and downtime compared to other

jurisdictions that we compete with, particularly in North

America.

[11:25 a.m.]

Hon. D. Donaldson: We have to ensure that it’s on the record that what we’re facing

today in the forest sector, especially in the Interior, is a legacy of

the previous government ignoring what they well knew was on the

horizon.

There was a 2013 report by industry experts predicting that up to

13 mills could be shutting down because of the pine beetle coming to an

end. The member himself admitted in 2014 that up to eight mills could be

shutting down. In 2015, the then government that he was a member of

commissioned a study and received a report that communities would be

facing mill shutdowns across the Interior.

The response was that absolutely nothing was done to prepare the

communities for this issue and to prepare that industry was going to be

facing these kinds of circumstances of less fibre and log shortages. The

legacy that we’re faced with today is what I focus on, and I focus on

workers and communities. I focus on the fact that workers and

communities are suffering because the previous government didn’t address

what they knew was going to happen.

We are behind the eight ball. Can you imagine how far ahead we

would’ve been if the previous government had begun, at least, addressing

what they knew was going to happen back in 2015?

We’re intent on the focussing on communities and workers. That

entails supporting industry where we can as well. But under the

cost-driver initiative that we’ve been engaged with, with industry,

industry was bringing to the table reduction of stumpage rates and

subsidies.

The member may disagree, but we believe in market economics. Maybe

he doesn’t. I’m not sure. Maybe he agrees with industry — that they

should be subsidized and they should be recipients of unwarranted

advantage when it comes to stumpage rates. We believe in market

economics. We believe that that’s the best way to recoup the best

revenue possible from the forests and the best benefits for workers and

communities.

[11:30 a.m.]

We have worked on stumpage where it makes sense within our

stumpage system and it makes sense for our stumpage system to be more

reactive to market trends and to log cost trends. We’ve incorporated

that data, and that data influences the stumpage rate on a quarterly

basis now.

I just don’t agree with the narrative that the member seems to be

spinning — that we should be ignoring market forces and subsidizing and

propping up industry when it isn’t profitable.

As far as the industry confidence in how we are ap­proaching

forestry resources in B.C., I think no better statement can be made than

the fact that Interfor recently made the decision to invest $9 million

in a new kiln-drying facility in their Adams Lake facility. That will

mean more jobs and confidence in our management of the forest resource

for the public benefit.

J. Rustad: I have some words. Unfortunately, they’re unparliamentary. So I’ll

keep them to myself. I’d just remind the minister, through you, hon.

Chair, that this is estimates, not question period.

Having said that, the minister talks about what-ifs. “Boy, if only

something could have been done.” Yeah. You know what? If the government

of the 1990s had dealt with the pine beetle problem, we wouldn’t be in

this pickle to begin with. Perhaps let’s not go back that far. But we

will go back and look at some of the other issues that the minister has

raised.

Our government, when we were in power, did a tremendous amount to

prepare communities for the challenges through the beetle action

coalition work that was done; through the work that was done with NDIT,

the Northern Development Initiative Trust, the additional money that was

put in there; and through the efforts on mining and diversification

within communities. We did a tremendous amount. In addition, we had a

strategy to go out to the communities after the last election to engage

with those communities on the transition that was coming.

Of course, when the government came in, they did nothing. They

said: “Well, just blame the previous government. We won’t worry about

it.”

To the minister: you’re sitting in the chair that has to make

decisions. I asked you some very straightforward questions around

competitiveness, around asking why mills in our jurisdiction took

downtime. Not closures. And I didn’t talk about stumpage. Why our mills

took downtime when other jurisdictions didn’t.

There’s only one reason for that. For the private sector, when you

have business operations, when you look at your costs and you’re facing

challenges, the first thing you do is you bring down your highest cost

producers. You bring those down because you are reducing the amount of

losses that you have.

The second thing you do is you look at where you need to invest,

what jurisdictions you want to invest in to actually get a return. And

you don’t invest in the highest cost jurisdictions. You invest in the

places where you’re going to get the best return, which, unfortunately,

is not British Columbia.

The minister talks about a no better example than $9 million spent

on a new dry kiln. That is maintenance work to update and to keep

operations going. That is not a significant investment in the future in

production. There are significant mill replacements that are needed to

modernize, standardize the mills for the fibre supply that they’ve got

coming in that companies are not doing. They’re not making the

investments. Why? Because of the uncertainty, because of the cost

structure in this province.

The state of the forest sector in this province right now has

never been worse. It has never been worse in B.C.’s history. The only

time that would even compare was in the early 1980s, when we saw the

significant break of interest rates and the significant downturn that

happened.

You know, we’re going into lots of political rhetoric here. I do

want to get back to the actual questions in estimates. But fundamental

to what we have been talking about…. Whether it is our working forests,

softwood lumber, the reports that have been done or contractor

sustainability and many topics that we’re going to get into later in

these estimates discussions, a fundamental piece of this is to have a

jurisdiction where companies can operate, where they can support

communities and families and workers and be able to make investments

that are needed to carry forward with that sustainable, supportable

forest sector.

[11:35 a.m.]

Right now British Columbia has none of the underpinnings for the

forest sector. There is no confidence in the ability for supply. There

is no clarity. The cost structure is one of the highest in North

America. The costs have continued to pile on.

I asked the minister what things had been added on. The minister

said that they hadn’t done anything. Just reporting the components alone

— the changes to a professional alliance, the additional taxes, like the

increase in carbon tax and employer health tax and corporate taxes…. All

of these things add on to the cost structure, and those are all

decisions that this government has made that help to make our forest

sector uncompetitive.

We ventured into the world of a little bit of finger-pointing, and

I suspect that is partly because we’re approaching the noon hour and

there are people who are a little hungry, with regards to their

responses. But I’ll ask once again. The minister mentioned…. Sorry, I

won’t ask again because I don’t think I’ll get a different answer if I

ask again about why the mills curtailed more here than any other

jurisdiction.

I will ask this. When you look at capital investment in forestry

mills and forest producing facilities across the province, there has

been a dismal lack of investment in this province compared to other

jurisdictions. Companies are taking their money and investing pretty

much anywhere other than here.

Could the minister perhaps provide some insight as to what’s

needed in this province for a forest jurisdiction to be able to attract

the kind of investment, the capital investments, needed? Whether it be

secondary manufacturing, value-added manufacturing or investing in

primary manufacturing, what is it that this province needs to do to be

able to attract those dollars and to make us a jurisdiction that

companies want to invest in and want to invest in their employees and in

their communities?

Hon. D. Donaldson: I welcome this debate, because it really is a debate about

different perspectives. It’s a debate about…. I’m sorry the member

doesn’t appreciate me bringing up the reasons why we are where we are

and the actions that we’ve taken since becoming government, but it’s

part of the context.

The fact is that log supply has declined, especially in the

Interior, due to the beetle-kill wood not being available any longer.

Basic economics: when log supply decreases and there’s a demand, the

costs go up for those logs.

[11:40 a.m.]

I do have confidence. The member doesn’t seem to express

confidence in the forest sector. I have confidence in the forest sector.

I know that when the alignment of capacity and supply balances, then the

fact that we have the expertise and the skills in the forest harvesting,

in being able to create products that are in demand around the world,

will put us in good stead. That is why we are seeing the investment that

we have seen.

I think the member is painting a rather bleaker picture than…. The

reality is different. We’ve had $150 million in lumber manufacturing and

remanufacturing facility investment by the Langley-based San Group in

Port Alberni. We’ve had Coastland Wood Industries in Nanaimo invest $7

million to $8 million to build a barge dock facility in the Harmac pulp

site that allows them to be more efficient in their logistics around the

products they create.

In 2018, we saw Skeena Bioenergy invest $20 million in a pellet

plant beside their Skeena Sawmills facility in Terrace, and that plant

is now up and running. We’ve seen, as the member alluded to earlier,

Kalesnikoff Lumber announce and undertake a $35 million investment in

mass timber.

These are smart business people. These are people who understand

return on investment, and they’re putting their money where their mouth

is as far as backing up and supporting our forest management

initiatives. It’s not as if there is no investment in B.C. These are

significant investments. To downplay a $9 million investment by Interfor

in the Adams Lake mill that will mean a lot to the workers there around

their future jobs, as well as increasing the number of jobs, is just not

fair to the workers in Adams Lake and surrounding communities. So we are

working.

The member asked what we’re working on to ensure that this kind of

investment continues and that the forest sector remains viable and

important. Well, I’ve mentioned in the past, we’re encouraging value

over volume in the Interior by the different tools we have as a

government. We’re working on the supply side. That means the log supply

side, taking measures to improve fibre supply. An example of how that’s

turned out is the reopening of the Conifex mill in Mackenzie, where we

were able to ensure that they had enough of a fibre supply to reopen 160

direct jobs in Mackenzie. I know the people of Mackenzie are extremely

encouraged by that reopening.

We’re working on the cost side, as I already said, in conjunction

with industry on utilization, on cruising and scaling design and on

cutting permit administration. So these are what we’re focusing on. The

member brought up in a general sense our government’s approach. I would

say, in a general sense, our government’s approach is investing in rural

communities, investing in workers and people, investing in

infrastructure and the services that people in rural areas had seen

decreasing under the previous government.

We’re building schools. We’re building hospitals, a hospital in

the member’s own constituency in Fort St. James. We’re building housing

like it’s never been built before, because we know that rural

communities are the backbone of a rural economy that supports the rest

of the province.

J. Rustad: Well, we will agree to disagree with many of those statements that

the minister has just said.

[11:45 a.m.]

I do want to touch on stumpage. I mentioned earlier that some of

the cost structure issues are stumpage. I do know that a year ago, or

more than a year ago, the minister said they couldn’t adjust the

stumpage because of the worry of softwood lumber and the challenges

there. Here we are a year later. While the industry suffered through

challenges and issues associated with the lumber price spike of 2018

that carried over into 2019 for the stumpage issues, the minister, lo

and behold, has changed the stumpage system. It took a year. It took

more than a year, unfortunately, which, of course, was a big factor for

the crisis in the forest sector in 2019.

Now we’re in a situation where, if my understanding is correct,

instead of the stumpage being calculated once annually, with a 12-year

period with a six-month delay with three minor quarterly updates, we’re

now into a quarterly calculation, which is still based on the previous

year’s stumpage with only a three-month delay. It’s an improvement, but

obviously, we’re now in a situation where we’re seeing lumber prices

spiking again. They’re spiking up. As the minister has said, I think

it’s over 600 now. The minister previously stated that the average

lumber price is expected to drop back down into the low-400

range.

Clearly, we’re going to be, once again, in a situation where

stumpage is going to be…. The price spike from this year that’s going on

is going to have a negative impact on stumpage for potentially 15 months

out, as lumber prices come back down. That, quite frankly, will once

again create more challenges and has the potential to lead to more

curtailments.

Now, I’m obviously pleased that people are working, that everybody

is making hay with the spike-up that we currently have in lumber prices,

but I still have significant concerns about where stumpage will go as

that works through the system.

The question to the minister is: why did the minister not look at

monthly calculations of stumpage similar to what is happening in Alberta

so that we don’t end up having our sector potentially at risk through

more volatility in the lumber pricing?

[11:50 a.m.]

Hon. D. Donaldson: I’m pleased to be talking stumpage as we lead up to our lunch

break today and enjoyed the last 2½ hours of discussion and forwarding

of different ideas with my official opposition critic.

I just want to make it clear that the member’s statement was

incorrect. What he’s referring to is…. I said that we would not

intervene politically in our stumpage system because of the negative

consequences that would have in our ongoing legal dispute on the

softwood lumber front. In fact, that was supported by industry, by

people, by experts in forest economics. If we were seen to be

intervening politically in the stumpage system, the U.S. would

immediately slap on additional tariffs that would impact our ability to

export economically to that jurisdiction.

That’s the statement I made at the time, but I can agree with the

member that we wanted to address lag times to make our stumpage system

more responsive. The member well knows that, for instance, right now the

stumpage is low compared to the prices that lumber is getting on the

open market. Conversely, there are times when the stumpage is high

compared to the prices that lumber gets on the market.

We had — and I believe this is what he is referring to — looked at

lag times on the coast, and we were undertaking work for a year on that.

What we’ve been able to institute on the coast is more of a stumpage

model that’s lumber-based versus log-based, so it’s more responsive to

lumber prices than the previous model. That was work that was undertaken

for over a year in the ministry.

[11:55 a.m.]

On the Interior, we’ve been able to reduce the lag time between

when lumber prices go up and down. It’s true, as the member has stated,

that they’ve been very — not static, I guess I would say, in the last

couple of years. We’ve reduced that lag time by using a rolling model to

consider previous years’ log prices as the data is being collected by

B.C. Timber Sales versus solely relying on a one-year calculation date.

So those are things that have led to increasingly smoothing out stumpage

prices. In fact, that is what industry is looking for.

Industry has not requested going to a monthly stumpage model. The

feedback that we’ve received from industry is that would be much too

erratic for proper planning in their economic cycles and even in their

economic quarters. So by taking the measures we’ve taken, it has

smoothed out the more erratic shifts that industry was concerned about

and is responding to what industry is looking at as being the best model

for them on a quarterly basis.

As far as Alberta is concerned…. The member brought that up as an

example where monthly calculations occur. Again, the industry in B.C. is

not advocating for monthly calculations. But I want to point out that we

have just a magnitude of order of ecological diversity in our tree

species compared to Alberta. We have high value, for instance, Douglas

fir and western red cedar that Alberta doesn’t have. So we have a much

more complex baseline to create our stumpage system from.

The Alberta stumpage system works for Alberta because of the lack

of diversity they have. If you’re looking for comparison points between

the Alberta stumpage system and B.C.’s, you could look to the Peace area

where that part of B.C. is more ecologically similar, as far as tree

species are concerned, to Alberta. Our stumpage rates in the Peace

region are very, very similar to what the stumpage rates in Alberta

are.

To leave it off on a positive note, I can agree with the member’s

comments around having a closer look at lag time. We’ve done that in a

non-political way, and industry is satisfied that we’re going with our

quarterly rather than a monthly synopsis, which would cause further

difficulties for industry and their economic predictions.

The Chair: Noting the hour, Minister, I’d like to ask you to move the

motion.

Hon. D. Donaldson: Hon. Chair, I move that the committee rise and report progress on

the estimates of the Ministry of Forests, Lands, Natural Resource

Operations and Rural Development.

Motion approved.

The Chair: Thank you, Members. This committee now stands

adjourned.

The committee adjourned at 11:58 a.m.

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