by Andrew MacLeod
Beating drums and wearing traditional black and red blankets, a large group of Kwakiutl protesters gathered one day in mid-February outside the British Columbia legislature in Victoria. They’d made the 500-kilometre trip from northern Vancouver Island, where their ancestors have lived for thousands of years, to show their outrage.
Two weeks earlier, the BC government had announced that Western Forest Products would be allowed to remove 28,283 hectares of private land from its Tree Farm Licenses (TFL) on Vancouver Island, a large part of which lies in traditional Kwakiutl territory.
For decades, the company had managed the lands as part of the TFLs, a concession made in exchange for access to huge tracts of publicly owned forests.
“Western Forest Products stands to recover millions of dollars from the sale of those lands,” says a Kwakiutl statement. “This is the primary reason the provincial government approved their application to transfer to private lands.” The transfer amounted to a handout, the statement says, and the first nation should have been consulted before the government agreed to it.
Inside the TFLs, the land was subject to provincial regulations that restricted the sale of raw logs and protected salmon streams and other wildlife habitat. Once it’s out of the TFLs, the company can more or less do what it wants, including clearing it for lucrative real estate development. “This just stinks to high heaven,” says Will Horter, a lawyer and executive director of the Dogwood Initiative in Victoria. “There’s absolutely no public benefit. It’s like writing them a cheque. Their lands are worth a fortune as private lands. They’re not worth anything otherwise. This is just a windfall gift.”
The move is ironic, he says, coming as it does from a government that claims to apply business smarts to its decisions on behalf of the public. “As the fiscally conservative government, they should be trying to extract benefits for the public, not give them away. They’re the subsidy government.”
Subsidized from coast to coast
He has a point, though the BC Liberal government holds no monopoly on subsidizing the forest industry. It’s common practice throughout Canada and has been for decades- a point at the heart of the softwood lumber dispute with the United States.
Forest observer Jim Cooperman of the Shuswap Environmental Alliance Society says the Americans are absolutely right – in Canada, both our provincial and federal governments do subsidize logging companies in numerous ways. For starters, there were the “softwood adjustment funds” the federal government handed out to “soften” the impact of paying duties to the Americans until the dispute was settled in 2006, despite the fact most companies remained profitable while paying the added taxes. In BC, the tenure take-back initiated by the Liberal government after 2001 – where the govern- ment pays companies to give up their licences to log a portion of a TFL-has given the companies millions of dollars as the province bought back timber that already belonged to the public. The companies, by the way, could still get the wood through the auction system. He says, “This compensation was actually a big subsidy.”
Also, the Liberals slashed forest management regulations around the same time, he says, introducing a ‘results based’ system that excuses companies from preparing the detailed plans that had previously required them to employ foresters.
But one of the biggest subsidies is also one of the most long-standing: the stumpage system itself.
Stumpage is the fee per tree governments charge forest companies for logging on public land. It is difficult to generalize about the fees, which vary by province, tenure type, and the value of the timber in question, but every province has a minimum fee.
In BC, about one in every three trees is cut at the rate of 25 cents per cubic metre. A cubic metre of tree makes a log the size of a telephone pole. “Even for firewood it’s worth more than a quarter,” says Dogwood’s Horter. “There is nobody who would argue that these trees aren’t worth more than a quarter. If they aren’t, leave them standing.”
In 2002, according to the latest data available on the forest ministry’s website, the average stumpage rate in BC was around $20 per cubic metre.
Indeed, low stumpage rates were one of the main concerns of the United States during the softwood lumber dispute, settled in October 2006, after over two decades of wrangling. A 2001 briefing note for the US Congress says, “The US producers argue that they have been injured by unfair Canadian competition. They argue that the provinces set stumpage fees’ (for the right to harvest trees) administratively at less than their market value.” The producers also complained that they couldn’t get direct access to Canadian timber and that Canadian companies were dumping their product on the US market at low prices.
To make up for these subsidies, the US Department of Commerce charged a duty of 17 or 18 percent on Canadian lumber entering the US. The Americans also charged individual Companies anti-dumping fees that added to the duties they paid.
The Canadian government fought the duties through the North American Free Trade Agreement and World Trade Organization dispute channels. In the Canadian media, the companies played to nationalist sympathies. But observers like Horter and Cooperman say they think the Americans were right – we do subsidize our forest industry. Even when the dispute was settled, the Canadian government agreed to forfeit 20 percent of the $5 billion the US Department of Commerce had collected. Many read the compromise as an admission that there was substance to the American claim.
Colonial thinking must change
Simon Fobister, the chief of the Asubpeeschoseewagong Netum Anishinabek, or Grassy Narrows First Nation, in northwestern Ontario, says subsidies like low stumpage fees are a result of the colonial thinking that still dominates the Canadian logging industry. The land and forests are seen only as resources to exploit.
“That’s kind of like the gold rush mentality, the last frontier mentality,” he says. Settlers arrived and grabbed land where they could, not caring who had a prior interest. “That’s still the same mentality. They don’t respect the environment. They don’t respect the people who live in that environment. The whole thinking has to change.”
The BC government announced that Western Forest Products would be allowed to remove 28,283 hectares of private land from its Tree Farm Licenses on Vancouver Island, a large part of which lies in traditional Kwakiutl territory.
Over the past few years, the first nation has frequently erected blockades to stop logging in their territory. Then in January, the protest escalated when the Grassy Narrows
leaders, including Fobister, notified logging companies and government representatives that they were placing a moratorium on the industry in their traditional territory. The first nation has had little choice but to fight, he says. “It’s like any abuse that won’t stop until a stand is made. It will go on and on till you get up and say enough is enough.”
Before logging continues, the first nation needs to be consulted properly and needs the resources to hire its own technicians to assess development in the region and decide whether the industry is beneficial to the community. The Supreme Court of Canada said several years ago, in a ruling on a case brought by BC’s Haida nation, that that kind of consultation is necessary, but so far Ontario hasn’t put the required process in place.
When Grassy Narrows is at last consulted, says Fobister, the question will be “Whether we agree with it, whether we can be a part of it, or maybe not.” There’s little doubt that opportunities are needed. “Billions of dollars of resources are leaving our territory, whether that’s timber or minerals. We’re not benefiting at all from these activities.”
Grassy Narrows has 800 people living on the reserve and another 400 living off reserve. The unemployment rate is 75 percent. Over 200 band members survive on cheques from Ontario Works, the province’s welfare program. The few jobs that exist are mostly in local government and social services, not logging or mining. Grassy Narrows is typical of many Canadian first nations. While some have done alright economically, the vast majority have rates of poverty and unemployment that far exceed the Canadian averages.
Corporate profits boom
The forest companies, meanwhile, have done very well. When the companies are negotiating with governments on stumpage rates or the easing of regulations, they claim hard times. But data from Statistics Canada tell another story.
The industry is cyclical, and profits rise and fall depending on various factors, including the strength of the US housing market and the value of the Canadian dollar, but it consistently makes a profit. They don’t bear the costs of soil degradation, ecosystem havoc, carbon deficits, or the loss of the boreal forest. Even in the “bad” years, the industry has done well.
In 2006, profits were down from a year earlier, but wood and paper companies still took a $3.3 billion profit for their shareholders. They made those profits at a time when they were paying large duties on softwood exports to the United States. In the worst year in a decade, 2003, StatsCan reports that the industry made a $2.4 billion profit.
On its own, Canada’s biggest forest products company, Canfor Corp. made a $471.8 million profit in 2006, partly from a refund on duties the United States had collected during the softwood dispute. As with the industry as a whole, even while paying the duties, the company had been profitable.
And profit, which tends to disappear into corporate bonuses, shareholder dividends and businesses interwoven by accountants, may not be the best measure of activity. The most recent figures available from the National Forestry Database Program show forest exports were worth over $34 billion in 2004, about double what they were in 1991.
In 2004, the companies returned $1.9 billion to provincial and territorial governments in Canada, including stumpage fees and other taxes. That works out to about 5.6 percent of their exports.
This year, Canfor and the other companies are set to make windfall earnings as softwood duties continue to be returned. Ironically, companies like West Fraser are already using some of that money to buy mills in the US from American companies, like International Paper, that pushed the softwood subsidy complaint.
Splitting the wealth
The question of how much benefit communities get from the forest industry is key. Most Canadian logging happens on public land, which in the past has meant an expectation that companies were responsible to give back extensively to local communities and government coffers. In many cases they were expected to run mills in communities near where the logs came from. But more and more, as with BC’s decision to release Western Forest Product’s land from public regulation, governments are allowing corporations to avoid their responsibility to local communities.
If politicians were interested in restructuring the forest industry, there are numerous suggestions available. Cooperman points out, for instance, that a never-implemented 1991 Forest Resources Commission report advocates selling at least 50 percent of tenure, or licenses to log particular areas on open markets. About 20 percent is now sold that way, and he says increasing it would make stumpage rates mirror more closely the value of the trees being cut.
A January 2007 report by Ben Parfitt, a journalist and researcher with the Canadian Centre for Policy Alternatives, looks at steps taken in recent years to distribute wealth from BC forests. He examines 130 accords signed between the province and first nations and finds they don’t go far enough. “The current situation leaves first nations with few dollars and minimal access to timber with which to diversify their economies and alleviate poverty and unemployment in their communities,” he writes in a summary of True Partners: Charting a New Deal for BC, First Nations and the Forests We Share.
BC collects about $1 billion a year in stumpage fees, Parfitt says, but only about 3.5 ercent of that flows back to first nations. He suggests a radical re-ordering of the industry, with half of all stumpage dollars channeled to first nations. He also recommends the province give first nations the chance to manage forests over longer periods than the five years currently offered.
The Iisaak experience
One place first nations have been more intimately involved in forestry is Clayoquot Sound on the west coast of Vancouver Island, where five of the Nuu-chah-nulth tribes jointly own Iisaak Forest Resources. The company was created after the protests of the early ’90s as a way to make opportunities for aboriginal people, build a “green” economy and bring logging back to the Sound.
After eight years, says Gary Johnsen, the chair of Iisaak’s board, the company is still figuring out how to be viable. It has managed to turn a profit in just two of the years it has existed. There’s a plan to create some kind of secondary manufacturing – turning wood into a value added product – that would build steady, year-round jobs.
But so far, he says, the company hasn’t had the capital needed to make it happen.
“I’m hopeful for the future, I guess,” says Johnsen. “I think there are lessons to be learned. Often that’s at the expense of Iisaak.” While there’s reason for optimism, it would be tough to set it up as a model for others just yet.
Part of Iisaak’s financial challenge is scale. The company logs about 100,000 cubic metres of wood a year from layoquot Sound. That’s about 10 percent of what would have been taken by corporate loggers in the 1980s or early ‘90s. Iisaak is looking at ways to get access to more timber, which would make the company more economically viable, but in some ways the problems it faces are the same as everywhere on the coast.
“The heyday of the virgin valley is gone,” says Johnsen, who worked 23 years for Macmillan Bloedel. The volume cut on the coast now is half what it was two decades ago, and much of what is available now is second growth that’s nothing like the huge old growth on which the industry was built.
Community management
The realities facing Iisaak hold true across the province and the country. For decades the forests have been logged at a rate that can’t be sustained, and that decision has reduced options in the present.
Chief Fobister at Grassy Narrows has also seen opportunities disappear as forests are clearcut. Not only has the first nation been cut out from the benefits of logging, he says, but the industry has made it much more difficult for local people to survive. After forests are chopped down, the trap lines stop producing. There’s erosion. Mercury poisoning from a paper mill up river harmed fishing in recent decades, taking away a food source. The loss of fish affected guiding as well, since tourists no longer wanted to cast their lures into a poisoned river.
“Most of our people were laid off from seasonal employment,” says Fobister. “It’s very different than it was in the heyday of the late ‘60s and ‘70s. Everything declined… Human activities and the pollution have had an adverse impact on the environment and the ecosystem, plus it has impacted on us as well.”
How areas are logged is intricately linked with who benefits and who is harmed. In Grassy Narrows, Fobister describes logging that is destroying a way of life while income from the forest disappears to somewhere outside the community. Increasing the return to first nations – either by splitting stumpage fees with them or charging a tax on lumber exports to replace the softwood duties – would no doubt help in the short term. But given a chance, Grassy Narrows and other communities might well prefer to make decisions foregoing immediate financial gain in exchange for the chance to make decisions that would sustain the community. There’s much more dignity in living as part of a functioning ecosystem, whether by fishing, tourism, hunting or forestry activities, or some combination, than there is in living in a wasteland, dependent on receiving a government cheque.
***
Andrew MacLeod is a journalist who lives in Victoria, BC and writes for Monday Magazine.
[From Watershed Sentinel, March/April, 2007]