B.C.’s forest companies are seeing their first test of the NDP government’s requirement to approve timber licence transfers, with a $60 million purchase of logging rights made available by the latest sawmill closure.
Canfor’s decision to close its Vavenby sawmill this week includes a deal to sell two licences in the Adams Lake area to Interfor, which owns the mill at Adams Lake. Interfor has applied to the B.C. forests ministry for the approval, required under legislation passed in May.
Interfor CEO Duncan Davies noted that the company spent $140 million modernizing Adams Lake in 2009, making it one of the most efficient in B.C. The companies are working with the province to maintain logging contractors and truckers in the region, as Vavenby’s closure affects 172 direct employees.
“This transaction materially enhances Adams Lake’s log supply and sets the stage for its future success in much the same way the investments made 10 years ago set the stage for its success over the last decade,” Davies said.
When the legislation was debated, B.C. Forests Minister Doug Donaldson warned the industry that its purpose was to reduce the concentration of Crown forest licences in B.C., and Indigenous community involvement in licence transfers will be mandatory.
Donaldson said the previous B.C. Liberal government’s changes in 2003 “artificially constructed an asset for companies, that being forest tenure, that they can and have traded.” He cited the timber supply transfer between Canfor and West Fraser in 2013 that saw mills close at Houston and Quesnel, as the artificially high timber cut to salvage beetle-killed pine began to wind down.
Premier John Horgan has said the big players in B.C. are working with the new rules, but “the ones that wanted to get out of town with a big bag of money weren’t happy about it.”
Kelowna-Mission MLA Steve Thomson, the previous forests minister, said the NDP government is interfering in business decisions and increased reporting, based on a so-far undefined public interest.
“The processing facility operators are really going to be busy in a forest of forms and reports,” Thomson told the legislature.
West Fraser has announced one-week shutdowns this month at its mills in Quesnel, Williams Lake, Smithers and Fraser Lake, reducing capacity by 30 million board feet. It also cited high log cost and low prices, which have been aggravated by continued import duties imposed by the U.S.
Interfor’s Adams Lake lumber mill is at Chase, north of Salmon Arm. Canfor’s Vavenby operation is further north, near Clearwater and east of the Cariboo region, which has seen its own mill closures and tenure swaps.
Interfor announced in late May it is extending its reduced operating days at three B.C. Interior mills, at Castlegar, Grand Forks and Adams Lake. The curtailment is expected to reduce production by 20 million board feet during June, from mills with a total annual capacity of 750 million board feet.
The reduction was implemented in May, as Interfor joined other B.C. producers in adjusting for low lumber prices and high log costs. Canfor cited the same factors in its announcement to workers that Vavenby is closing this week.
On the B.C. coast, Surrey-based Teal Jones Group announced May 31 that its second-growth logging at Honeymoon Bay on Vancouver Island is shut down due to “excessive stumpage rates” charged by the B.C. government.
That will soon mean lost mill time and employment at Teal Jones’ mills in Surrey, where a shortage of logs has already resulted in the loss of four weeks of run time so far in 2019.
Teal Jones said in a statement it expects that when the Horgan government’s coastal revitalization plan reduces log exports, stumpage rates will be adjusted to reflect domestic milling.
“However, the changes to the stumpage system to reflect this reality will not come into place until 2020,” Teal Jones said. “In the interim, the mounting losses are requiring the company to curtail the second-growth harvesting operations.”