Evan Saugstad: Economics 101 coming soon to a mill near you

saugstad

Spring is here, summer is just around the corner, and, hopefully with that, some sense of normalcy in our local economies with more people beginning to get back to work.

But, with this, my fears are that we will hear that one of Chetwynd’s two sawmills will close as they will be unable to access enough timber to supply both, and therefore will no longer be able to continue operating efficiently. So, with that, here is a bit of a background, and why I think this way.

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On January 24, 2020, Blair Lekstrom announced his resignation as Premier Horgan’s community liaison for the contentious caribou conservation plan for B.C.’s South Peace. A month later, the Section 11 Agreement was signed with virtually no recognition of the Lekstrom Report’s 14 recommendations.

The final agreement differs little from the draft Agreement, despite 18 months of local community input. The only concessions were our Prime Minister, Premier, and two Chiefs reluctantly agreed that they could talk to others about this Agreement if they had consensus to do so.

The most significant change reads: “promote reconciliation by providing for the participation of local governments in caribou recovery initiatives,” whatever that means or entails.

Does it mean that the local communities must ask for forgiveness for objecting to the Agreement, or that the parties to the Agreement need to apologize to the local communities for their abhorrent process?

If we were to believe the glowing press releases issued by the Agreement signatories, we would think that our future is thousands of caribou spread across the landscape while thriving local communities all sing kumbaya and celebrate.

Those carefully crafted press releases and selected quotes reiterate that no jobs will be lost, no sawmills, coal mines, pipelines or other industries will be closed, even though this Agreement bars these same industries from using those 700,000 hectares of land. Despite repeated requests, no socio-impact assessment was ever completed and released that would substantiate those claims.

The quotes and news stories from the local communities and Lekstrom painted a completely different picture. There will be severe direct impacts to Chetwynd and substantial indirect impacts to other Peace communities.

All forest licences impacted by this Agreement are now required to update their Forest Stewardship Plans, at their cost and considering all measures as approved within this Agreement, with approval being subject to First Nation agreement.

As a result of this Agreement, a new and updated Timber Supply Review (TSR) by BC’s Chief Forester is required. After the Chief Forester receives this new information and determines the impacts to timber supply, a new annual allowable cut (AAC) for the South Peace area will be rendered.

What has not been made clear is the timing of this review. It could come early this fall, if the Agreement signatories have concluded their work in determining which limited areas may have some industrial activities, such as timber harvesting. As far as the public can determine, this work is currently behind schedule, likely in part, due to COVID.

Upon receiving this new information, the Chief Forester will have no choice but to reduce the AAC as a result of the significant amount of land lost for timber harvesting. A lower AAC means less wood for mills, plain and simple; there’s no way around this.

There was good reason why Premier Horgan did not have the full socio-economic study completed and released prior to this signing. The final Agreement still refers to that there “may be” timber harvesting impacts, and the signatories can, with all sincerity, follow the script and state that no impacts have been determined, as of that February 21 signing.

A completed socio-economic impact study (with a new TSR) would show that there is not enough timber to sustain two sawmills and that one of Chetwynd’s two sawmills will become uneconomic to operate. This study would also show that both mills currently buy timber from other places to supplement the local supply to keep them operating and profitable.

Timber cannot miraculously appear from elsewhere when this amount of timber harvesting area is suddenly made off limits, as that timber does not exist. The Agreement also contains a clause making sure timber harvesting cannot increase in other areas to make up for these shortfalls.

Economics 101: when a sawmill cannot operate at its designed capacity, it cannot operate economically, and when it is not economic, it will not be kept operational.

Of interest, the BC government has implemented a process (working groups) to determine if any industrial use can be accommodated in limited areas within the Agreement area. Industry and other affected users (stakeholders) are being asked to provide their input, but they are not part of any decision making.

What is interesting is that all stakeholders have been requested to act in “good faith”, this after the four signatories to the Agreement acted in such bad faith.

The Province has also admitted that the socio-economic study they direct awarded and paid thousands of dollars for did nothing of value in determining impacts from this agreement, and that they now require a new one.

When one mill closes, there will then be more timber available than the remaining mill can process, but don’t expect that it will stay in Chetwynd. Timber in excess of one mill’s capacity will be transported to the Prince George area to help keep one of their mills operational, as mountain pine beetle impacts have resulted in a timber shortage there.

Logic tells me that when this announcement is made, all four Agreement signatories will be silent and hope it blows over, or put out their press releases claiming that this is a business decision, that it doesn’t have to happen, has nothing to do with the lopsided Agreement and that one’s anger should be turned towards the forest industry.

After the closure, we are very likely to hear those licences be handed over for First Nation management. Who knows what government’s response to that will be, but then again, by the time this decision is made, maybe we will have a new and different government.

Evan Saugstad is a former mayor of Chetwynd, and lives in Fort St. John. 

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