Canada: B.C. Government Redesigns Forest Policy

On March 26, 2003, the B.C. Minister of Forests announced a "forestry revitalization plan" aimed at curing the last decade of difficulties experienced by B.C.’s forest sector, which have caused significant job decline, major loss of Crown revenues, 27 permanent mill closures, poor return on corporate capital employed and a lack of new investment. The Government’s strategy to revitalize the forest sector includes a new "results-based" Forest Practices Code (see our December 2002 issue), the creation of a "working forest" to stabilize the land base for forest activities, and the "revitalization plan". This third component consists of three pieces of legislation (the "New Acts"): the Forestry Revitalization Act (which became law on March 31, 2003); the Forest Statutes Amendment Act, 2003; and the Forest (Revitalization) Amendment Act, 2003 (the latter two Amendment Acts are at first reading and thus not yet passed as of April 7, 2003). According to the Minister, the New Acts set the stage to provide "new forest sector opportunities, open up new markets for B.C.’s forest products and ensure sustainable forest practices". The revitalization plan consists of nine specific elements, ranging from tinkering with regulatory controls to dramatic shifts in entitlements to forest resources.

This article highlights the dramatic shifts as set out in the New Acts and discusses the proposed working forest. Many of the details on the implementation of these changes are expected by way of regulations in the next 6 months.

In seven short pages, the Forestry Revitalization Act does two significant things. It automatically reduces the allowable annual cut (the "AAC") of certain listed licences by 20% resulting in a retrieval by the Government of about 8 million m³ of wood. It also establishes a $275 million fund to provide for compensation and transitional assistance resulting from these reductions.

These listed licences involve 27 companies, mostly the major licencees such as Canfor, the Doman Group, Interfor, Riverside, Slocan, West Fraser and Weyerhaeuser. The mechanics of the reallocation are not established in the Act other than to state that, within the 3 years after March 31, 2003, the Minister, by written order, must reduce the AAC "in equal or unequal portions" to one or more grouped licenses. The Government has indicated that it will work with affected companies to identify the specific areas to be returned to the Crown. The Government has set aside one-time funding of $200 million and $75 million, respectively, to compensate affected companies and their workers and communities.

One of the key consequences of the 20% AAC reduction is the Government’s stated intention that about 8% of this newly available "pot" of timber (or about 5.5 million m³ of AAC) will be available to accommodate First Nations’ interests. This is a much needed measure given B.C.’s situation with unresolved aboriginal land claims. In its press release announcing the revitalization package, the Government commented that this 8% share of the AAC equates to the proportion of First Nations people in the rural population. The Government also noted that it will share $9.5 million in forest revenues with First Nations in the next three years. The New Acts create the avenues for these commitments to occur.

Another consequence of the available timber being created by the 20% AAC retrieval is to allow for the introduction of a new market-based stumpage pricing system. The New Acts provide the ability for auctioning about 20% of the AAC through a program called "B.C. Timber Sales". Many of the current regulatory controls that have formed the foundation of B.C.’s forest economy, including dictated rates of cut, required destinations for timber manufacturing (the "appurtenancy rule") and Ministerial consent for certain transactions, are being altered or eliminated. However, one key element has not been touched—log exports from Crown land will continue to be restricted. It is expected that these market- driven reforms may also facilitate a negotiated resolution of the U.S./Canada softwood lumber dispute.

The concept of a "Working Forest", a new land designation that will afford legal protection to the land base supporting the use of forest resources, has been set out in a Government discussion paper issued in January. It is proposed that about 45 million hectares of provincial Crown forest land be designated as Working Forest. The proposed legislative framework will authorize Cabinet to establish objectives and permitted uses for the Working Forest, including specific timber targets and zones for intensive or enhanced forest activities; and providing a "consistent and transparent" administrative decision-making process in dealing with changes or removals to this land base.

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