Saturday, April 19, 2014

British Columbia Forest Tenure Reform

Excerpt from 2008  letter to Minister of Forests "As Minister of Forests you've inherited a policy framework that has been forged over fifty years, by what I refer to as the Unholy Trilogy – big business, big labour and big government."




Link to Related Government Documents

Preamble

Stephen Covey, in his book Seven Habits of Highly Successful People, counsels us to “begin with the end in mind”. The end I have in mind for forest policy is forged, in as large measure, by what I want to avoid “more of”, than what I want to see more off and is founded as much in the preservation of healthy societal realities that existed in the past, as opposed to the promotion of nouveau societal engineering.

Here is what I know for sure, if you generate a circumstance where every acre of forest land is meeting its potential, then societal benefit will be greater than it is now, so that is where the focus should be in forest policy.  In essence then, take care of the long term production interests of the forest and you take care of the people relying on the forest.  

I can know nothing of the forest and know how best how to manage it - because I understand people. All policy has to start with the realities of the individual, the realities of community and finally, the central administration. The cornerstone of a healthy community is a collection of prosperous individuals. In reading the materials generated in the policy process to date, this reality has been forgotten.

China tripled agricultural production in three years by merely giving people quasi property rights and the fruits of their labour. They also improved the overall stewardship of the land - we know that the incentives inherent in ownership and market driven enterprise work, it is amazing to me that so many seem to think they can engineer something better - the facts simply contradict them - ownership or in essence long term tenure, works, the capacity to hold rights to and manage assets in accord with our judgment, and the market, is the cornerstone of the western world’s success, embrace the reality and prosper.  I believe in markets and ownership, and the desire of the individual to better their lot, I make policy suggestions based on this reality.  The benefits of ownership are proven time again, this is no mere academic musing, we all enjoy the fruits given us by an environment that permits enterprise.

In British Columbia, Canada over actually, we are witnessing the de-ruralisation of our society, people are moving away from the land, away from natural systems, away from the Kadence of life that brings into visual relief the true realities of stewardship. With this reality, we have been left with a largely urban population convinced nature is a place of fragility, rather than a robust and generous provider.  An aft glance to the society that built a compassionate, self-reliant Canadian reality shows a rural / agrarian community as its point of origin. We would do well to look back and extract from history what best suites our future, in forest policy and other policy as well.  The rural agrarian Canadian society was a complex of self-reliant individuals, living miles from one another – but connected by a common living circumstance that made community. From this came a culture that forged the great generation, people who lived by one another for generations, held integrity in high regard and lived by their word, this stands in stark contrast to the popularity culture emerging out of the urban reality, where fickle seems to be the order of the day.    

It was with this backdrop that in 2008 I wrote a letter to then Minister of Forests Pat Bell in the hope that perhaps government would see the opportunity to prosper from our forest resource, truly prosper in the fullest sense of the word. I have been largely disappointed, a reality us idealists are often faced with. This is in no way a reflection on Mr. Bell or his efforts, in fact he achieved a great deal in this portfolio – the town of McKenzie thanks him for his efforts.  The culprit here, is the same as it is everywhere in government, institutional inertia just keeps the beast rolling – enshrined interests holding on to what they have at the expense of greater prosperity. 
  
In review of the discourse around forest policy one asks, what is in it for me, an individual who sees opportunity everywhere for forest related business and witnesses the entire thrust of forest policy directed toward incumbent actors – 5% of the land donated to woodlots or other means for the entrepreneur to access resource is as laughable as it is dismal and it is sure to produce more of the same mediocrity in land utilization that one has witnessed in the past. 

Below is an excerpt from a letter sent to Pat Bell in 2008, it communicates the “end I had in mind” then, when you read it contextualize it contents to the time … in rereading the letter in preparation for this submission I have found little reason to change my position, nor has the situation that the functional aspects my suggestions were addressing found resolve.


Letter to Pat Bell – then Minister of Forests – 2008

Over the course of my lifetime I have worked in the forest industry, interfaced with it while involved in the tourism industry and gained some insight into its administrative side via participation at the Kamloops LRMP. This exposure has formed a perspective I think is worthwhile, and may be of use to you is some way.

As Minister of Forests you've inherited a policy framework that has been forged over fifty years, by what I refer to as the Unholy Trilogy – big business, big labour and big government. Political pragmatism in relating to the two primary special interest groups has created an industry that has perhaps underserved British Columbia, or left potential un-accessed. The weak US market and resulting waning of the forest industry presently, may offer a juncture where many of the interests that may have inhibited reform in the past, are now muted – companies gone or contracting and labour expectations reduced due to the stark realities presently facing the industry. The areas wanting of attention from my perspective are tenure reform, bug kill utilization and non-United States’ market development.

When one examines the forest industry, a glaring aspect that comes to view is the present domination by Volume tenure allotted to companies and then loosely tied (but tied to milling) to production facilities. The present policy has; failed to facilitate “the support of communities” in any real way, failed to facilitate the most effective use of timber assets, siloed lumbering functionalities in a manner I believe to be undesirable, and perhaps, most importantly, generated a log market that offends our best customer. A transition to an area based long term tenure format may address these issues.

I envisage area based tenure taking a form similar in nature to our present Woodlot tenure or Tree Farm tenure, existing completely separate and distinct from milling facilities (the actions of individuals may include milling activities but policy considerations would have milling separate and distinct). Tenure size would be moderate, perhaps in the order of an average annual timber volume accretion, in the context of long run sustainable yield, sufficient to generate net revenues in the order of $500,000 annually for proprietorship (based on historical data). The term of tenure (tree farming rights) would be ad infinitum, facilitating the future trade of tenure or perhaps intergenerational transfer. The industry would then be supported by an open log market that would emerge in much the same fashion as the cattle industry or other markets have. Government revenues would be garnered from the initial sale of these long term harvesting rights and then a royalty structure at the point of log sale. There are many issues that arise in designing tenure to meet the best interests of British Columbia, such as the nature of ownership of these tenure units, while these issues are extensive they are outside the scope of this communication. This brief outline of the created tenure type will, hopefully, serve to provide context and support to the points made with respect to tenure reform.  
   
Forest companies in the past have been able to secure the rights to harvest a given volume of timber; where, when and how, has been at the discretion of Ministry of Forests (MOF), and this right seems to be let often on the bases of a milling facility requiring timber. By observation, often the milling facility is closed, as production is concentrated to a more productive facility somewhere else or as the result of some other dynamic. Again by observation, the Forest Company retains the volume, often at the expense of local industry. This rationalization of production facilities may be necessary (for forest companies) to garner maximum efficiency under present industry conditions; however, the premise for the company’s garnering the tenure is no longer valid. This reality is not conducive to healthy public perception of government action and is breeding resentment, as evidenced by press coverage often referencing this occurrence in local media. An area based tenure format would extend to proprietors long term tenure based solely on harvesting and sale of timber to a free market. While area based tenure may fail to guarantee the logs will be milled locally, area based tenure and the related open log market will guarantee the opportunity for them to be milled locally. Additionally, the premise for tenure will always hold policy integrity (continuity with perceived public good) as policy is executed, allaying the valid public perception that local trees are unduly being milled in other regions. The pure physicality of the circumstance will extend advantage to local purchasers due to transportation advantage and local association.

The development of area based tenure, with tenure being focused to harvesting and growing trees, serves to fracture the tree farming tenure ownership from the milling function. This is desirable, as it extends greater influence to the tree farming process in the logging industry as a whole, by bringing “business” focus to tree farming process. Presently, the logging function is performed under contract to an entity absent long term interest for a specific area of operation and then the silviculture function is performed by another contractor who is overseen by the government (and with no long term interest in the area); the government of course being largely isolated from incentives associated with long term ownership and most certainly absent any real attachment to a profit motive.

The management of resources by “macro” entities, as is now the case, results in the siloing of activities in a manner that is both unnatural and unproductive. The present circumstance is analogous to government owning all the farmland and functioning as the monolithic manager of agricultural lands; the person milking the cows with no attachment to the cow’s long term health or wellbeing. The present circumstance then is absent the incentives that drive success generally in other sectors of economy - the ownership and interest in the profitable utilization of an asset. By designing the tenure in a manner that integrates the management perspective, resources will ultimately become better utilized. The tenure structure that provides incentive to proprietorship by integrating the profit motive with the full spectrum of tree farming activity, silviculture to logging in the context of long term ownership and appropriate logging practices, will surely result in better outcomes over time.    
                      
A by-product of broad based “proprietorship focused” tenure will be an emergence of an open log market and a Royalty system for government revenues. This means of government interface with resources and revenues is commonplace and widely accepted by governments the world over. Our present mode of governance over the province’s timber resources is both an anomaly and irritant to the United States. …..

I offer a less “industrialised” perspective than you're apt to be exposed to as Minister of Forests, a perspective I can proudly state has found its origins in being a farmer’s son and the desire to produce a societal circumstance well populated with independent people – well designed forestry tenure reform offers opportunity to create such a circumstance. Thank you for your consideration of the contents of this letter and I hope the election outcome gives you some extended tenure!

Industry Asset Security & Labour Interests

In reading the materials that have emerged out of the tenure reform process thus far, one sees repeated reference to “secure timber supply” for milling facilities and secure jobs for workers – This was dealt with to some degree above – but it requires further attention.

Sawmills and timber processing facilities will exist in relation to the timber supply regardless of whether sawmills and timber processing facilities hold tenure over forest or not. It is the coupling of the two operational modalities in conjunction with the siloing of growing, harvesting and marketing timber that is at the crux of miss management in the industry as a whole.  The process of growing and harvesting timber has no mandatory relation to processing timber into a finish product. It is the job of government in forging policy to attack the challenge of forest management with the maximum outcome of the committed land base and resource in mind.  If the government does this, the security of production assets will be inherent. Asserting that tying timber tenure to production facilities is necessary so secondary producers can have their assets secured is analogous to insisting that Cargill slaughter facilities hold primary production for cattle rearing on a 1/3 of Alberta. What secures assets is a supply of inputs and a market for outputs - timber tenure in no way is an imperative to have fiber supply - the willingness to pay fair market price at any point in time is.  BC forest policy has been held in stasis  by aforementioned  unholy trilogy - Big Government -  Big Business - Big Labour, what is key in policy reform it to remove ourselves from the limitations associated with industry actors perceived and often short term interests - and focus on maximizing the production of every acre of forest land slated for forest activity. 

The joy in fragmenting the timber supply management is that a 1000 flowers bloom; it is errant to try to anticipate management outcomes to a specific degree, one needs to realize that more actors means more innovation. At present there is a monolith called the BC Forest Service that manages the timber supply, by fracturing the management of the forest new best practices will emerge more often and in greater volume - it is the nature of large entities to have a low degree of absorptive capacity. 

One is compelled to voice strong objection to policy that would have tenure allocation at the behest of government only and directed toward established participants - we have stagnation now - what we need is to facilitate disruption and dynamism. Disruption, innovation, fast timber growth - dynamism will come from smaller area based tenure - same tenure area, more wood faster, needs to be theme of tenure reform.  There is no operational correlation between forest farming and secondary production - there is no practical rationale for continuing to attach the two in policy. Fiber garnered through an open log market and fiber garnered in the present modality is still fiber - the difference is an open log market fed by a large number of area based tenure holders, will see the timbered land base more intensively managed to grow timber and it will also align timber harvesting and marketing more intricately with demand. 

By detaching primary and secondary production there is no compromise made in primary production in the harvesting and marketing of timber to satisfy other interests - the market is the best determinant of when and what to harvest - certainly a better determinant than cashflow considerations of secondary producers or the sacred cow of "labour” quotas, tacit and omnipresent in the present policy mix. Let me assure all concerned however, that if policy is directed at maximizing resource value in the context of market imperatives, the wellbeing of those dependent on the industry will be better addressed - ultimately asset security and job security is a function of a strong industry overall that is rationalized to the market place.

The very best way to satisfy social and economic objectives is to have the value of the resources under management maximized.  The focus of land management policy needs to be on managing land, extract the maximum poetical volume and quality of timber from the land and you extract the most social benefit.  This is especially true when you have granted access to the land, to a large number of operators whose future is forged by the production choices they make – the new source of prosperity for British Columbia – the forest farmers. 

If policy makers have the courage to donate a significant portion of the a land base to the tenure profile suggested above, say 25 – 50 % of the annual allowable cut, much benefit will be derived. The trilogy will have a new partner, the independent business operator – the tree farmer. In the late 1970s there was a study conducted to find the most efficient business unit functioning in the US, they identified the 1200 acre family farm. It was efficient because the decision making processes where generated by the people executing on the land – knowledge was applied at the point of action. The realities of scale have driven farm sizes upward, but the efficiency remains.  Most importantly in relation to the suggested tenure however, is that the management perspective is lengthened along the full forest growth continuum to harvest, there is a steward that is intimately acquainted with a given acreage and the knowledge that can only be garnered by close association with a given stand of timber will drive a stem by stem market execution. 
   
One would think that this would be an agreeable proposition for incumbent timber companies; this proposal allows them to focus on their core capacities – processing lumber and value added products – and ensures unfettered and fair access to fiber via a free and open market.  

Letter to Mr. Thomson - Minister of Forests, Lands and Natural Resource Operations

April 20, 2014


Hon. Steve Thomson
Kelowna-Mission
Minister of Forests, Lands and
Natural Resource Operations
102 – 2121 Ethel Street
Kelowna, BC
V1Y 2Z6


Dear Sir,

In 2008 I submitted a letter to Pat Bell, the then Minister of Forests in the hope of calling attention to the opportunities associated with tenure reform. I encouraged him to contemplate the advantages of smaller area based tenure rather than the present circumstance of volume based tenure. Mr. Bell’s efforts as Minister of Forest were exemplary, he accomplished a great deal. The challenge is the inertia associated with entrenched industry interests – they have effected a stasis in forest management in BC. The recent forest policy review and the subsequent tenure review appear to have achieved very little reform. It seems your Ministry has embarked on a process of tenure reform as indicated by the Discussion Paper the ministry generated titled Area-based Forest Tenures; this document however, and the associated process, has defined the scope of discussion within the “status quo box”, when what is required is “real reform”.

I am concerned that there has been no real change in the tenure picture all these years later – there is no greater access to the land for individuals. There is no doubt that area based extended term tenure will generated a better stewardship circumstance for the industry. We know from experience that “extended ownership” encourages better behavior than temporary arrangements. We know that tightly run small business brings efficiency to any task. We know the merits of enterprise. We know that we need to extract maximum benefit from the land base. It is time we put what we know to work in forest policy.

Please see my response to your tenure review process at the link below.


We need to do better than the status quo, we need new blood and dynamism in the forest industry, please have a look at what I’ve proposed. It takes courage to change, we need leadership here.       

Sincerely,



Neil E. Thomson

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