Atlantic Forestry March 2017

Big numbers, heavy artillery
by David Palmer
    It’s hard to square the upbeat message and positive numbers in recent Irving ads, trumpeting the past year’s purchases of private wood, with the glum mood that prevails among woodlot owner organizations, which feel they are being increasingly sidelined by the big forestry company.
    “To date, JDI is … on target to purchase 870,000 cubic metres of private wood. This will be the most private wood the company has ever purchased,” the ad states. It goes on to say, “JDI appreciates its relationship with private wood producers and woodlot owners which has made this record breaking year possible … is the result of direct contracts with private woodlot owners and wood producers.”
    The clear and simple message is that JDI is not interested in dealing with marketing boards. In fact, there hasn’t been a contract between the southern New Brunswick marketing boards and the company for five years. JDI refuses to sign one, so if you are a woodlot owner and have even one load of wood to sell, you have to call a JDI rep instead of going through your own duly elected woodlot owner organization.
    Marketing boards have seethed in frustration and appealed to the government to intervene on their behalf. Those appeals have fallen on deaf ears. Now, as SNB faces yet another legal challenge from JDI, a former DNR minister, Jeannot Volpé, is calling on the government to intervene in the dispute. “The government should consider a requirement that industrial players like JDI buy a portion of their wood from New Brunswick’s forest products marketing boards as a condition for access to trees on Crown land,” he recently stated to CBC. 
    Those are nice words to hear, but it’s not likely to happen, and Volpé knows it. If a supportive fellow like him, who is sympathetic to the plight of woodlot owner organizations, failed to protect them when he was the minister in the pre-Forestry Plan days, what’s the likelihood of that happening today with an Irving-friendly minister? 
    The government actually thinks everything is just fine the way it is. Their spokesperson, Jean Bertin, said they support the “current practices” for wood flow. He went on to say, “With the current levels of private wood harvesting back to historic levels, there does not appear to be a market issue.”
    But there is a market issue. When a woodlot owner can’t simply call his local marketing board to sell a load of wood because the board doesn’t have a contract, and he is forced to call the company rep, that’s a market issue. When markets are practically plugged year around because too much wood is being cut and markets start closing up in January, that’s a market issue. When the price of pulpwood is so low that it gets left in the woods, that’s a market issue.     
    When a government spokesperson says that the closure of pulp mills has created an over-supply of low-grade material in the region, he is just repeating an old shop-worn government line that has become the standard excuse for doing nothing. The fact is that the government has directly contributed to the over-supply by a series of ill-considered actions capped off by the signing of the Forestry Plan back in 2014. That single act put an extra 660,000 cubic metres of wood on the market, and effectively transferred control of the public forest from the Crown to JDI.

    Now JDI is seeking control of private woodlots, which, if successful, would give the company full and unfettered dominion over a big chunk of the forests of New Brunswick.  Efforts by Southern New Brunswick Forest Products Marketing Board (SNB Board) to reinstate marketing control over private wood have been challenged three times by JDI: first at the Forest Products Commission (FPC); second at the Court of Queen’s Bench; and third, at the New Brunswick Court of Appeal. Each time the company has lost. Now they are back for round four. 
    The lawsuit being brought by JDI against the SNB Board and the SNB Wood Co-op stems from an order (2015-604) passed by the SNB board in January 2015, that required all private wood in the SNB area to be purchased from the SNB board. It was an attempt to stop the direct contracts that have divided wood producers and their organization, and to steer all sales through the Board. That order was appealed by JDI to the FPC, and will be heard in March. In the meantime, with a stay in place, JDI has carried out business as usual, and the board has been left without a contract.   
    This current lawsuit, which was scheduled to be heard on Feb. 21 (as this issue of AFR was going to print), challenges the authority of the SNB Board to delegate its powers to its sister organization, the SNB Wood Co-op, and also asks for a stay of all appeals stemming from Order No. 2015-604 pending the outcome of the court case.

    In the meantime, there is plenty of concern among lumber producers that traditional access to the U.S. market enjoyed under the now-expired Softwood Lumber Agreement (SLA) will be severely curtailed. As noted by Peter McKenna in our guest editorial (pg. 6), with Trump in place as president, the powerful U.S. Lumber Coalition believes it has the upper hand, and is calling for tariffs and quotas on Canadian lumber. They want to reduce the Canadian share of the market from 31 to 25 percent, a move that would likely rocket lumber prices through the roof and possibly have a dampening effect on U.S. housing starts just as they are starting to pick up steam.  
    Already, the U.S. International Trade Commission has determined that there is a “reasonable indication that the U.S. industry is materially injured by imports of Canadian softwood lumber.” This means the U.S. Department of Commerce will carry on with its two investigations, one on countervailing (ruling due on or about Feb. 20), and the other on anti-dumping (preliminary ruling due on or about May 4).
    The heat and pressure are on, and the Canadian industry isn’t speaking or acting with a single voice. Recently, Nova Scotia Minister of Natural Resources Lloyd Hines led a delegation of Nova Scotia lumbermen to Washington to plead the special case for the Maritimes, a role that would have formerly been carried out by a strong, disciplined team led by Dianna Blenkhorn of the Maritime Lumber Bureau, representing all Maritime lumber producers.
    While the Quebec government and Resolute Forest Products want free trade with no quotas or duties – a position that is unrealistic – the B.C. Lumber Trades Council says it could accept a flexible system that adjusts to market conditions. Breaking from the pack completely, and possibly looking for a compromise, Tembec CEO James Lopez is open to quotas, saying that a tighter supply of lumber, combined with a steadily improving U.S. housing market, could trigger additional price increases, thereby offsetting the disadvantage of losing some market share. He could have a point.