PAGE 2 - ~ NORTH WES r FORESTRY DIGEST - JAN UARY 1997 MILL WORKERS throughout the northwest faced greater uncertainty in 1996 as a result of bottomed-out pulp prices and high logging costs. THE YEAR IN REVIEW Proposed buyout of Repap was key feature of forestry here in ‘96 1996 WAS a rollercoaster year for the northwest forest industry. , The biggest unknown through the last 12 months — and into 1997 — was just who will be in control of major portions of northwest limber stands. The year started with failed efforts by Orenda Forest Products to find a buyer for its 342,000 cubic metre forest licence in the upper Nass. A New York consortium had proposed to lake over the company and divert the woed to a pulp mill at Gold River on Van- couver Island. That deal fell through however after dis- sapproving noises from the forests ministry. Orenda did however find a buyer in Repap B.C. which was moving to increase its regional fibre supply in the wake of the Nisga’a agreement-in-principle. The deal signed in February meant the loss of 140,000 cubic metres for Repap. The company demanded $80 Million in compensation from the province while at the same time predicting they'll be able to work well with the Nisga’a. By summer licence trans- fer hearings were over and ihe Orenda deal was ap- proved, The conditions re- quired upgrading of the company’s Port Edward pulp mill, comfort lo workers in’ the Stewart and Kitwanga ‘arcas that there would be job stability. Almost immediately after ‘some but gave little they couldn't give their pullp - logs away, Repap bought — Orenda, Tumours began to spread that Repap itself was for sale. That was confirmed when ~ potential buyers showed up in Prince Rupert, for a tour of the pulp mill, ~ It wasn’t until December that the deal was made pub- lic, with Montreal-based Avenor offering one share in its company for every 4.25 shares of Repap Enter- prises Ltd. Bul Avenor’s announcement included mention of the possibility of ‘‘strategic divestiture’? of some of Repap’s assets. That raised fears that Repap’s northwestern oper- ations could be put on the auction block if the sale goes through. Forests minister Zirnhelt would not commit himself to licence transfer. hearings over the deal. By year’s end the markets began to pass judgment on the proposed acquisition. Repap’s share price plunged more than 25 per cent, lead- ing to speculation Avenor shareholders might kill the dea! when they vote on it in February. Pulp markets The story of the year that affected the average forestry worker, most was the poor econemics fer the — north- west’s pulp-heavy forests. | ’ Although saw. log. prices were padding big profits: far “interior - "operators, more coastal outfits found Both Repap.- and West Fraser said the costs of har- vesting pulp logs were run- ning at approximately dou- ble the price the logs were fetching on the open market. The first sign of trouble was a series of extended shutdowns and- slowdowns that accompanied ‘the: strike at Repap’s Prince Rupert pulp mill in late ‘95, It was late spring before con- (ractors in some areas got back to work, West Fraser began warn- ing mill workers of an im- pending shutdown in the summer, but it didn’t come until late fall. A six-week shutdown of Skeena Saw- milis in Terrace was an- nounced, throwing several hundred mill workers and associated contractors out of work. At the same time both West Fraser and Repap be- gan a concerted push for special consideration of the difficulty of operating in the northwest. Raad building costs, oper- ating costs, and the price of pulp were making it difficult for them to continue opera- lions. Both companies took the matter to government. Repap proposed a change in the stumpage system that would take into account losses on the pulp side, ef- fectively reducing . the stumpage. of more pulp- laden ~operators, and | in- ercase the stumpage. in the interior: where.-sawlogs are more prevalent. West Fraser also met with forests minister David Zirn-- helt, secking ‘telief on: log- ‘ging costs. One possibility raised was some relaxation of road-building standards. Same in the industry said present slandards — are ludicrous because they in some cases require roads that will ultimately be deac- tivated Lo be constructed to highway standards, Zirnhelt’s office was ac- tively - considering both companies’ proposals at year-end. By early January, more bad news came, hitting the town of Stewart like a sledgehammer blow. The key operators in the Meziadin-Stewart area told workers and contractors there that logging would nat resume there until June be- cause of the poor pulp markets, Forest Renewal B.C. a The promise of Forest Renewal B.C., bankroiled by the superstumpage fees the industry had agreed to, became a bad joke in 1996. Things had started well for the organization, | After much criticism in 1995 about delays in issuing grants, the money finally started to flow. Numerous projects were announced around the northwest. But then came. figures showing an unprecedented provincial government budget deficit — figures which the government had apparently sat-on through the spring election. [twasn’t long before’ the: ‘now in- famous decision was made to raid $400: million from FRBC’s $900 ‘million sur- “plus.: Tt will likely be consider- able time before the industry feels anything but betrayed by the NDP government. Logging dispute HW anyone felt betrayed by government, it was the Port Simpson Indian band. The group tried to get a permit to log reserve land near Prince Rupert. They claim the federal De- partment of Indian Affairs had no one on staif to pro- cess the request, so - they went ahead and logged without a permit. In August, the — feds swooped in and seized $5 million worth of logs. The band disputed the seizure in court. The episode escalated when federal’ negotiators said they might be forced ta suspend Tsimshian treaty negotiations while the legal dispute is ongoing. To date, contractors have gone unpaid and a Japanese firm hasn’t received its wood. Meanwhile the tim- ber sits and loses value. Cutting levels a New annual allowable cuts (AACs) came down for many areas of the province including parts of the north- west. in most cases the chief forester indicated existing culling levels could he maintained for the short- to mid-term, but that some reductions will:be necessary over the long term. Con- versely, a proposal to dramatically increase cut- ling ‘rates in the Cassiar area came under fierce criti- cism from environmental e Year in Review groups. Ahead to 1997 am Crilical to the northwest in 1997 will be the outcome of Avenor’s proposed takeover of Repap. If the deal dies, as some - analysts have suggested’ in the wake of market activity, Repap will be at the mercy of its creditors, mainly the TD Bank and the Royal Bank. If it goes ahead, there’s still the possibility Avenor’s planned ‘‘strategic’ divesti- ture’ may mean more in- stability for the northwest . B.C. operations. a Also critical is how the government decides to play both the Nisga’a treaty ne- gotiations and the land claim’ negotiations, with more than 40. other tribal groups. A final Nisga’a. treaty should: be: reached ‘in: 1997, but’ key provisions — for transition to Nisga’a forestry control are yet to be hashed out.” . Most important is whether the government decides to sign similar deals with other native groups. A govern- ment committee touring the province is to issue recom- mendations this spring. a A close eye will be kept on pulp prices. Some im- provement in the market, barring unprecedented government assistance ora major stumpage .” policy change, will’ be needed to. ensure northwesterners work in mills and in the bush in 1997. 1997 NORTHERN WOOD FORUM May 8-10, 1997 Williams Lake, B.C.