Future of forestry communities unclear

WENDY STUECK VANCOUVER There is no shortage of opinion about what forestry towns might look like in the future, or how to save existing ones. In British Columbia, the issue has become even more complex with the pine beetle infestation, which is creating a short-term harvesting bonanza of beetle-killed lumber but is expected to result in a longer-term shortage until replanted trees can take their place.

The province could help local communities by providing dedicated pools of wood for regional operations, says Ben Parfitt, a policy analyst with the Canadian Centre for Policy Alternatives.

The province should also overhaul its agreements with native groups, Mr. Parfitt says. B.C. has struck about 130 "forestry accords" with First Nations over the past few years, but the deals don't provide enough money or timber rights to build viable new enterprises, Mr.

Parfitt said in a recent report. Cutting rights typically run for only five years, not long enough to attract outside investment, he argues.

Companies should be looking at "a whole different way of doing things," says CIBC World Markets forestry analyst Don Roberts.

Mr. Roberts sees potential in engineered "building systems" -- packages of building materials that profitably use more of each tree and, once on the market, give a competitive edge over a producer that's just selling two-by-fours.

Although observers have for years bemoaned the lack of investment and capital spending in the industry, especially on the B.C. coast, Mr. Roberts says there would be money available if there were less uncertainty over land claims and if labour costs were reduced.

Private equity players are flush with cash and are taking a greater interest in the industry: Private equity ownership of North American paper capacity climbed to 25 per cent last year from 12 per cent in 2000, Mr. Roberts says.

If communities think their mills are in jeopardy, local governments, labour unions and employees should all get involved in a renewal plan, says Daniel Veniez, who was involved in a lengthy, and ultimately unsuccessful, battle to revive the Skeena Cellulose pulp and lumber complex in Prince Rupert.

After Mr. Veniez's efforts to raise new financing for the mill failed, it went into receivership and was sold in 2005 to a Chinese investor for $3.3-million. The province poured $323.3-million into the mill between 1998 and 2002, the Conference Board of Canada said in its recent report.

Mr. Veniez, who is now involved in assessing business opportunities for a private equity group based in New York, says towns don't have to be resigned to their fate but that saving an operation may involve wage cuts, tax breaks and other concessions aimed at making the business competitive.

"They have to be turning over every rock."