Jun 25, 2020

British Columbia’s largest raw log exporters make pitch to deregulate


Federal government would do well to resist call by Mosaic Forest Management, before opportunities to process wood in province are further compromised

British Columbia’s forest industry was in trouble long before anyone had heard the name of the virus now seared into our brains. 

Months before COVID-19 appeared, forest companies had curtailed operations in response to declining prices and escalating costs. 

One of the earliest companies to shut down was Mosaic Forest Management, a company that coordinates logging and marketing efforts for Island Timberlands and TimberWest. 

The two companies export, by far, more raw, unprocessed logs from the province than any of their competitors—roughly half of all the logs shipped from BC to out-of-country buyers. 

Mosaic pulled the plug on its coastal logging operations in late November, announcing that its annual winter shutdown would start early and last indefinitely, affecting 2,000 union and non-union contract workers. 

“We are currently experiencing very challenging pricing and market conditions,” Mosaic’s media spokesperson, Pam Agnew, said then. “As a result, we are shutting down earlier ahead of a usual winter shutdown. We are monitoring the situation closely and look forward to restarting production when the market outlook improves.” 

Four months before the global pandemic arrived Mosaic’s workers were out of work and reeling from slumping markets.

So to recap, four months before the global pandemic arrived Mosaic’s workers were out of work and reeling from the left hook of slumping markets. The right jab to follow—the virus—came second. 

Keep that one-two punch in mind, because it is critical to what follows—an attempt by Mosaic to obliterate rules that place only a modicum of restrictions on its ability to export raw, unprocessed logs by the millions out of the province. 

For decades, many unionized and non-unionized forest industry workers, environmental organizations, rural communities, small independent sawmill operators and others have opposed raw log exports. 

Their strenuous and ongoing objections have focused mostly on the foregone domestic manufacturing jobs associated with sending unprocessed commodities out of the province. 

Some unions and environmental organizations have also argued that by logging less and processing more, BC could generate both more jobs overall and increased forest conservation, particularly of ancient forests that once logged will never again be seen. 

Others actively or more quietly support either unfettered raw log exports or at least some such exports. They include private forestland owners (both major corporations and much smaller property owners) in particular—along with contract loggers and truckers (such as the BC Truck Loggers Association)—some unions and some First Nations. 

In 2017, the BC office of the Canadian Centre for Policy Alternatives analyzed data on exports. 

Some unions and environmental organizations have argued that by logging less and processing more, BC could generate both more jobs overall and increased forest conservation.

The research showed that roughly 6.5 million cubic metres of raw logs, on average, were shipped out of BC in each of the previous four years, an unprecedented number for such a timespan.

Based on employment data compiled by BC Stats, the CCPA estimated conservatively that if those logs had been processed in BC instead, another 3,650 people could have been working locally to process  those logs into lumber, pulp and paper and other forest products. 

The same research showed that the two companies benefitting most in the trade of raw, unprocessed logs were Island Timberlands and TimberWest. 

The two companies are in the enviable position of owning vastly more forestland in the province than any other company, most of it on the southern half of Vancouver Island. (Most of the provincial land base is publicly owned or “Crown” land and therefore under provincial jurisdiction.) 

Mosaic also coordinates operations at two large log export facilities on the island, one at Duke Point near Nanaimo, the other at Crofton. 

Tens of thousands of logs are stacked high in long lines at those facilities before being loaded into the holds of ocean-bound freighters for shipment to China and other overseas markets or to the United States. 

Destination of British Columbia Log Exports in 2019

Country Dollar Value Volume – cubic metres Average per metre
China $372,372,710 2,950,837 $126
Japan $190,832,925 1,142,796 $167
South Korea $55,230,364 336,731 $164
United States $40,195,065 391,352 $103
Total $661,633,455 4,842,997 $137

Note: The numbers on Log volumes are rounded. A very small number of logs also went to Vietnam, Taiwan, Cypress and Germany. Data sourced at: https://www2.gov.bc.ca/gov/content/data/statistics/business-industry-trade/trade/trade-data

In the second week in May, after most Mosaic workers had been off the job for nearly half a year, the company announced it had signed an agreement-in-principle with Local 1-1937 of the United Steelworkers (USW) union. The deal is expected to govern relations between the union, which has about 650 of its members involved in logging operations for Mosaic, and the company for the next five years.

The major planks of the agreement include:

  • Improved job opportunities and job security for USW members;
  • More “flexibility” for the company to control the movement of contractors, equipment and logs across Mosaic’s South Island operations;
  • Unionizing approximately 35 workers at Mosaic’s two shipping facilities at Duke Point and Crofton; and,
  • A renewed collective agreement between Mosaic and the union at the Northwest Bay Operations near Nanoose Bay, which will run from 2020 to 2025.

“Working together with Mosaic on unionizing the shipping facilities . . . reflects our collective desire for policies that support access to both international and domestic markets,” Brian Butler, president of USW 1-1937, said in a prepared public statement when the tentative agreement was reached. “Given the current context, the USW 1-1937 supports immediate temporary relief on federal log export policy for private land to kick-start the Coastal forest sector, on which thousands of workers, their families and communities depend.”

In a subsequent television news interview, Butler stressed that the union’s support for the change was not a deviation from its longstanding opposition to most log exports. “The provision around temporary relief on log exports is just that. It’s temporary. We haven’t changed our position in Steelworkers in opposition to log exports.”

However, Butler wasn’t pressed on how long such temporary relief would be needed. And it is unclear what would happen should the relief be granted and the government then decide to reinstitute the regulation. 

In the same television news segment,  Domenico Iannidinardo, Mosaic’s vice-president and chief forester, said that the company wants a new “deal” with the federal government that reflects “modern realities.” It doesn’t take much to read the comment as a call for deregulation. 

“There’s a legacy policy that’s managed by the federal government. It applies to private forestlands, of which Mosaic has a significant amount, that causes uncertainty in terms of end customers,” Iannidinardo told Kendall Hanson, a reporter with CHEK News. “The federal government policy at the moment interferes with us making international contracts.” 

It doesn’t take much to read the comment as a call for deregulation. 

Another Mosaic executive, Benjamin Lee, vice-president of business development, has called the changes that the company is seeking “comprehensive and progressive solutions” that will help “to shape a better future despite current events.”

Not long after making those comments, Mosaic stated that should the federal Ministry of Small Business, Export Promotion and International Trade fail to acquiesce to the company’s demands it would not be resuming operations.

“If the federal government says no, and we’re unable to get acceptable terms . . . then we will have to remain curtailed,” said Iannidinardo.  

The company has since announced that in the coming weeks it intends to put people back to work, but it continues to press for the changes arguing that overseas buyers pay more for some of its logs than do domestic buyers.

“The only way to supply local mills at typical domestic pricing is with some access to international markets and pricing. No forest company can sell production at below costnor should they have to,” the company said in a prepared statement.

The main federal regulation that Mosaic takes exception to is one that requires it to first advertise logs that it wishes to sell to foreign buyers to domestic buyers. (Ottawa, not the B.C. government, has regulatory powers on Mosaic’s vast private timberland holdings that trace back to a decision by the old Dominion government to grant the lands to railway interests at the end of the 19th century.) Only after those logs have been advertised and not purchased domestically can Mosaic and other companies then sell the unprocessed logs to out-of-country buyers. 

The regulation theoretically stops logs that are not surplus to domestic needs from being exported. But because of steady and drastic declines in the number of sawmills in the province, the door keeps opening wider and wider to more exports. If local mills aren’t there to purchase logs, the logs can and do go elsewhere. And Island Timberlands and TimberWest, who don’t own a single sawmill between them, are only too happy to oblige. 

In 2019, according to data available on searchable spreadsheets from this provincial website, companies advertised more than five million cubic metres of logs that they wished to export from the province that year. More than half of those logs originated at logging operations managed by Mosaic on behalf of Island Timberlands and TimberWest. There is a lag between those notifications and ultimate sales, but if past patterns hold true, the vast majority of those logs will not be purchased by domestic buyers and will go instead to overseas buyers. 

Logs Advertised by Mosaic Forest Management in 2019

Species Volume (cubic metres) Per cent
Douglas Fir 1,751,156 60 per cent
Hemlock 996,214 34 per cent
All othres 176,603 6 per cent
Total 2,923,973 100 per cent

Note: Companies are required to advertise logs domestically before receiving export approval. These log volumes are indicative of what Mosaic wanted to export, not necessarily what it did. The data is available at: https://www2.gov.bc.ca/gov/content/industry/forestry/competitive-forest-industry/log-exports/bi-weekly-advertising-lists

The Mosaic announcement never mentions COVID-19. But the document can be read as obliquely referencing it with phrases like “current events” or “modern realities” or “the current context.” 

But COVID-19 was nonetheless very much on the mind of Premier Horgan when asked to respond to the Mosaic announcement by CHEK news. 

“BC’s premier says raw log exports are a divisive issue. He just wants to maximize the value of BC-grown logs,” CHEK’s Kendall Hanson reported as a segue to an interview clip of the Premier saying: 

“I think the vast majority of British Columbians as they look at log prices as they look at lumber prices and the significant decline in demand as a result of COVID-19 that the best way forward is that we steward those resources in the best interest of this generation and future generations.” 

With that comment, Horgan situated the proposed regulatory changes not in the context of market fluctuations and the vulnerabilities that all commodity producers face when markets are oversupplied and/or demand plummets, but in the context of the coronavirus. 

COVID-19 was nonetheless very much on the mind of Premier Horgan when asked to respond to the Mosaic announcement.

The comment was not lost on the Teal Jones Group, which is one of BC’s largest cedar shake and shingle producers and also mills Douglas fir, Sitka spruce and hemlock logs. The company has written an open letter opposing the proposed changes to export policy saying: 

“Mosaic has curtailed the majority of its operations since November 25, 2019, citing poor market conditions, exacerbated by the impacts of the corona virus and global supply chains. We believe that Mosaic has used this ‘burning platform’ of lost economic contribution, wages and government revenue to aggressively lobby the government to relax restrictions on export policy.” 

Horgan’s comments are all the more curious to Teal Jones and others because as leader of the then NDP Opposition, Horgan and his colleagues understood that things were getting progressively worse in rural communities that were more dependent on the forest industry than the provincial economy as a whole. 

Roughly 100 mills had closed in the province over the previous 16 years, closures that could not be linked to any COVID-like cough, but the sputtering of an industry that had failed to make new investments while concentrating more and more wealth in the hands of a few corporations. (Currently, 10 forest companies control nearly 70 per cent of “timber supplies” in provincial forests.) 

The NDP platform prior to the last provincial election noted the “unprecedented” number of raw logs that had been exported from British Columbia during then-Liberal premier Christy Clark’s leadership. And it vowed to do something about it saying: 

“We will work with BC’s forest industry to find fair and lasting solutions that keep more logs in BC for processing. This will give BC mills of all sizes access to the logs they need to create good jobs and support BC communities, providing certainty and job security for forestry workers.” 

Roughly 100 mills had closed in the province over the previous 16 years.

That is the kind of commitment that commands Kamal Sanghara’s attention. 

Sanghara is CEO of the San Group, which has invested millions of dollars in a new milling complex in Port Alberni that will need 3,000 to 4,000 cubic metres of logs per day to run through its new facilities, which could eventually employ 300 people in one of the hardest hit forest industry towns in British Columbia, a town that once had one of the highest per capita incomes in the province. 

“I’m not against exports but the wood should be available to manufacturers like us, in the domestic market first,” Sanghara said in another CHEK News report that aired after Horgan’s COVID-19 comments. “If these changes [to export policy] happen, what will happen to us is less wood available to the locals like myself.” 

Doing away with the requirement that companies first advertise logs to domestic buyers before being able to sell to foreign buyers, has not prevented Mosaic or a host of other companies from exporting millions of logs each year. 

Changing those requirements now, while subtly inferring or directly stating that it is needed “temporary” relief in light of COVID 19 is both inaccurate and setting BC on a potentially dangerous path to accelerated log exports and diminished opportunities to add value to logs here at home. 

The Premier would do well to say so in the strongest possible terms, and to join with those unions, businesses and environmental organizations that are calling on the federal government to resist the demands by Mosaic to deregulate. 

And then he should do what many have called for; implement a revitalization plan that truly puts our forests and forest workers first, not the corporations that would be only too happy to keep us being hewers of wood.

Read the letter to the federal Minister of Small Business, Export Promotion and International Trade from union, business, environmental and CCPA representatives.

Letter to Canada’s Minister of Small Business, Export Promotion and International Trade

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