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5.1 C-Ged Forest Products and Interpac
5.2 Little Red River Cree Nation and Tallcree First Nation
5.3 Woodland Cree Resources and Wapawekka Lumber
5.4 Nabakatuk Forest Products Inc.
Previous sections of this paper have explored the context of Aboriginal participation in the forest industry in Canada and examined some theoretical best practices for partnership design and implementation. This section will describe four existing partnerships involving Aboriginal communities and the forest sector. A variety of innovative ideas are presented that have been tailored to four very specific situations. The scope, scale and nature of the partnerships described here differ greatly from one another. These examples are therefore not intended as models to be replicated. Instead they are meant to provide and spark ideas and possible alternatives for companies and communities seeking opportunities for collaboration.
Cases were chosen based on three factors. First, there was an attempt to describe a variety of partnership types that have not already been described. Second, cases were sought from regions across the country. And finally, cases were chosen based on the willingness of organizations to share their experiences and insights.
The Gitwangak Indian Band is located in Northwestern British Colombia on approximately 1,500 hectares of land. Gitwangak is a member of the Gitksan-Wet-Suwet'en Government Commission. The total registered population is approximately 970, some 450 of whom live on reserve. Education and employment are significant concerns for the community. Eighty-five per cent of the population has no secondary school graduation certificate and 3% have a university degree.
The Gitwangak community has four decades of experience in the forest products industry in saw milling and planing. Since the 1970's, the community has been struggling to ensure adequate and secure employment from the forest products sector. Several earnest efforts to succeed in the industry have met difficult obstacles including a lack of management expertise, capital, and knowledge of the market as well as conflicting objectives with forest sector partners.
In 1991, Westar, the original owner of the local mill, chose to build a higher-technology facility and offered the original mill to the Gitwangak community. Westar had concluded, based on a number of studies, that the mill was no longer viable for their purposes. The community, encouraged by the prospect of eventually securing a timber licence from the province and eager to create employment opportunities, set out to prove that it could run the mill. To accomplish this, the Gitwangak created a company called C-Ged Forest Products.
With no timber licence, C-Ged was forced to buy fibre from outside sources to keep the mill running. A lack of industry experience in senior management and marketing functions resulted in the company paying an inflated price for less than optimal supply. This forced the company to incur a substantial debt. While C-Ged did eventually succeed in obtaining a timber licence from the province, the licence was non-renewable and therefore of little use in securing capital from financial institutions. The short-term nature of the licence was not sufficient security for banks to provide adequate operating credit. As a result of these two factors, serious financial pressure was added to an already strained management capacity.
| Major Events - C-Ged and Interpac | |
|---|---|
| 1991 | The Gitwangak Indian Band takes over a mill previously owned by Westar and creates C-Ged Forest Products to run it. |
| December 1996 | As a result of poor management capacity and inadequate operating capital and facing a $5 million debt, the mill was shut down. |
| early 1997 | C-Ged enters into joint venture with Interpac Forest Products. A $1.6 million capital injected into the mill. An additional investment expected by the community is never made causing dissatisfaction among the community. As a result of incompatible objectives (return on investment vs. employment) the venture soon fails. |
| 1998 | Under new management a new partnership is initiated with Interpac which separates responsibilities between partners based on objectives. C-Ged runs the mill based on employment priorities while Interpac provides operating capital and markets logs and lumber. |
The lack of operating capital put the company at a significant competitive disadvantage vis-à-vis the larger forest products companies that had been in the business for many years. Larger, more financially secure companies are better able to respond to fluctuations in this volatile industry by holding stock for periods when wood is inaccessible (fire season, winter) or when prices rise. For C-Ged to operate in this manner would have required an estimated $1.6 million per month in operating credit when the company had only been able to secure $175,000. The company struggled for some time under these circumstances but a downturn in lumber prices combined with a lack of softwood lumber quota became too much for C-Ged.
In December of 1996, unable to service its $5 million debt load, the mill was shut down, causing a spiral of defaulted mortgages on employee housing and resulting in the closure of the band office.
In early 1997 Interpac Forest Products, a member of the Clark Group, and C-Ged formed a joint venture with ownership of the mill divided 49% and 51% respectively. Interpac injected $1.6 million into the partnership for the purposes of debt reduction and the development of forestry plans. The mill, which was to be run by Interpac based on the company's return on investment (ROI) objectives, was never reopened. The community had expected a further injection of capital by Interpac for a whole log chipper for the mill that would have created some fourteen additional jobs. Disappointingly however, this investment did not take place. As a result, the Gitwangak's employment objectives were largely neglected, causing dissatisfaction in the community. Interpac's focus on ROI conflicted with the community's socio-economic objectives and soon resulted in the failure of the joint venture.
With the arrival of Lonnie Hindle as General Manager of C-Ged in early 1998, the partnership between Interpac and C-Ged was restructured to incorporate both the interests of Interpac and the expressed needs of the community. Mr. Hindle consulted community members on their priorities for the partnership. They identified job creation as the primary objective followed by return on investment. This consultation was undertaken during and following an agreement reached with the Job Protection Commission, which involved a $750 thousand loan from the province to finance a trial run of the mill in order to determine its viability. The mill, which is considered antiquated by industry standards, proved economical even given relatively low lumber prices. A new business plan was developed as a result and C-Ged and Interpac signed on to a new economic plan.
Under the new arrangement, C-Ged runs the mill while Interpac provides operating capital and markets logs and lumber. The arrangement has succeeded in creating a significant amount of employment for the Gitwangak. Ninety-eight per cent of the approximately 70 employees of the mill and woodlands operations are members of the local community. The partnership is currently working on securing niche markets for 'First Nation' lumber at a price premium and production has returned to the high levels achieved in the 1970's. Monthly sales are estimated at $680,000. In addition to the mill and woodlands jobs created, this partnership has provided spin-off opportunities for many Aboriginal individuals to start their own small businesses as owner-operators of trucks, skidders and loaders.
This partnership is unique in that the functions have been clearly separated between partners. Each entity is independently responsible for managing its operations prudently. C-Ged must keep production costs under control to ensure that the operating capital and interest can be repaid to Interpac. For its part, Interpac must forecast market demand and advance capital against this production level. If prices fall to levels that cannot sustain the operations of the mill, production is simply halted until markets recover. To a large extent, this partnership does not require the higher level of compromise required for more integrated joint ventures.
After one false start, the future looks positive for this collaboration. Interpac has recognized the needs of the Gitwangak and their expertise in milling and planing. It is expected that a new partnership agreement will be in place in the next several months and the partners are expected to begin the lobbying process for a renewable timber licence. In addition, Interpac is expected to make a major capital investment in a replacement mill in the near future.
The forest industry is a volatile and complex one. Many of the existing players have decades of experience in the industry, 'deep pockets', and an intimate understanding of the markets. New entrants must be prepared to face competitors armed with an adequate understanding of the complexities of the markets. First Nations' companies must be well versed in business details such as the many categories of licences and types of fibre and should ensure access to qualified professionals such as registered foresters, engineers and financial experts. Many of the problems encountered in the C-Ged case were a result of a lack of understanding of the licensing, pricing, costing and marketing aspects of the business. While some of the obstacles were clearly out of the control of the company (the type of licence granted by the province), the initial closing of the mill might have been avoided if managers had better information about the industry within which they were working. While the community had substantial expertise in milling and planing and was highly qualified to carry out these aspects of the business, management expertise and adequate operational planning was lacking. In such situations it is necessary to either recruit the expertise that is lacking in the organization or enter into a partnership with a party that has the expertise required and allocate the appropriate decision-making authority to this partner.
As discussed in the literature review at the beginning of this paper, the sharing of management expertise between partners can be a way to improve management capacity. Mr. Hindle cautions that this can be difficult in the case of non-Aboriginal forest products companies partnering with First Nations because the interests of the two partners are so different. It is not, for example, useful for a First Nation business to learn how to maximize the return to shareholders if their primary objective is job creation. There may be useful aspects of management and market information, however, that can be shared between partners.
C-Ged's objectives on behalf of the community did not coincide with their partners' goal to achieve an optimal return on investment both in the case of Westar and the first partnership with Interpac. Mr. Hindle asserts that social objectives must be designed into the structure of the venture at the outset to avoid dissatisfaction later on. They cannot be superimposed on existing business arrangements that are inherently profit oriented. This type of proactive planning was a key finding of the literature review conducted for this paper.
A mutual understanding and agreement on each partner's objectives has allowed the current partnership to be designed so that C-Ged is responsible for the mill and can therefore operate it such that community employment goals are met. For its part, Interpac has access to incentive programs, earns interest on the operating capital it provides, and earns a commission on sales of the mill's production. Interpac has come a long way in terms of understanding the needs and priorities of the Gitwangak. Mr. Hindle identifies this effort toward understanding as an important element of the success of the current partnership.
A serious challenge for First Nation-owned businesses is to maintain community interests as a priority while adequately distancing the operations from excessive community involvement. This can be difficult in small communities where personal relationships are expected to take precedence over business decisions. While consensus decision-making may be an important element of the community's tradition, the time required to reach consensus can put the company at risk of losing market opportunities. These types of cultural issues, discussed briefly in the literature review, are matters for which there is no simple answer and must be addressed with great care.
Mr. Hindle judges that the Federal government has a role to play in ensuring that First Nations efforts in the forest industry are facilitated by government policy. He asserts that current government requirements for accessing community-owned resources, such as forests, cost communities an inordinate amount of time and money and should be streamlined. He does not, however, feel that the government should be involved too closely in the formation of industry partnerships because they do not have sufficient knowledge of the forestry markets.
The Federal government should also use existing procurement policies to favour the purchase of First Nation wood. Mr. Hindle explained that a variety of departments purchase significant quantities of wood for use in parks, housing and international development projects and could represent a substantial market for First Nations businesses.
In addition, Mr. Hindle expressed a need for governments to ensure that policies intended to protect First Nation business are in fact enforced. In the past, forest products companies have been granted licences on the understanding that they would partner with First Nations but have not followed through on these commitments. According to Mr. Hindle, for the most part these companies remain unchallenged. In some cases licences are held by non-Aboriginal companies but go unused, leaving the land unavailable to First Nation logging. This occurs even though a "use it or lose it" policy exists on timber licences.
The literature review supports Mr. Hindle's recommendation that governments distance themselves somewhat from the activities of business and the creation of partnerships. It also supports the belief that governments have a role to play in ensuring that First Nations are aware of the opportunities available to them. The incentives offered by the government to encourage partnership appear to be successful to some extent but seem to become the primary concern of some companies, leaving other elements of the partnership neglected.
Mr. Hindle expressed a need for a non-government cadre of forest industry experts for First Nations to call on for advice on the industry and business management. Echoing the findings of the literature review, Mr. Hindle suggested that a First Nation industry association might be in an ideal position to perform this function. He also felt that such an association could act as a broker for First Nation forestry businesses.
The C-Ged case is a striking example of the need for creativity in structuring partnerships to meet the diverse needs of each participant. An earlier joint venture partnership failed to do this - reinforcing one of the principal messages of the literature review that joint ventures in multi-cultural settings are risky undertakings.
Revamping the partnership into one where the functions of the business venture were separate proved to more successful. This arrangement appears to have allowed each partner to meet different objectives while still maintaining a mutually-beneficial partnership.
Little Red River Cree Nation (LRRCN) and Tallcree First Nation are made up of five small communities situated in a remote region of Northern Alberta near Wood Buffalo National Park and have a combined registered population of approximately 3,700. Education levels are low and unemployment high (85-95%). The rate of dependence on social assistance is also high at approximately 65%. Eighty-five per cent of the population is below the age of thirty and population growth is significant, at close to 4.2% per year.
Traditionally the communities practiced a forest-based lifestyle of hunting, trapping and fishing across an area of over seventy thousand square kilometres. The last five decades, however, have seen the relocation of the population onto Indian reserves and traditional forestlands converted to farmland or used for mechanized logging. Wildlife populations have decreased and the Peace River polluted by industry and therefore made unsuitable for fishing. Many of the resources traditionally used for survival (caribou, buffalo, ducks and geese) are depleted or are no longer available to the communities. Elders have been seeking out ways to preserve wildlife and the environment and create economic opportunities that will provide them alternative means of subsistence that are environmentally sustainable as well as long-term.
During the 1950's a number of small bush mills were located in the LRRCN and Tallcree traditional area. At this time, a company by the name of Swanson Lumber ran a mill in the LRRCN community of Garden River. Community members held all mill positions and logging jobs for this facility. In the late 1960's Swanson consolidated operations of the small mills into one facility located in the emerging town of High Level, concentrating all milling positions within the town. As a result, the only jobs remaining were to harvest for the mill. This fact, combined with the mechanization of the new mill, resulted in the First Nations communities having a net loss of 50-60 positions.
In the early 1970's, the LRRCN succeeded in obtaining provincial timber quota, providing the opportunity for the community to log and sell its own wood. Throughout the 1970's and until 1989 LRRCN had a joint venture with a Métis logging contractor to supply fibre from this quota.
The mill in High Level was eventually purchased by Canadian Forest Products Ltd. (Canfor). During its ownership of the mill, Canfor provided a small number of jobs to community. The company also procured fibre from the First Nations at a price of $0.50 per cubic metre. When the Federal government disallowed logging on parkland in 1989-90, Canfor quoted a value of $10 per cubic metre for the fibre. It became clear at this time that the forest industry had been exploiting local resources at the expense of the communities.
The same mill was sold to Diashowa Canada Inc. in 1990-91, and a new company, High Level Forest Products Ltd. (HLFP), was formed to take over the operation.
In order to manage timber allocations, LRRCN formed two wholly owned corporate entities called Little Red River Forest Products Ltd. and Little Red River Askee Ltd. In 1989-90 Little Red River Forest Products (LRRFP) embarked on a $2.5 million mill venture. As a result of a variety of obstacles including the isolated location of the mill and insufficient management capacity, the venture failed. In an attempt to recover from the failed venture and regain the confidence of creditors, representatives from LRRCN met with creditors and representatives from the Department of Indian Affairs to come to an arrangement for LRRFP to repay its creditors. LRRCN proposed that if HLFP would agree to pay the community a fair market price for fibre, LRRFP would repay creditors dollar for dollar over five years. A deal was struck and LRRFP succeeded in repaying its debts under the agreed terms.
| Major Events - Little Red River Cree Nation/Tallcree | |
|---|---|
| late 1980's | LRRCN/Tallcree elders come to policy decision that they will seek to protect traditional lands by any means available. LRRCN/Tallcree creates four holding companies through which timber allocations will be managed. |
| 1989-90 | LRRFP embarks on $2.5 million mill venture, which soon fails. |
| early 1990's | First Nation representatives negotiate a plan with creditors, DIAND, and High Level Forest Products to purchase fibre at a fair market price and repay dollar for dollar over five years. This plan proves successful. First Nations, industry and the Province work together on a Model Forest proposal in addition to working on a co-management agreement among the three parties. |
| 1995 | First cooperative management agreement (CMA) is signed and includes the establishment of a Forest Management Board made up of government, industry and First Nation members. Volume sales agreements include letters of intent which link forest companies with the CMA. |
| 1999 | A second CMA is signed, which has an expanded mandate and geographical scope and involves university research initiatives (the Sustainable Forest Management Network) as well as the First Nations, industry and Provincial government partners. |
The success of this arrangement built a significant amount of trust among the parties and in particular demonstrated that LRRFP and HLFP could work effectively together. The relationship strengthened and eventually led to more comprehensive partnerships.
Over a decade ago, elders from both LRRCN and Tallcree First Nation came to the fundamental policy decision, as a result of the degeneration of the environment around them, that they would work together to regain control over as much of their traditional lands as possible, through whatever means available.
A variety of Federal and provincial policy initiatives provided background and opportunity for collaboration in the area of sustainable resource management. Some of these include: The National Forest Strategy, the Alberta Forest Conservation Strategy, 'Red Book' commitments, the Council of Chiefs Political Accord with Alberta, the DIAND Treaty 8 Cooperative Management Strategy, and the Alberta Water Management Legislation Initiative, among others.
The first cooperative management agreement (CMA), signed in 1995, was sought jointly by the two First Nations and included government (the province of Alberta) and industry (HLFP and Alberta Energy Corporation). The CMA includes First Nation-government and First Nation-industry agreements that focus on the implementation of an ecosystem based resource management strategy for sustainable development. The CMA consists of a thirty thousand square kilometre area of traditional use forestland of the LRRCN/Tallcree and involves six Forest Management Units (FMU's). With the execution of the CMA a Forest Management Board was put in place to manage these resources based on a Forest Management Plan to be developed by the Board. Board members include representatives from the two First Nations, Alberta Forest Service, Alberta Fish and Wildlife, Alberta Water Management and the Municipal District of MacKenzie. Non-voting members included HLFP and DIAND.
Around the same time, LRRCN and Tallcree also collaborated with government and industry partners on a proposal under Canada's Model Forest Program, which would have seen their forestlands designated as the first Aboriginal-managed Model Forest. Partners on this application included the Alberta Forest Service, Alberta Fish and Wildlife, Parks Canada, and HLFP. While the proposal was unsuccessful, the First Nations see this collaboration as an important relationship-building experience that created a strong basis for further partnership with government and forest industry partners.
A new CMA has recently been negotiated and involves a memorandum of understanding that expands the Cooperative Management Planning Board and mandate. The agreement now applies to a larger geographic area including seven FMU's and Board membership has expanded to include as voting members the province of Alberta, LRRCN, Tallcree First Nation, Municipal District of Mackenzie, Daishowa-Marubeni International Ltd., Footner Forest Products, Askee Development Corporation and Netaskinan Development Corporation. Under this memorandum the Board has committed to multi-stakeholder consultation in the cooperative planning process.
Included in the new CMA is a commitment by the Board to a cooperative research and planning relationship with the Sustainable Forest Management Network Caribou-Lower Peace Research Initiative. The Network is a university-based initiative, the goal of which is to "facilitate First Nation involvement in the development of sustainable forest management strategies by integrating scientific knowledge with traditional ecological knowledge." Projects address areas such as water quality, vegetation mapping, eco-tourism and environmental health. The co-management agreement as specified under the new memorandum effectively links industry resource management planning to the research findings of the Network.
The First Nation-Industry component of the initial cooperative management agreement signed in 1995 established a commitment between the two First Nations and HLFP for the joint planning and management of forestry operations within six FMU's. The agreement included a long-term commitment of timber to HLFP in three of those FMU's. The arrangement therefore links both a long-term commitment to HLFP of supply timber held corporately by LRRFP, and an agreement for the partners to collaborate on the development of complementary forestry management plans. HLFP later agreed to support additional First Nation allocation of timber in two FMU's under the condition that they would have access to the conifer supply in these areas at fair market price. LRRFP fibre represents 20% of the HLFP mill supply.
In addition to the agreements with HLFP, LRRCN and Tallcree both have recent volume supply agreements with Footner Forest Products to supply a new oriented strand board mill. Footner is a joint venture between Ainsworth and Grant Forest Products. The province allocated tenure for various amounts of coniferous and deciduous fibre to the First Nations on the condition that supply would be assured to the Footner mill. LRRCN, for example, has been granted 55,000 m3 and Tallcree 80,000 m3 of deciduous to be allocated to Footner. A letter of intent will allocate a further 200,000 m3 to LRRCN and 45,000 m3 to Tallcree for deciduous harvest to be committed to Footner. As described earlier in the case of HLFP, the supply agreements between the First Nations and Footner are accompanied by letters of intent, which commit the company to collaborative forestry management under the CMA.
The First Nations have been offered a 15% equity position in the Footner mill but have not, as yet, been able to secure financing to take advantage of this. A variety of proposals have been made to the Federal government for assistance, all of which have been unsuccessful.
A US pricing index for forest products is calculated and applied to the product mix of each company in order to determine a fair market price for fibre. The pricing structure includes a floor price, which both Footner and HLFP must pay. As the mills break even and begin to make a profit, the price paid for fibre rises proportionally. The First Nations are guaranteed a triple net revenue flow. This means the LRRCN makes just over $2 million per year on timber over management, harvesting and reforestation costs.
The First Nations volume supply agreements include a clause that allows the diversion of 30% of the supply to First Nation mills should the opportunity arise. This ensures that they will have ready access to supply for support to a First Nation initiative if another mill venture is undertaken.
Tenure of the timber is held corporately by the two First Nations in four separate holding companies: Little Red River Forestry Ltd., Little Red River Askee Ltd., Tipemso (Tallcree) and Netaskinan (Tallcree). Representatives from the communities, a registered forester, and the bands' legal counsel all come together to discuss the agreements. Consulting the community can be a relatively slow process but the lawyer for the First Nations notes that industry partners have been relatively cooperative and respectful of the need for consensus. He also explains that many of these are not "boiler plate" agreements but involve a variety of cultural and employment objectives. He does acknowledge, however, that some are more "sterile" than others in order to be more palatable to lenders.
In terms of employment, Footner Forest Products has committed to filling every new mill position with a local community member while HLFP has agreed to fill every job for which capacity is demonstrated to First Nation individuals. Mr. Webb of the LRRCN acknowledges that, thus far, the community has been lacking in the capacity to secure significant employment as a result of both lack of skills in the community and a general poor fit between forest industry jobs and local community values and lifestyle.
Relatively little has been done in these two First Nations in terms of employment and business development apart from logging operations. Aside from the failed mill venture, there was a joint venture with a Métis contractor, which had dissolved and has subsequently been reestablished. The contractor is providing some employment and training and is offering the community the opportunity for buy-out in five years. The bulk of the rest of the logging is done by non-Aboriginal contractors and involves little Aboriginal employment.
In general however, the community would prefer to stay away from logging contracts as it does not fit well with community values. Jobs in the areas of resource management and reforestation, such as environmental monitors (2 positions) and resource technicians (2 positions), are much more appealing to the communities. They have also successfully trained a group of approximately 30 community members who work seasonally as firefighters and perform other ecosystem and forestry duties for 5-6 months of the year.
Representatives for the First Nations see the evolution of the relationships among partners as a key element of the ongoing success of the CMA. Early experiences with partners in overcoming the failed mill venture set a solid foundation for additional collaborative efforts such as the model forest proposal and the previous and current CMA's. Over this period of time a significant degree of trust has developed among the First Nation and industry partners and also the province of Alberta. First Nations representatives perceive a great deal of commitment on the part of all involved, a fact which has allowed this CMA to evolve to its second stage. The experiences of this partnership, therefore, support the literature that places a high degree of importance on building and nurturing trust among partners.
The CMA has successfully linked the priorities of all stakeholders in this collaboration. LRRCN and Tallcree elders want the protection of traditional lands. The needs and responsibilities of industry are to access fibre and perform resource management planning. The interest of the provincial government is commitment to sustainable development and the consideration of local views, values and needs in resource management. The First Nations have succeeded in tying their commitments to the fibre industry to sustainable forest management requirements on the part of these companies. Over the years, the parties involved in this agreement have been willing and committed to exploring new ways to collaborate on ensuring the sustainable development of the traditional lands of the First Nations in this area. This type of creativity has resulted in a comprehensive agreement involving community, industry, government and academic interests.
LRRCN and Tallcree continue to seek out additional opportunities in the forest sector. In addition to requesting financing from the Federal government to secure an equity position in the Footner mill, which has been unsuccessful to date, the First Nations have proposed a business incubator model designed for the communities by a reputable consulting firm. The model would support 15-20 Aboriginal businesses and would involve loan guarantees of approximately $20 million. Thus far, securing this support has also been unsuccessful. This will be further discussed in the following section on the role of government.
Representatives for the First Nations were relatively complementary of the actions of the provincial government with regard to the CMA. They have been as generous "as can be expected" with fibre allocations to the First Nations. They have also acknowledged their own deficiency in implementing an effective integrated resource management process that should have included a comprehensive consultation process. They have supported this gap being filled by the Forest Management Board under the CMA and, as voting members on the Board, are committed parties to the agreement.
The Federal government does not get such positive reviews, however. It has been unable to provide the capital support necessary for the communities to increase their participation in the forest industry by securing equity participation in the Footner mill or by implementing the business incubator described in the previous section. First Nation representatives have attempted, unsuccessfully, to negotiate support based on pending specific claims with the Federal government. This was done by estimating the value of claims to the government and seeking a portion of this compensation in the form of capital financing for the aforementioned initiatives.
In addition, representatives for the communities note that forest industry initiatives do not fit with the Aboriginal Business Canada's current priorities, which are high technology, women and youth, and international-oriented projects. This fact adds an additional obstacle to securing support for the communities' business ventures.
The Sustainable Forest Management Network, by way of its consultations with elders in researching resource issues in the traditional area, incorporates First Nation values into the research that is then considered by industry in developing resource management plans. In this manner, issues of culture and heritage become important elements of the sustainable development objectives of the agreement.
In terms of sales agreements, legal representatives for the First Nations who negotiate on behalf of the communities note that the need for consensus within the community lengthens the process significantly. They also note, however, that industry has been relatively understanding and respectful of this requirement of the First Nations.
This case is an excellent example of a partnership incorporating other-than-profit priorities. It involves collaboration among First Nations, industry, both levels of government and universities, allowing the partnership to achieve a wide diversity of goals among partners. Of particular note has been the role played by the Province in granting fibre allocations to First Nations in a manner that meets industry needs and in supporting the formation of a multi-party, integrated resource management process. Also significant in the case is the fact that First Nations came to a clear decision about the need to increase control over traditional lands and set about methodically achieving this through a variety of partnerships.
First Nation communities in northern Saskatchewan have made significant efforts to gain economic and social benefits from resource development activities taking place within the region. This focus has emerged through recognition that a strong economic base will be a key factor in determining their ability to implement self-government. Significant challenges to achieving this economic base are also recognized. For example, the general education level of the Aboriginal population is significantly lower than for the area as a whole. Nearly half of the First Nations labour force in 1995 had less than a grade nine education. The labour force participation rate for First Nations in the region is also low. In 1991 it was only 38%, compared to 60% for northern Saskatchewan communities. It is within this context that the three Woodland Cree First Nations - the La Ronge Indian Band; Peter Ballantyne Cree Nation; and Montreal Lake Cree Nation - have actively sought opportunities within the forest sector. The level of experience in forestry varies considerably amongst the three nations, and is greatest amongst members of the Montreal Lake community. Located right in the middle of Weyerhaeuser Canada's cutting area, this community has held a moderate timber supply contract to Weyerhaeuser of 20,000 m3 for a number of years. They have their own skidders, cats and a bulldozer. The logging culture is reasonably well established in this community. Prior to Weyerhaeuser's presence in the region, Montreal Lake Cree Nation cut wood for the Saskatchewan Pulp company from 1964 right into the 1980's. Many of the community members involved in logging today are second-generation loggers, who have grown up with their fathers passing on their knowledge of logging operations and life in remote logging camps. Logging experience has been more limited in the other First Nations, and those communities have not held timber contracts in the past. During the late 1980's, Weyerhaeuser began to recognize the growing significance of Aboriginal peoples in the regional demographic mix. Non-Aboriginal people in the region were aged while a larger number of youth in the First Nation communities ensured long-term growth in the Aboriginal population, and an increasing representation of Aboriginal people in the regional workforce. Further, the education level of the Aboriginal population was low but this level was increasing and expectations for greater involvement in the forest sector were growing. This understanding led the company to begin to focus attention on the need to increase participation of First Nation and northern communities within their business activities in order to ensure a strong and stable future in the area. Origins and Development of the Partnership
In 1993 an opportunity to build a business relationship between Weyerhaeuser Canada and the Woodland Cree Nations emerged. A large logging contractor went out of business, freeing up some 300,000 m3 of timber supply from Weyerhaeuser's Forest Management Licence Area (FMLA) that could be allocated to other suppliers. Half of this amount would be allocated to existing contractors. However the opportunity to assign some of the resulting harvesting business to First Nations in the region was of interest to the company. When Agency Chiefs Tribal Council approached the company with an interest in undertaking contract logging, Weyerhaeuser responded with a harvest contract. An Aboriginal harvest company, Agency Forestry Inc., was established. While this activity did not involve the Woodland Cree, it did provide Weyerhaeuser Canada with the assurance that it was possible to do business with a tribal council in a way that did not embroil the firm in the day-to-day politics of the member communities.
Much of Weyerhaeuser's FMLA (approximately two thirds of the area) falls within the traditional territories of the three Woodland Cree nations. It was natural, therefore, to seek business partnerships with these First Nations. Weyerhaeuser Canada held meetings with each of the three Woodland Cree Bands to discuss possible opportunities. On the table were harvesting contracts for approximately 35,000 m3 of timber. While it was feasible to award individual contracts of 10-15,000 m3 to businesses from each community, the possibility for collaboration was suggested.
The communities responded promptly with a proposal for the formation of a harvest company - Woodland Cree Resources (WCR) - that would be owned equally by the development corporations of the three Woodland Cree Nations. A harvest contract was awarded and logging began in the fall of 1994.
With a focus on job creation for community members, WCR initially employed chain saw and cable skidders for harvesting. During the first years of operation, however, the company experienced equipment problems, along with problems related to employee turnover. Harvesting operations were being carried out in remote areas, with workers based in logging camps. This meant that workers had to spend periods of time away from their communities and families. These challenges were particularly significant to workers who were not experienced in the harvesting culture.
To maintain production levels, a decision was made to invest in mechanical harvesting equipment: a feller-buncher, a de-limber and a grapple skidder. Although it was recognized that the 35,000 m3 contract size would be insufficient to make these investments profitable, WCR proceeded on the understanding that Weyerhaeuser would assign additional timber allocations to the harvest company. However, this expectation was not met as quickly as anticipated and the WCR partners experienced significant financial stress for a period of time. Achieving production targets has also presented a challenge at some points along the way. One year, for example, equipment problems contributed to the need to sub-contract out some of the work, in order to meet the contract volumes.
Currently WCR employs fifteen people during ten months of the year. Members from Montreal Lake have tended to dominate this workforce, related possibly to the greater experience within this community, as well as to closer communications with Weyerhaeuser. As more members from one community become employed it is natural for other members of that community to become better aware of opportunities. The issue of providing training and equal opportunity for members of Peter Ballantyne and La Ronge is presently on the agenda.
While the relationship between Weyerhaeuser Canada and Woodland Cree Resources is primarily a straightforward contractor relationship, some additional benefits have flowed from this arrangement. For example, Weyerhaeuser provided technical assistance in areas of basic business issues during the start-up period. This included areas such as book-keeping and the maintenance of good relationships with suppliers. During the period of financial stress, the company basically upheld its relationship with WCR as it would with any other contractor. Payment was made only when logs were delivered to the yard. However, when WCR's debt load led to small suppliers going unpaid, Weyerhaeuser cut the company some slack by breaking its own policy of not advancing cash. This allowed WCR to pay up its suppliers and ensure continued ability to operate. The company is now actively working to reduce its debt load.
Worker safety was another area where the company was able to provide some valuable advice, and Weyerhaeuser mechanical technicians regularly show up to provide assistance in equipment repair and maintenance. Alternatively, the involvement of a local Cree-owned company in logging operations carried out within the traditional territories of the Woodland Cree First Nations has helped to avoid potential land use conflicts in the region. Both Weyerhaeuser and the Woodland Cree are aware of the benefits of this relationship.
Perhaps the most significant subsidiary benefit arising from the WCR-Weyerhaeuser experience has been the strengthened partnership between Weyerhaeuser Canada and the Woodland Cree First Nations. Based upon the positive nature of this relationship, both partners decided to explore ways to take the relationship "to the next level."
A natural next-step for the Woodland Cree would be to expand their involvement in the forest sector from harvesting to manufacturing. However, high capital costs and the lack of an FMLA to feed the mill prevented direct entry into the manufacturing sector. A year of discussions with Weyerhaeuser Canada led to a decision to establish a joint venture sawmill company. The company, Wapawekka Lumber, is a new, independent company with its own management and its own Board of Directors. Located near Prince Albert, the mill began production in 1999 and uses state-of-the-art curve saw technology. This sawing method permits optimal extraction of dimension lumber from small logs by cutting along the curve of the log. At full production level, the mill employs 40 people, over half of whom were recruited from the three Woodland Cree communities. Other jobs are be created indirectly through trucking and forest operations.
The Wapawekka mill has been made possible through financing arrangements involving the three Bands, Weyerhaeuser Canada, commercial banks and government contributions. In total, $25.5 million was required for capital and operating start-up. The joint venture partners raised $10 million of this amount, while $12.5 million plus $3 million for operating expenses was financed through commercial banks. Of the funding raised by the partners, $5.1 million came from Weyerhaeuser and $4.9 from the three bands. Of this latter amount, 75% has been financed by a national bank. Government contributions helped in raising the other 25% of the First Nations' share.
In addition to its contribution to job creation, the mill will also create demand for additional timber harvesting, as it uses an annual volume of 280,000 m3 to produce 50 million board feet of dimension lumber per year. This added demand has created an opportunity for WCR to significantly increase its harvest levels. Last year WCR's contract was increased to 50,000 m3, and this is expected to continue to rise to the 85,000 m3 range or higher. This will put WCR in "the big leagues" in terms of logging contractors in the region. Participation by the Woodland Cree in the forest sector is not expected to stop with their relationships with Weyerhaeuser Canada. Ultimately the First Nations hope to establish themselves as key players in the management of the forests of their traditional territories. To this end, for example, the Peter Ballantyne Cree and the Government of Saskatchewan agreed in the fall of 1994 to begin negotiating an FMLA for the Peter Ballantyne Cree Nation.
The relationship between the Woodland Cree First Nations and Weyerhaeuser Canada has developed slowly, starting with a low-risk engagement period, before jumping into more intensive partnership arrangements. In this case, the engagement period consisted of a relatively low-risk contractor relationship. This provided the opportunity for the partners to get to know each other and to demonstrate the ability to operate in a business environment. The credibility created during this experience led to deepening of the relationship and the eventual establishment of a joint venture sawmill operation. This is not to under-play the significant challenges and stresses that Woodland Cree Resources has had to overcome in the course of its operations. Rather, it has been the successful preservation of the relationship throughout these challenges that led to the strengthening of the relationship and the ongoing development of new partnerships with the company.
The decision to establish WCR as a joint venture between the three First Nations of Montreal Lake, La Ronge and Peter Ballantyne has had significant repercussions. It would have been feasible for the communities to respond individually to Weyerhaeuser's offer of timber supply contracts. For Montreal Lake, they could have added this additional supply to their existing supply contract. For Peter Ballantyne and La Ronge, sole control over a supply contract would have given them sole control over hiring decisions. The advantages of working together, however, were identified early on. By establishing the partnership, WCR was able to capitalize on the existing experience within Montreal Lake, while extending the opportunity for involvement in harvest operations to the other communities. At the same time, collaboration provided the opportunity to get into mechanical harvesting. While this decision was considered risky, it has put the company in the position of being ready to dramatically expand its productivity as additional supply is allocated.
For Weyerhaeuser Canada, the decision to encourage a three-way partnership has helped to ensure the success of the Woodland Cree harvesters. If WCR has a better chance of survival than three separate companies, then the challenges to build relationships that might be caused by a business failure can be avoided. This arrangement also allowed the company to focus various informal services such as technical support and occasional internal policy bending on one, not three, companies.
| Major Events - Woodland Cree Resources Inc. | |
|---|---|
| 1993 | Weyerhaeuser Canada begins discussions with Peter Ballantyne Cree Nation; Montreal Lake Indian Band; and La Ronge Indian Band to allocate a supply of timber that has come available due to a large contractor going out of business. |
| 1994 | Woodland Cree Resources Inc. is established as a harvesting company supplying wood to Weyerhaeuser Canada. |
| September 1994 | Peter Ballantyne Cree Nation and Saskatchewan Environment and Resource Management sign an agreement to begin negotiating an FMLA. |
| March 1998 | Wapawekka Lumber is formed as a joint venture between the Woodland Cree First Nations and Weyerhaeuser Canada's Saskatchewan Division. WCR's contract is increased to 50,000 m3 in anticipation of opening Wapawekka mill. Half of the incremental increase in timber harvesting accounted for by the new mill will be contracted out to WCR, further increasing its harvest operations |
| May 1999 | Wapawekka sawmill begins operation. |
Throughout the period of operation of WCR, each partner has become familiar with the other. As a key player from one of the partner First Nations puts it, "WCR has let us get to know each other. We have learned that Weyerhaeuser Canada is driven by its policy, so we know what to expect. They are organized, their targets are clear, and they are here for the long term." Unlike some bad experiences that have occurred at the hands of smaller operators, the WCR experience has led to a strong level of trust that Weyerhaeuser is not a fly-by-night operation that wants to take advantage of the Cree.
For Weyerhaeuser, the experience has demonstrated that the First Nations are able to work together with them in a way that keeps community politics at arms-length from their involvement. The issue of job allocation, while important, is one example of how the communities are able to address internal issues without having Weyerhaeuser involved in the discussion.
This trust has formed a solid base for moving the relationship into more risky joint ventures. The investment of significant funds by Weyerhaeuser and by the Woodland Cree into the Wapawekka sawmill is a clear example. This mill has been built explicitly upon a cooperative model. While Weyerhaeuser holds a majority share of the company, and four of the seven seats on the Board of Directors, decisions will be made on the basis of a super-majority. If consensus decision-making cannot be achieved, then at least five votes will be required to pass a decision.
Given the high level of community ownership in the joint venture, recognition of the close relationship between management and workers has led to a greater degree of cooperation. Union representatives were invited to come into the mill to recruit members, and membership in the union is on a voluntary basis. It is hoped that labour issues, when they arise, will be able to be resolved more through cooperation than confrontation.
One dimension of Weyerhaeuser's motivation in building relationships with the Cree was to bring the demographic mix of its business relationships more in line with that of the population of the region. The importance of workplace diversity had already been established as a corporate value throughout the various regions of operation. Significant experience in this area had been gained through the hiring of minority African-American employees in its US operations, for example.
While cultural issues were relatively minor factors in the business relationship with WCR, they have become much more important in the context of the integrated workplace environment of the Wapawekka sawmill. Having developed a strong basis for trust through the WCR experience, all partners in the joint venture mill were prepared to take a pro-active approach to cultural orientation. During the three months prior to the opening of the mill, cross-cultural training has been provided for all of the mills technical people. These sessions included visits to the communities, learning about the Treaties and learning about the Cree view of the world. Screening of prospective employees includes discussions that address their willingness to respect the culture of Cree co-workers.
This case reinforces the following best practices gleaned from the literature review.
Waswanipi is the most southerly of the nine Quebec Cree communities, located on a regional highway about 100 kilometres southwest of Chibougamou and approximately 700 kilometres north of Ottawa. Some 750 people live in the community with another 300 Band members living off-reserve. In 1994, 189 members received benefits from the Income Security Program set up under the James Bay and Northern Quebec Agreement (JBNQA) to supplement income of those involved in traditional trapping pursuits. Another 130 members held full-time jobs. Local government institutions accounted for the largest share of these jobs. With a high youth population, the anticipated rate of new entrants into the labour force was high, and the need for job creation critical.
Situated within an intensive zone of logging operations and pulp mills, Waswanipi naturally looked to the forest sector as a potential growth area to support local economic development. Under the JBNQA, the Waswanipi community was provided with an area of 612 square kilometres ("Category I" lands under the agreement) with a timber supply of approximately 60,000 cubic metres per year. This region includes traditional traplines, which also extend into the region well beyond the community.
Since the early 1980's, the Waswanipi Band has carried out forestry activities utilizing two Band-owned companies. Founded in 1983, Waswanipi Mishtuk Corporation was responsible for wood harvesting and road construction, while Waswanipi Apit-See-Win Cooperative was established in 1986 to carry out silvicultural contracts.
Mishtuk harvesting is mechanized, with two feller bunchers, four skidders and one de-limber owned by the company. Other equipment is rented from the band, or hired contractors to carry out specific tasks. Prior to the establishment of the Nabakatuk mill, discussed in the next section, wood that was harvested by Mishtuk was sold to sawmills in the region. Recently, there have been eight forestry companies active within the Waswanipi trapline territories.
The Apit-See-Win Co-operative carried out silvicultural contracts both related to the Band's forestry activities, as well as for other forest companies operating in the region. Activities include site preparation, tree planting, and pre-commercial and commercial thinning treatments. The Apit-See-Win technical team consisted of six people with skills in forest management, Cree resource use issues and GIS technology. In addition, the Co-operative hired some forty seasonal workers to carry out silvicultural projects. The Apit-See-Win forestry team also provided forest planning and management services for Mishtuk Corporation. On average, the Co-operative scarified and reforested an average of 200 hectares and carried out pre-commercial thinning of 50 hectares each year.
In order to streamline management and administrative tasks, the Apit-See-Win Cooperative was shut down in March 1999, with all its activities transferred to Mishtuk Corporation. Mishtuk is now responsible for forest management, silviculture, and timber harvesting activities, and the Apit-See-Win technical staff now work within the structure of Mishtuk.
Up until 1991, the logging methods utilized by Mishtuk within the community's landbase mirrored those of the other forestry companies. Large clear cuts of up to 400 hectares were utilized, with no formal regard for the coexistence of other resource use on the same land. This led to internal community tension, with traditional trappers and other community members concerned about maintaining the Cree relationship with the land on one side of the issue, and proponents of job creation on the other. In response to these concerns, Mishtuk modified its harvest methods to a "checkerboard clear felling" approach - the first use of this forest management technology in the region. Under this approach, cut blocks are no larger than 40 hectares, and within these blocks only a third of the mature trees are harvested at one time. Distribution of the blocks ensures that trapping and other traditional activities can continue within the region.
Forestry activities carried out by Mishtuk and by the Apit-See-Win Co-operative provided an important source of employment for members of the Waswanipi community. However, by the late 1980's community leaders recognized that in order to play a larger role, they would need to expand their forestry operations. Further, this expansion would be an important key in trying to develop a form of forest management that supported coexistence with the Cree trappers.
Barriers were identified that needed to be overcome to achieve this expansion. First, there was a need to access a larger amount of forested land in the form of a forest management and supply contract (CAAF). To obtain a CAAF from the provincial government, however, one requirement is a sawmill. The cost to establish a mill was well beyond the financial resources of the community, so funding would be necessary. However, to secure the funding required to establish a sawmill, not only did potential backers want to see a secure wood supply in place, they also demanded a demonstration of the expertise and management experience associated with running a commercial mill.
When a forest concession of some 60,000 cubic metres became available in the late 1980's, the Band approached the Quebec government to express their desire to obtain the CAAF for this area. Quebec agreed to reserve the area for the Band for a period of five years. The Band was required to put down $250,000 as a guarantee that they would take action. This amount would be refunded if and when a mill was successfully launched. With a timber supply in place, Mishtuk began discussions with forest companies related to the possible establishment of a partnership. These discussions dragged on for several years with no result. By the spring of 1993, the Quebec government wanted evidence that planning was taking place for the CAFF area for use in logging activities. They requested the presentation of a detailed business plan.
As a result of this pressure from the province, Mishtuk obtained funding from a Federal government program and proceeded to hire a company to prepare business plan for a sawmill. The results of this plan suggested that a mill would require a further allocation of timber in order to reach a cost-effective scale of production, and that a significant funding contribution from government sources would be required. The Federal government, through Industry Canada, was supportive in principle to the idea of assisting in the funding of a sawmill. They insisted, however, that the Band team up with an experienced partner before making any funds available.
| Major Events - Nabakatuk Forest Products Inc. | |
|---|---|
| 1983 | Mishtuk Corporation established to oversee Waswanipi's timber harvest contracting activities. |
| 1986 | Apit-See-Win Cooperative established to carry out silvicultural work. |
| Late 1980's | Quebec agrees to reserve a timber supply and management area for the Waswanipi Band, provided they establish a sawmill to utilize the wood supply within a five-year period. Mishtuk begins discussions with a forest company about a joint venture mill, however the negotiations proceed slowly and the company pulls away from the table after a year and a half. |
| June 1993 | A detailed business plan for a sawmill is prepared for Mishtuk Corporation and presented to the province. |
| Spring 1994 | Four companies are invited to submit proposals for a sawmill joint venture. Domtar is selected as the industry partner best suited, and negotiations toward a protocol agreement begin. |
| Spring 1995 | Quebec officially registers the CAAF to Mishtuk. Mishtuk and Domtar sign the protocol agreement and begin working together to achieve the objective of developing a mill. |
| Fall 1996 | Formation of Nabakatuk Forest Products Inc. with first Board meeting and start of site preparation. |
| Winter 1997 | Three-month training program begins to train workers in sawmill operations. |
| June 12, 1997 | Official opening of the sawmill. |
Four companies were invited to submit proposals to enter into a sawmill partnership. Three of them responded. Specific criteria were established that included the willingness of the company to meet the community's need for socio-economic benefits such as jobs, training and other factors related to financing and purchase agreements of mill by-products. Although Mishtuk Corporation had not previously carried out contract work for Domtar, discussions with the company suggested that Domtar would be the most responsive of the candidates to the special needs and demands.
The selection of Domtar as the mill partner was based on several considerations. First, this company already operated a processing mill within 80 kilometres of the community of Waswanipi. That meant that rough lumber produced at the joint venture mill could be easily shipped out for finishing. Secondly, Domtar held a CAAF within the Waswanipi trapping territories. The Cree hoped that by working in the context of a joint venture sawmill, Domtar would become more willing to work with trappers to develop modes of coexistence in their logging operations. In addition, it was anticipated that spin-off benefits such as harvest and silvicultural contracts could most readily be obtained from Domtar, given the proximity of its forest management area.
In May 1994, Mishtuk and Domtar agreed to begin negotiating a formal protocol agreement that would set out the nature of their partnership and the responsibilities and expectations of each partner. In March 1995, the Quebec government officially registered the CAAF to Mishtuk Corporation, clearing the way for Domtar and Mishtuk to sign the protocol agreement.
This protocol agreement addressed issues directly related to the operation of a sawmill, as well as several side issues of importance to the Waswanipi Cree. For example, the preamble to this agreement sets out the fact that the venture would be operated for profit. Within this for-profit context, Mishtuk is recognized to have the additional responsibility of addressing the needs and expectations of community members for social benefits in addition to profits. Among the key elements within the protocol agreement is a contract in which Domtar agrees to purchase wood chips from the mill for a period of ten years. Domtar also agrees to purchase rough lumber from the mill at a price clearly tied to market prices, with a clearly spelt-out payment schedule.
The protocol agreement also spelled out that Domtar would work with a newly established committee representing Cree trappers that would review Domtar's annual harvesting plans within Domtar's CAAF, in relation to the trapping activities of Waswanipi members. This collaboration was intended to ensure that Domtar's logging activities would avoid areas of key concern to the trappers which included trapping lines and related issues such as fish spawning areas, burial sites, and so on. The agreement also included a settlement of a long-standing lawsuit against Domtar by the Band related to mercury pollution from a Domtar pulp mill alleged to have impacted Waswanipi's commercial fishery.
With timber supply and a partner in place, a long process of negotiation with various government agencies began to nail down funding. The capital cost to establish the Nabakatuk mill totalled $5.2 million. The Waswanipi Band and Domtar each put up $1.1 million, while Industry Canada provided a further $1.2 million. The remaining resources required to build and operate the mill were provided in the form of a loan from Domtar to the new company. Funding of $425,000 to train workers for the mill was provided by Human Resources Development Canada and by the Cree School Board. Nabakatuk is set up as an independent joint venture company held by Mishtuk Corporation and Domtar, with Mishtuk holding a 55% share and Domtar 45%. The company's Board of Directors is composed of seven members, three from Domtar and four from the community of Waswanipi.
Nabakatuk began operations in the summer of 1997. Operating on two shifts, the mill workforce is comprised of 30 native employees, mostly from the community of Waswanipi, and three non-native managers. When the harvesting, forest planning and silvicultural activities of Mishtuk are considered, the employment impact of forestry involvement is even more significant. Some 60 community members are employed year-round, and during the summer, seasonal work pushes this number up to over 100 people involved in the sector.
Plans for Phase II of the partnership are currently under way. This phase will involve a $13.5 million investment to install drying kilns, a planer mill, a heavy equipment garage and a computer-based optimization system for the sawmill itself. While this phase will involve considerable financing commitments from outside sources, considerable interest has already been indicated. Under the protocol agreement and through Mishtuk Corporation, the Cree will retain control of the Board of Directors, throughout any evolution that may occur within the partnership.
The path to partnership in the Waswanipi sawmill was a journey that took many years. The complexity of issues ranged from internal community discussions about jobs versus traditional pursuits, to coordinating financial commitments from several sources including government, to dealing with regional Cree politics. Within this context, one potential partner lost interest and walked away. In the end, Domtar was able to maintain a commitment to stay at the table and take a long-term view of the process.
An interesting aspect of this partnership is the formal way in which the industry partner was ultimately selected. Due to the presence of many forest companies in the region, and to the availability of a wood supply controlled by the Cree, Waswanipi was able to choose its partner on the basis of its own criteria. Although Domtar and the Cree had had little business dealings with each other in the past, the formal approach of inviting proposals seems to have been successful in selecting an appropriate partner.
The forests of the Quebec Cree territories have seen a rapid expansion in logging activities over the past decade. This expansion has corresponded to a general push by the province and the industry to open up more northerly regions to logging activities as forests in the south have been depleted. It also corresponds to the increasing production of Quebec mills of dimension lumber for export. At the same time, Aboriginal populations within the region have become increasingly concerned about the impact of this expansion on their ability to carry out traditional lifestyles and activities based on the forest. Protests and blockades against logging activities south of the Waswanipi Cree territories had been established by the Algonquins of Barriere Lake around the time that Waswanipi began negotiating for the CAAF. The Cree of Waswanipi had also launched a lawsuit against the Domtar pulp mill claiming that mercury pollution had negatively impacted Waswanipi's commercial fishery.
Clearly, the opportunity to work as partners in a forestry joint venture held promise to create favourable relations between Domtar and Waswanipi and avoid the disruptions and ill will generated through confrontation. For both partners, the prospect of settling the mercury lawsuit out-of-court was a further incentive for cooperation rather than expensive legal confrontation. Domtar was further motivated by the prospect of accessing a significant flow of rough lumber to its planer mills, in addition to the potential for profits generated by the sawmill venture itself.
Waswanipi was clearly interested in creating jobs in the forest sector, while respecting the rights of the community's trappers. While they had considered the option of establishing a mill on their own, the need for capital and expertise meant that an established partner was needed.
Careful negotiation of the protocol agreement has helped to avoid potential misunderstandings during the implementation of the partnership arrangement by clearly outlining the basis for working together. This formal agreement addresses issues directly related to both the operations and business of the sawmill. These issues include the long-term chip contract, purchase and payment schedules for the rough lumber produced by the mill and the arrangements to be made in the event of expansion of the partnership. The agreement also addresses some of the side issues of critical importance to the community of Waswanipi, such as the establishment of a trappers committee to review Domtar's harvest plans.
In addition to the solid basis created by the protocol agreement, membership on the Nabakatuk Board of Directors has provided representatives of Cree and Domtar with the opportunity to meet on a regular and frequent basis. This has helped to improve communications and enhance information flow that, in turn, has helped to improve relationships between the Waswanipi community and the forest company.
The involvement of an experienced partner has provided considerable benefits to the Nabakatuk joint venture in the area of management of costs and cash flow. For example, harvest contractors working for Mishtuk were previously paid upon delivery of logs to the roadside. The cost of these logs would then need to be carried as inventory until the mill was ready to saw them. Domtar advisors have led the mill to change this policy so that contractors are instructed when to harvest, in order to ensure that timber harvest coincides with the mill's sawing schedule. In this way log inventory is reduced, helping to mitigate cash flow problems.
Domtar specialists have also worked with Mishtuk forest planners to design road construction and cutting patterns to benefit the mill operations. This includes targeting areas for harvest so that the size distribution of logs fits with the mills optimal demand. For example, too many small or large logs supplied all at once would make less effective use of the mill's current set-up than a proper mix of sizes. Company engineers have also assisted in the design of road construction schedules that take account of terrain and optimal time of year. Nabakatuk has implemented a mosaic-cutting pattern, in order to enhance the coexistence of logging with trapping activities. One outcome of this is that more roads must be constructed in order to supply the logs required. This road network will become an asset for future logging activities from these same mosaics, but in the short-term has added to the cost of timber supply.
For its part, Mishtuk has applied its expertise in managing relations with trappers within the CAAF. Individuals holding traditional responsibility for the management of activities taking place within their trapline, or tallymen, are consulted prior to road construction and harvesting. This provides them an opportunity to suggest changes to where the roads are built, or to identify sensitive areas that require special care. Domtar has picked up on some of these processes within its own CAAF.
Various levels of government played their parts in influencing how the Nabakatuk partnership was formed. The initial objective of the Cree was to gain management influence over the CAAF that became available within their traditional territories. Provincial requirements that the CAAF be tied to a sawmill played a factor in encouraging the community to establish a mill. This also led the community into a period of intensive debate over the merits of jobs versus the impacts of logging. Quebec also requested that a business plan be developed. That process brought in the Federal government, initially to fund the costs of the business plan, and later to contribute to the capital requirements of the mill itself. This contribution did not come without strings attached, as the Federal parties wanted to see an experienced partner involved before they would supply funding.
This case reinforces many of the lessons found in the literature: the importance of partner selection; building the diverse needs of the partners into the agreement; the synergies that can result from a carefully planned partnership; and taking a long-term perspective.
The case also illustrates the important role that government can play in setting out conditions for partnerships to develop in an effective manner.
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