February’s Speech from the Throne is a case in point. “Energy opportunities will transform the future of forestry in British Columbia with clean, carbon-neutral bioenergy, fueled by biomass from beetle-killed forests. It will mean new jobs, new revenue streams and new electricity.”

Sounds promising. But I have my doubts. It costs money – lots of it – to move trucks onto old logging sites, pay workers to gather and grind up waste wood, then load the chips onto trucks that drive back to facilities that take the chips and burn them under intense heat to fire turbines that generate electricity. Which is why the bioenergy industry has historically relied on chips and sawdust from sawmills as a “secure” source of extremely cheap fibre for its feedstock.

But what happens when all – or most – of the sawmills close? Well, we’re about to find out. And much may hinge on the outcome. In Williams Lake, EPCOR owns North America’s largest biomass power plant. The 66 MW facility, capable of supplying power to 33,000 homes, has been in operation since 1993, and has historically relied on 70 truckloads of waste wood chips and sawdust per day from the city’s lumber mills.

Now, most of the city’s mills are closed and EPCOR, locked into a 25-year power supply agreement with BC Hydro, must begin to pay – and pay dearly – for companies to go out and find the wood it needs to keep its facility running.

EPCOR, given its considerable size, is an exceptional example. But the bioenergy giant is not alone in feeling the pinch. Like EPCOR, BC’s infant wood pellet industry has so far hitched its fortunes on accessing waste wood from sawmills. That supply source is a shadow of its former self.

Ironically, in a province awash in “waste” wood in the form of millions upon millions of dead pine trees, supply issues may prove the undoing of the vaunted bioenergy industry. Cheap, readily available supplies, that is. Businesses used to getting something for virtually nothing often have a hard time making money and profits the old fashioned way – by earning them.

A longer shelf life, combined with “new” sawmill technology that allows beetle-killed logs to be scanned and rotated prior to cutting so as to avoid defects, will help to ensure that maximum value is extracted from the dead pines for as long as possible, Bell said.

Unfortunately, Bell’s optimism stands at odds with people whose job it has been to try and figure out how forest companies can economically cope with the increasing numbers of dead, defect-riddled pine logs entering their mills.

Three years ago, Igor Zaturecky, a research scientist with Canfor’s Wood Products Research and Development Centre, co-authored a paper with fellow researchers at Canfor and the University of British Columbia. The paper showed how the scientists had successfully subjected dead pine logs to special stress tests that revealed hidden defects in the logs prior to them being milled. This was big news because, as Zaturecky said, interior sawmills were even then overwhelmed with droves of sub-standard, beetle-killed logs that were wreaking havoc with their equipment.

“I’ve been in mills and seen wood processed into lumber that was full of spiral checking,” Zaturecky said in a summary report on the research project he had participated in. “In one [mill] shift there’s so much breakage and waste it’s unbelievable, and that happens over and over.”

Coincidentally, the facility where Zaturecky witnessed all the log breakage was a new, state-of-the-art Canfor mill in Vanderhoof, with the same log-rotating equipment in it that Bell now boasts about.

Asked about conditions in interior sawmills today, Zaturecky, now an independent researcher, said in a telephone interview this week that log breakage due to beetle-attack-related defects “is still a big, big issue.” And it will continue to be so, he said, because “you can only do so much” to avoid log breaks by rotating logs prior to cutting them.

As droves of dead standing pine trees continue to age, more of them will develop defects that lead to messy and costly log breaks in mills. Such outcomes can be avoided, Zaturecky said, but will require investments by companies to “commercialize” the stress-testing he and others developed. In other words, companies like Canfor will have to spend more money up-front, perhaps at the logging sites themselves, using stress tests to sort logs into two streams – one stream for the sawmill, the other for pulp and paper mills or wood-based “bioenergy” plants.

If Bell’s optimistic projections are to have a shot at being credible, he better pray that an economic recovery happens soon and that ideas like Zaturecky’s catch on. Otherwise droves of dead pine trees won’t go anywhere any time soon.

Gian Sandhu isn’t buying it.

Owner of the Jackpine Group of Companies in Williams Lake, Sandhu was a leading light in British Columbia’s interior forest industry, at one point employing upward of 300 people. In December, with his workforce down to 116 employees and over 27 million board feet of product sitting on his lot with not a buyer in sight, he was forced into receivership. In an industry renown for turning out billions of board feet of commodity lumber, Sandhu’s workers took a different approach, making high-value, re-cut boards that were actually stronger than traditional lumber products. His workforce (non-union but paid close to union scale) turned out made-to-length, tension-tested floor joists and rafters as well as a range of laminated furniture and shelving panels.

But no amount of entrepreneurship could shield Sandhu from the economic havoc unleashed by the collapse in the US housing market. “I’ve never seen this in close to four decades in the industry,” Sandhu says. “There are no buyers. In previous downturn cycles you could sell. Not now. We’re pretty much dead.”

Sandhu is not alone in being stunned by the breadth of the downturn. Elsewhere in his central BC home city, three sawmills owned by Tolko Industries Ltd. are idled at a loss of another 600 jobs, plus a related 150 or so jobs in logging and related activities. And at least one locally owned independent mill – Sigurdson Bros – is also down putting another 100 workers off the job.

Sandhu says that that the breadth of the housing crisis in the US throws into question any economic recovery this year. “There’s 11 months of [new] unsold houses in the US,” Sandhu says. “Then there’s the existing inventory that the banks have taken over. That’s another nine months or so of inventory.”

The sheer size of that unsold inventory, will delay the advent of even a modest recovery for several quarters Sandhu believes. In the meantime, a steady deterioration in the quality of trees in BC’s interior continues, thanks to the ongoing mountain pine beetle attack. That likely means that only some of the many idled mills throughout the province will reopen when markets pick up.

To prepare for that reality, Sandhu says governments need to introduce new policies that encourage a transition in forest industry output – one where fewer commodities are made because there are less raw materials to work with, and more jobs are created by taking commodities and re-working them into higher value products. Barring significant changes in industry output, a 20 per cent increase in forest industry revenues, as Hansen predicts will occur in two years time, seems a stretch.

Confusing because Finance Minister Colin Hansen projected that forest revenues will go up next year when all signs point the other way. And misleading because even a cursory review of revenues to date shows that the Minister’s latest numbers dramatically overstate how much money is likely to come in during the current fiscal year.

The latest budget pegs royalties from logging activities this fiscal year at $587 million. Yet the Forests Ministry, which collects the royalty fees and rigorously tracks them, says that for all of 2008 just $493 million was received. Worse yet, for the first 10 months of this fiscal year just $335 million has been collected. With only two months to go before year-end, it is possible that total forest royalties will amount to $400 million or less – a whopping 32 per cent below the Finance Minister’s projection, which, it must be pointed out, is actually a revised figure. Just last year, the Finance Minister predicted that BC’s coffers would be enriched by nearly $1 billion from this revenue stream!

The ugly truth, which the government ought to be forthright about, is that historically important sources of revenue are in far worse shape than some public accounts suggest. And they’re going to get worse.

Just five years ago, royalty payments from companies logging public forests stood just shy of $1.3 billion – a tidy sum that defrayed some public health and education costs. Those days – as thousands of laid off mill workers fear, aren’t coming back soon. Even, if by chance, the sickening slide in US housing starts abates, another ugly reality stands in the way of a healthy rebound in forest revenues – those tiny mountain pine beetles and the millions of trees they’ve killed.

In the past five years, never less than half and in some years more than 60 per cent of all the forest revenues generated in the interior of the province came from the logging of pine trees. As each year passes, the trees killed by the beetles continue their inexorable decline in quality. Under the circumstances, its very, very difficult to see how the government justifies forest revenue increases to $609 million in the coming fiscal year and $708 million the year after that.

It’s time to take the axe to such figures, give the public a true accounting of the real numbers and trends, and outline in clear terms how the government plans to reverse the slide in forest revenues and related forest industry activities.