New BC Forest Licences

This week the British Columbia Ministry of Forests, Lands and Natural Resource Operations announced the creation a new type of forest licence that allows emerging, innovative forestry companies to more effectively respond to fluctuations in the supply of wood fibre. These licences will allow secondary manufacturers, such as pellet producers, to apply for supplemental forest licenses when they can’t get enough residual waste from their usual suppliers.
The new Supplemental Forest Licence allows companies to harvest wood only when traditional, business-to-business fibre supplies are reduced. This helps ensure that licence holders – bioenergy companies, pellet producers – have ongoing access to the fibre supply they need to operate.
The new licence also allows the Province to include conditions in licences that encourage the harvesting of less marketable and harder to access wood, helping to make greater use of the existing allowable annual cut.
BC forest minister Steve Thomson explained to the Vancouver Sun Tuesday applications would be approved upon proving demand and the availability of timber in the area that the applicant would need it. Timber for such a license would be allocated within a region’s annual allowable harvest from low-grade tree stands deemed uneconomic for lumber production.

Innovative, Flexible Residuals Licence

The Legislation has been passed over the years, and last week details of the regulations were worked out in the BC legislature.
These forest licences under the Forests Act, five-to-15 year non-replaceable, are a new variant to previous and existing licences.
Next week the Ministry will publish the final policy.
A preliminary document, obtained by Madison’s Thursday, details that “annual rent for a SFL is $0.25 per cubic metre of Annual Allowable Cut (AAC). Annual rent will be payable on the issuance of the licence. Note: Annual rent for a restricted forest licence is $0.37 per m3 of AAC”.
Doug Stewart, Director, Forest Tenures Branch, FLNRO, explained to Madison’s Thursday in a phone interview that this is a new licences are derived — in part — from the old ‘pulp wood agreements’ (which were also non-replaceable) under the Forest Revitalization Plan.
“These new licences are intended for companies that rely on business-to-business [relationships] for timber supply,” said Stewart to Madison’s.
The supplemental licences will specify volume, time frame, and timber profile.
Once issued, a restricted forest licence holder has the same basic harvesting rights as any other non-replaceable forest licence holder. However, an supplemental forest licence holder’s harvesting rights are not activated until “need” has be assessed and approved by the Ministry. In deciding whether to advertize a supplemental or a restricted forest licence, ministry staff should first determine if the target  timber processing facility audience will require a continual supply of additional volume on an annual basis or whether there is only a supplemental need for volume from time to time.
Example calculation of fibre supply and time frame:
•    Supplemental Forest Licence  AAC = 50,000 cubic metres
•    Term = 5 years
•    Maximum to be harvested under the licence = 250,000 cubic metres
•    Ministry confirms by way of a letter the licensee’s “need” is 20,000 cubic metres in which they can harvest this volume anytime in the next 3 years.
The licensee then submits a cutting permit (CP) under the following potential scenarios:
a.    CP for 30,000 cubic metres
b.    CP for 20,000 cubic metres
c.    CP for 20,000 cubic metres and then another CP for 15,000 cubic metres.
The Ministry must then determine the best course of action associated with the above scenarios.
Stewart explained that the Minister of Forests will advertise opportunities and make them available for competition. These advertisements will be restricted to specific types of operators or geographic areas. Bidders must “hold or intend to hold a pellet plant or OSB mill,” said Stewart. “And provide rational for why they couldn’t get sufficient volume attached through business-to-business.”

When asked about a timeline for roll-out of these new licences, or in which geographic areas they are likely to be first implemented, Stewart said it’s too early to know that yet.
“There is a lot of industry demand,” explained Stewart. “The last thing we want to do is put more timber supply on already constrained land. We’re going to take the time we need to do this right, where there is real demand.”
Wood Pellet Association of Canada (WPAC) executive director Gordon Murray detailed to the Vancouver Sun that the [BC pellet] industry welcomes the change, which he believes will wind up being as much of a tool to gain leverage in securing longer-term contracts to buy wood waste from sawmills as it is a way to access timber directly. Murray expects that the bigger forest-license holders will be more cooperative in signing longer-term fibre deals, giving pellet producers access to the scraps from their harvesting that often wind up being burned, rather than having pellet producers taking up timber allocations.
“We’re trying to make something out of everybody’s leftovers,” Murray said to the Sun. “The barrier to our industry growing is having some secure access to low-grade timber.”
In a phone interview with Madison’s also Thursday, Murray said, “This is a good start, a good gesture, and an acknowledgment of the hard work we have been doing.”
“The major forest companies in BC are still burning post-harvest forest residuals. This kind of waste shouldn’t be allowed. WPAC wants more secure access to that fibre. The major forest companies want fibre security to build their sawmills, as do pellet manufacturers to build their plants. It is not competition for the same wood, pellet producers are not interested in sawlog grade timber.”