Fix stumpage fee system, put B.C. companies on equal footing

The spring forward into daylight savings last weekend was countered by uncertainty at the end of the softwood lumber agreement with the United States.  Longer days inspire confidence, but British Columbians feel they are falling back into U.S. protectionism.

forest

The fear is that the U.S. will impose duties on the importation of our lumber which will result in layoffs in the forestry sector.  The U.S. claims that our lumber is unfairly subsidized through low stumpage fees — those fees which forestry companies pay for logs taken from Crown land.  This may be true but it is not our real advantage.

Another claim by Americans is that they are just trying to save us from ourselves.  They are trying to salvage what we won’t protect — our forests.  This argument doesn’t hold water.  The hard choices between saving a resource and exploiting it for jobs and money are easier made from a distance.  It’s easy to be an American environmentalist when it comes to making policy for Canada.

In a case of bad timing, a study from the Sierra Legal Defence Fund supports the American claim of subsidization.  One of the study’s authors, Mitch Anderson, says that “We have lost over $120 million in stumpage shortfall over a two and a half year period”.  That’s just in the interior of B.C.  On the coast, there is an additional shortfall of $224 million.

Forest companies say that the study misrepresents the facts and is nothing but “cheap shots”.  Forest companies say they pay exactly what the timber is worth because much of the timber has been damaged by the pine beetle. The Sierra Legal Defence Fund counters that the “damage to the merchantable timber itself is usually limited to discolouring the wood with a blue stain.”

Although forest companies may argue that the wood that they log is inferior, and therefore they should pay less, no one can argue that forest companies are collectively not paying target fees set by the Ministry of Forests.

Part of the problem is the complex stumpage fee system that allows some parts of B.C. to pay less than others.  While forest companies in Kamloops, for example, pay an average of about $28 per cubic metre of wood, those in Golden pay about $2.

Stumpage target rates are determined by combining variables such as the value of timber, market conditions, and logging costs in a formula detailed in appraisal manuals produced by the Ministry of Forests.  The Ministry sets target stumpage rates based on Statistics Canada evaluations of our wood products.

That target must be met collectively by all B.C. licensees but the each district pays a fee based on local determination of timber value.  And this is the tricky part of fee calculation, something called the “waterbed”.  The waterbed aims to distribute differences in stumpage rates between different companies.

But the advantage that Canadian lumber has is not stumpage fees, even if they are too low.  Our lumber is priced competitively on world markets  because of the efficiency of Canadian technology.  Canadian sawmill technology, such as that produced by CAE Forestry in Salmon Arm, is world class.

The stumpage fee debate is distraction to our real advantage.  This distraction could be resolved if forest companies paid fair value for logs as determined by the Ministry of Forests.  After all, British Columbians deserve a fair return on our resource. That’s the first step.

The second step is to restrict the flow of lumber into the United States.  This is being done already in an attempt not to provoke Americans into imposing tariffs against our lumber.  But lumber flow must be dramatically restricted so as to increase the value of lumber.  Because the American construction industry can’t do without Canadian lumber, this will result in howls of protest.

Americans will then claim we are trying to fix prices by controlling the market.  Canada will immediately respond by agreeing to free trade in lumber, which is what lumber producers want all along.

The difference between now and the future will be that the there will be a fair return for forestry companies and for the people of B.C. on this dwindling resource.

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