Exactly Ben. The trees in the forest belong to the people of BC and they should be used for the benefit of the local communities and not as a source of leverage for the multinational forest companies.

I believe the whole purpose of NAFTA was not free trade (lumber was excluded), but rather a back door way for Ottawa and Washington to get legal control over how we run our resource industries usurping the sovereignty of the provinces... without the provinces having any say in signing off on that. Danny Williams will soon be the first to come up across this ugly new reality. Not that it matters here in BC, because our current government in BC is of the whole purpose to sell off all our sovereignty to our resources to the highest corporate bidder (foreign and domestic)....

We need a Danny Williams here in BC, because we need to have free enterprise opportunity again where local citizens can create value and participate in the utilization of our resources.

Our bureaucracy (planning and crown resource agency) is of the mind that it is easier for them to deal with three large multinationals and therefore that is the only business model they are willing to work with. We need a new way of doing things in BC that protects our provincial sovereignty and create opportunities for its citizens with those sovereign rights exercised for the kind of policies that keep profits, jobs, and control as local as is possible (thats how diversification also happens).

I agree that Danny Williams is a conservative and a lot more of a true conservative than those at the federal level. Being a conservative does not mean you have to support the corpocracy agenda as a right of passage. I think Danny Williams should run to be the Prime Minister and I'd support him over Harper any day of the year.

Right on Ben & Eagleone. I too totally agree and I too wish we had someone like Danny Williams looking after BC.

I understand Dany Williams works for only a dollar a year...that alone would make me vote for him.

Good on Danny Williams! Wake up Pat Bell!

I say way to go Danny!!! Campbell and his goons do not have the guts to do this in BC, they would rather see everyone on EI, social services, or perhaps even living on the streets. I say lets bring Danny to BC before may, and then maybe we would have some one to vote for.

Right on by all!
Unfortunately, we have a government here in B.C. who are willing to sell our resources out to the corporate power brokers and it is time the people of B.C. said enough is enough.
And that would include other resources as well.
Danny Williams has it right, and we could use some of that here.
Take back the tenure if the corporations are not going to use it,tie the timber back to the mills,and then I believe we would see a completely different attitude to forestry here in B.C.
As Ben and Eagleone both said,the resources in B.C.DO belong to the PEOPLE of B.C., and we really need to remind those we elect of that!
This corporate butt kissing for whatever reasons by our leaders has got to stop!
It is this very same attitude of corporate entitlementwith government backing that has brought the entire country to the brink of financial disaster!

Totally agree... The Govt. should expropriate (for market price) the alcan power system from Alcan/Rio and give the people in kitimat and B.C. some more stability. Iam not a socialist but I think that the government should exert more control over forest tenures and own all of the power systems in the province. Before we know it we will be paying more for hydro like Ontario.

Danny Williams has courage and stands up for Newfoundland-Labrador.
Resources belong to the people of the country and not to big corporations. Hope something can happen in McKenzie.

I've read that there were once 800 small mills operating in the bush around Prince George. But whatever the figure, 800 or 100, how many of them were 'profitable'? Couldn't have been ALL of them, or ALL of them would still be operating, don't you think? Like Warren Buffet says, "Buy, HOLD, and prosper." But that only applies to those operations in which there's a 'profit', or a reasonable expectation there'll be one. Now we're down to what, and how many of THEM are 'profitable'?

Now, don't get me wrong. I'm in full agreement with what Premier Danny Williams has done in this case. And it seems he's on solid ground legally, too, in regards to the agreement between the Newfoundland Crown and Abiti's predecessor companies.

And it would be nice to see "our" B C Government move to enforce agreements it, or its predecessors, entered into with various companies for the disposition of Crown resources in return for various other societal benefits.

The long-term allocation of timberland tied to the continuation of operation of the Youbou sawmill on V.I. comes to mind. The mill is gone, the allocation has been sold, and the logs coming off it are now primarily exported, so I understand. That certainly was not the intent of the original deal.

But the central issue here is still one of 'profitability', is it not? Unless one thinks that we should just cut trees, and run mills, and do all the job-creating 'value-added' just to provide an "excuse" for paying those doing it, that is.

If that's the case, then why anger the Enviros by cutting forests and all these other 'global warming' causing activities? Couldn't we just as easily give everyone a pick and shovel and a bare piece of ground and tell them to dig a hole, and when they're finished, fill it in again?

We could do that to the end of time. And employ everyone who's unemployed, all the time. And we've provided the perfect excuse for "let no man eat until he's first worked", have we not? And it is no more useless than making any forest products for which there is no market available that covers fully the costs of their making, plus a reasonable inducement in profit to continue to do so.

"Value-added", despite what many persist in thinking it is, can be defined very simply. It is "any further process beyond the initial stage of any product's manufacture that returns its costs plus an additional profit."

Unless it can do that, there is NO "value" added. Only additional "cost" that can never be recovered in "price". It becomes as ridiculously akin to believing the Hope diamond could be "value-added" by cutting it into four smaller jewels, just because the work and wages of the diamond cutters might be multiplied four times over that earned in finishing the one big gem-stone.

The key here, people, is to realize why products that ARE genuinely needed or wanted, and CAN be made, CANNOT now be made at a "profit". Not necessarily because the "costs" are too high, but because those "costs" are no longer in a correct nexus with the "incomes" that are necessary to liquidate them through price. This is what we, and "our" governments should be focussing on. Applaud Danny Williams for what he has done, by all means. It's one step in the right direction. But realize that it really does very little to solve the larger underlying problem

If the issue that Premier Williams is addressing is breach of contract, then surely the correct course of action would be to take it through the courts. Passing legislation in the House leaves the smell of dictatorial power not unlike in a banana republic. The last time I looked, it was too cold to grow bananas in Newfoundland.

I absolutely adore Danny Williams. It is true that he works for a dollar a year. He was incredibly wealthy before he became premier, so instead of drawing a huge wage, he donates his wages to charity. Contrast that to our premier who gave himself and his cronies a nice raise while allowing BC's resources to be sold to the lowest bidder.

Williams' approach to resources is incredible. When the oil companies wanted to sign a deal, he held out until he got the right deal proclaiming, "That oil has been there for thousands of years. It isn't going anywhere and it won't go anywhere until the people of Newfoundland and Labradour get a deal that works for them!"

I have never voted Conservative in my life, but if Danny Williams ran for Prime Minister, I'd vote for him. He is the rare exception of a politician who actually is in office for the people. I don't those Ruskies would be putting their flag on our ocean floor if Williams was PM.

Williams for PM!

He makes me want to move to NFLD.

China will never (in the near future anyways) match the lumber demand of the US, for the sole fact that they build a fraction of the wood-frame houses that the US does. Most of the lumber sold to China is used for concrete framing, not home construction. Some companies are taking the initiative and going overseas to push the wood-frame construction business, and kudos to them for building their own markets.

Sometimes in life it is a good thing to pinch yourself...wake up and realise what state things are actually in.

I think Mr Williams has just pinched something which has awoken many people to what things have really come to.

These international corporations, their system of finance and the all mighty market economy which is a game of speculation more than anything else has now proven to be a farce.

Corporately dominated industry sectors including the financial sector have now become so central to everything that takes place globally that when they faulter for reasons which their structure is based, such all encompassing calamity occurs.

This game of speculation could not work without having each of these sectors effectively controlled and manipulated by a very few. Stability will not return to anything until this control and influence and manipulation is broken.

The problem with the situation we now face is that the lack of foresight has led us to an economic structure of which when things go this wrong, we are basically helpless in adapting.

The lions share of the economy is dependendent upon a very few group of companies which have very limited abilities to adapt to anything and governments are largely responsible.

At a crisis point such as it currently is, we do not have the diversity in place to shift anything from the business models that large corporations have developed.

Governments have blindly coordinated the structure of our primary industries with large corporations "specialised mega factory" business models while at the same time have ignored the inevitable consequances of the "all eggs in one basket".

Comitting practically all of our resources to this "big only" business model is now seen as a mistake by some, only because of the awareness that all our eggs have been dropped...and there are very few diversified and therefore adaptable enterprises left.

There is no doubt a role for large public owned corporations and their large scale business approach, but governments must not allow this to dominate everything and therefore make all of us dependent upon their business model and this business structure.

What is most alarming is that the federal government is now desperately searching for a solution...but the people who they are asking are the large corporations..and they are asking them ..what they need to repair their economic problems.

Guess what money they are after and guess what good this will serve and guess where we will be when they find out it didn't work. We will be even more committed to what is responsible for this whole mess in the first place.

Great article Ben, and very thoughtful comments from all.

According to the news NAFTA prohibits what Danny Williams did. He will be fighting lawsuits by the American investors before you know it.

Same obstacles would exist whenever some other American and/or Mexican interests are perceived to have been violated under NAFTA rules.

With NAFTA we gave up a lot of our sovereignty. Thank you, Brian Mulroney!

(I do agree that it was the right thing to do, but that is another matter).

woodchipper:- " Guess what money they are after and guess what good this will serve and guess where we will be when they find out it didn't work. We will be even more committed to what is responsible for this whole mess in the first place."

When it doesn't work, which it won't, we'll end up having 'one' employer ~ the Government. That should make some very happy. Until they realize that 'socialism' is merely "monopoly State capitalism with (absolute) control by Finance."

The 'name' on the title deed may then be "the People", but there'll still be exactly the same crowd in control as there is now. And that control will still be to THEIR priority of benefit, not ours. And it will be absolute control, not almost so, as at present.

The only way it can be changed is to change "finance" first. Total "incomes" available to the public, as a whole, have to be made continually equal to total "prices" of goods and services, as a whole, coming on the market. It's not hard to do, the means have been known for nearly 90 years. It allows genuine 'free enterprise' to flourish for the benefit of all, rather than to be continually corrupted by those trying to establish control over others through the use of 'money'.

I agree with you socredible. I'm not sure why most everyone seems to be applauding this thing.

I guess some people won't be happy until the government controls every aspect of our lives, as if it's not bad enough already.

Socredible:"The only way it can be changed is to change "finance" first. Total "incomes" available to the public, as a whole, have to be made continually equal to total "prices" of goods and services, as a whole, coming on the market."

Very intriguing. You seem to have done a lot of thinking about this. Which other country (in the capitalist sphere) has adopted this kind of system and how is it working out?

Give me a hint, please, so I can use that as a starting point for some possible research of my own.

Socredible; your first post refers to the evolution of the forest industry and your theories of why things have turned out the way they have. You speak to this as if only economics and profit or lack of profits are responsible for what has happened. This presumption is absolutely ridiculous when you understand how our governments have coordinated the structure, size and conglomeration of our industry and specifically the timber supply.

There is absolutely no doubt that a portion of these numerous small mills went broke for reasons which are simply explained as business failures..but far more of them were forced to quit or made to go broke because of the governments actions towards phasing these type of small operations out of existance.

Should there be 800 mills around PG?..probably not. But should there be a handfull of international corporations which dominate the North American forest industry and control the lions share of our resources? Should this control be allowed to be so strong that it overpowers our governments ability to regulate them or hold them to their legal obligations?

I gather from your perspective on how you define "value added" and why you condemn this as a fruitless option to what we have, coming from the same basis of simple profit assumptions.

FYI, this province has not for at least the last 40 years had any genuine intent to support small operators or value added manufacturers by providing reasonable access to the resources it needed.

The few token measures offered, were in fact nothing more than attempts to appease the public complaints. Ridiculous timber tenure schemes were largely designed to prove that this sector couldn't survive ..and it certainly didn't for the most part... because it wasn't supposed to.

In BC and in fact most of Canada, the governments notion of success has been measured by consumption levels of resources or the production rate of a plant and efficency is largely seen as how few people it takes to do this. You can understand why a shareholder would like this success, but does it serve the publics interests?

Small business with timber rights was not the industry which this province wanted because it interfered with the interests of the tried and proven big business model which simply couldn't go wrong....so they..and perhaps you thought.

Socred, once again you are wrong. "But that only applies to those operations in which there's a 'profit', or a reasonable expectation there'll be one."

Correct that profits drive the viability of a company, but your assumption that a consolidated industry is a profitable one is flawed and only on paper.

When PG had over 100 mills in the surrounding area I would argue the vast majority of them were profitable. The problem was the banksters came in with cheep debt capital to buy out all the small operators at a nice premium that no one could refuse... and thus used debt financing (that you are so fond of) to consolidate the industry under bankster Madeoff type hedge fund ponzi schemes and our paid off politicians were in bed with them.

This is why that Americans came after us was because we allowed corporate consolidation of our industry with the help of our tenure policy that enabled the banksters to use the leverage to create new values and thus consolidate the industry with the eye to a lowest cost production that undermines previously viable forestry operations that did not sell out to the debt financiers for a lowest common denominator solution. The province was guilty for enabling this with its tenure policy, previous industry insiders sold out for personal one time gains and moved on to other investments, and the new industry capitalists were subsidized in their consolidation by a broken and corrupted financial sector that allowed them to use speculation and cheep debt to manipulate entire industries so as to gain control of those industries to the detriment of other participants that didn't have the same access to cheep capital.

The bottom line is BC sold its sovereignty for quick profits to those who sold out to the cheep debt banksters. Politically it was a win win situation until the ponzi scheme started to unravel, which it is now and we find we no longer have any sovereignty over our economy because we sold it for one time profits.

I agree with the bulk of the posters on this one. To me it's somewhat irrelevant whether new operators would be profitable or not. Ultimately that's up to them and how they manage their operations. Some will win and some will lose. That's what the free market is for.

I don't think it's in the spirit of the free market to basically continue to provide absolute rights to a public resource to one large company or a handful of large operators, even when they decide not to operate! I have no problem whatsover with the operators making the decision to shut down or close their operations. That is their right. If they make that decision, however, it makes perfect sense to me that they should forgo their claim to the resource.

At the end of the day, the private sector does not own our crown resources and we should NEVER get to the point where we allow that to occur, either implicitly or legally. I'm all for the free market and big business, however, they need to know that WE still own the resources and we only ALLOW them access to them on OUR TERMS.

No, woodchipper. I am not an advocate of the "big business model". There is a genuine 'efficiency' that is often far greater overall in smaller businesses than it could ever be in the international corporate behemoths that have replaced them. Where any efficiency is more often than not a purely 'paper' one.

This is a very complicated subject to try to discuss in this form of venue, since to properly make the points I'd like to make requires an examnation of "why" governments have done what they have done, and seemingly always favour the "big" over the "small".

There are many reasons. The familiar ones being everything from outright political corruption, to a very genuine desire to more fully utilize the entire tree, and not leave the kind of slab, edgings, and sawdust "burn piles" that used to characterize many Interior bush mills. And a great number of other reasons in between. Some valid, some spurious.

But undoubtedly the largest reason is "financial". And, in the sense I mean, it is not something unique to the forest industry alone, but something that pervades EVERY industry. It is a 'macro-economic' problem, a correctable 'flaw' in the way 'accounting' relates to 'money'in any modern industrial economy

And that's where the solution, if we are indeed serious about preventing further concentration of the resource, has to come from. No amount of 'micro-economic' tinkering with the forest tenure to try to reverse what's happened will ever have the desired lasting long-term effects unless we first deal with the larger problem at that greater level.

It's fundamentally what's 'caused' what has happened to happen.

And if we don't deal with it, even if we could strip the resource base away from the "big" and re-issue it, even on the most generous terms, to the "small", it would only be a short time before what happened before would just repeat itself. Legislation to prevent that simply will not work, no matter how well-intended, without basic changes to "finance" itself.

Diplomat asked:- "Which other country (in the capitalist sphere) has adopted this kind of system and how is it working out?"

None have ever adopted it fully, Diplomat. Alberta came close, despite some vicious opposition from the Federal government and the private Banks in the late 1930's. The outbreak of war in 1939 made it difficult to continue, since we went from a world where there was too much production capacity available but not enough 'money' in the hands of consumers to fully draw on it, to one where there was suddenly not enough production capacity (for both consumer goods AND the implements of war) and too much 'money'. Which people were encouraged to put into 'war bonds', since there was little to spend it on

Austria, right after the close of World War One tried a variant of it which was quite successful in establishing a rather unprecendented prosperity for a country that had just been defeated in a war that cost it all its empire and sea coast. But by 1923 the Austrian government was isolated by the "international financial community" who demanded a return to "orthodox" finance. Or else. They complied, and the previous prosperity came to an abrupt end.

Australia, during the latter part of the 1940's tried another variant of it to prevent post-war 'inflation' from making food prices unaffordable. Through it, Australian consumers were able to buy their groceries at a discounted price. The difference between the price they paid and the one a store would have had to charge to recover its costs plus a profit was made up to the store by subsidy from their central bank.

Pre-war Japan used the reverse of it to subsidize 'producers' (instead of 'consumers')to help build up their war machine, and, before Pearl Harbour, to try to peacefully 'capture' foreign markets for certain of their exports.

Ludwig von Mises Institute - classical liberalism and the Austrian School of economics.

You are pointing me in that direction, I presume. Thanks.

I guess I would be more supportive if I believed that governments acted in the best interests of the average person (taxpayer).

NMG, I think you summed it up good.

Socred, what you are talking about is the Obama tax plan?

Heaven forbid, Diplomat! Not at all! von Mises and the Austrian School of Economics have quite contrary ideas to those of Social Credit!

After the close of World War One there was a period of trade depression in Canada that later gave way to the excesses of the "Roaring '20's". While we were in this recession the Federal government, just as now, was under considerable pressure to "do something". Though no one was sure just "what" this "something" really should be.

Some prominent MPs who were members of the House of Commons Banking Committee sought to have several 'experts' in the field of business and finance appear before it and give advice on what should, or could, be done. (Sounds vaguely familiar, doesn't it?)

One of the 'experts' called who did appear, (Henry Ford was one of the more prominent ones asked, but didn't show up), was C H Douglas, a former British army major who, before the war, had been a consulting engineer with an extensive knowledge of cost accounting.

Douglas had already written several books explaining how a 'flaw' in the overall financial system would make any period of economic 'boom', (as had been the case during the War), inevitable to be followed by an ever more serious period of 'bust'. And he proposed a method of correcting that, one which would have also prevented the concentration of wealth into ever fewer hands.

His ideas were being quite widely discussed at the time in Britain, (where they also had a recession, one that never really ended until just before WW II), and there was some feeling that the British Labor Party might adopt them as their policy, rather than the 'socialism' which it subsequently did.

During his appearence in Ottawa before this Committee, (this was in 1923), H.H. Stevens, a prominent Conservative MP, was his sharpest critic. And the subject of what had happened in Austria after the war came up. Douglas explained at some length how the Austrian government had been able to use 'national credit' to induce and maintain a 'prosperity'. While its former ally, Germany, was undergoing the infamous 'hyper-inflation' that paved the way for Hitler's rise to power later on.

In spite of the evidence given, Stevens still didn't believe it possible. The Committee did not move to adopt any of Douglas's proposals.

He left them with the prediction that before the end of the 1920's there would be a complete economic collapse unless changes were made. Shortly thereafter the economy improved, and the whole issue became moot.

In the fall of 1929, Douglas was again in Ottawa, enroute to a World Engineering Conference in Tokyo, Japan, where he was to present a paper. He was invited to lunch by some of the members of the Banking Committee he'd previously appeared before, and one of them pointedly reminded him of his prediction, and wanted to know just when the impending financial doom foretold would actually happen.

Douglas replied, just to seem as if he wasn't being put on the spot, "Oh, in about a month." And, though he often admitted quite openly that it was purely a fluke, about a month later the stock market crashed and the Great Depression began!

Later, in the midst of that Depression, which Conservative PM R B Bennett first tried to deal with as unsuccesfully as I believe Harper would deal with this one, had he a majority, H. H. Stevens abandoned the Conservative party and formed the Reconstruction Party. The platform he campaigned on called for the adoption of Douglas's ideas!

The Liberals very successfully upstaged him, however, by MacKenzie King's twisting of what Douglas had really proposed into a call for 'nationalising' the Bank of Canada instead. (But still using it exactly the same way it was being used when it was partially 'privately' owned.)

The Liberal government then slowly moved to follow the ideas of John Maynard Keynes, who, it has long been alledged, was paid by the large banks in Britain (including the Bank of England), to find a way to 'stimulate' a depressed economy WITHOUT giving up Bank control over credit. The downside being that such a stimulus always leads to increasing 'inflation'.

In contrast, the Social Credit ideas utilized the benefits of 'deflation' (lower prices to consumers), by using new credit to make up any loss from selling below financial cost incurred by producers. Even the banks, so far as their profits are derived from the actual business of banking are concerned, would benefit from this poicy. They would do more business. But they WOULD lose control over their current ability to 'choke-off' credit at will, and through that, concentrate wealth into ever fewer hands as business assets have to be liquidated to meet otherwise unrepayable debts. And that's why they've been death on Social Credit ever since the ideas were first proposed.

I think NMG summed it up very well, too, Eagle. But just what IS the "Obama tax plan"?

If it's simply another means of "RE-DISTRIBUTIVE" taxation, that's not what I've been talking about at all.

The big problem we face today isn't one of 're-distributing' incomes. It's that incomes distributed, in their totality, are currently insufficient to fully liquidate the overall costs of production continually coming forward into prices at the point of final retail.

And no matter how you try to 're-distribute' an 'insufficiency', you can't really ever make it into a 'sufficiency'.

The answer is to find a way to make incomes sufficient without further raising prices. Infrastructure spending won't do that. It'll just make everything more expensive.

NMG; your post goes entirely around a circle and back to where you started.
What you base your understanding of this upon is that BC has a free enterprise system, as in an open market availability of timber, a somewhat level playing field and it is simple economics that drive everything..and "win or lose" is all just simple and fairly based.
Our American neighbours might claim to operate more like this but it is not this way in BC or most of Canada.

I don't know why or where it came from but people have a very unique approach to what forests are supposed to do and how restrictive we have made our regulations concerning the forest industry. Any person can hold a parcel of agricultural land and is not obligated to farm it at all.If they decide to grow wheat, they are not obligated to produce bread. A placer minor can mine gold but is not required to make jewelery. But when you cut a tree there is a very restrictive set of obligations involved including processing wood which has changing stumpage rates.

BC for instance controls 95% of all the forestland in the province and this is essentially 100% control over the entire forest industry supply. There are a few minor sources of timber scattered accross the province but very few which could sustain much. This means that whatever industry we might have is absolutely dependent upon the provincial tenure system. Pretty hard to make wood products without trees and pretty hard to build any sort of plant without a secure source of trees....when there is no real open market source either. This is entirely different than what you infer as actually happening and this is where the US has its biggest problem with the softwood issue.

The Canadian approach to its timber tenure/licencing/rights systems have also included the social contract elements of obligated manufacturing of forest products in a certain manner, at a certain rate, at a certain place for a certain amount of time or perpetually. Cyclical markets and everchanging public demands makes this a very difficult system to balance properly.
It is indeed a very highly manipulated system.

Right or wrong this has been the way we in Canada have done things in an effort to create stable longterm employment and economic development.

What this social contract amounts to is a coengineered forest economy between the government and the companies with a very complicated set of rules/principles which are supposed to ensure that the objectives of the province are met.
Most primary wood manufacturing plants in Canada were granted long term timber tenures in accordance with this social contract and hence we the public expect that this continues.
We expect that if a company holds a timber tenure that the company continuously operates and therefore employs people, pays stumpage and taxes etc...continuously.

The other side of this social contract involves the profitability of the company which has specific and sometimes unprofitable obligations. Continuous operation and therefore continuous employment, a consistant tax base has all justified and necessitated our governments concessions through reduced stumpage.It has also justified huge and very secure commitments of our timber resources, of which are very difficult to remove from the companies which hold them.

However logical this expectation is to the Canadian public, our American neighbours insist that stumpage must be competetively based regardless of whatever other type of obligations to costs that our Canadian industry must bear.

The softwood lumber agreement which we signed in 2006 has eliminated our sovereign right to set stumpage rates for social benefit purposes.
Therefore our governments must rescind these continuous manufacturing obligations (which apply only to the softwood lumber producers)which we placed within these social contracts.

What seemingly applies in this "Danny Williams" move is that somehow certain companies have taken the liberty to shut down other types of wood facilities such as pulpmills, OSB plants etc when in fact they had no such right to close.
A similar breach has occurred in BC as well, but no Danny Williams here...?

Well, Woodchipper, lets say technically they could be forced to keep them open. Which would only bankrupt the company. And probably other companies, too. Then they would have to close.

Witness the effects on the Gold River pulp mill when the government owned Skeena Cellulose continued to operate in a market that was clearly unprofitable for it to do so. For purely political reasons. Both mills eventually failed, even though Gold River had previously been profitable enough to operate, and Skeena never had been.

Presumably a subsequent owner, if the mill could be had cheap enough after a bankruptcy sale, might have reduced the 'capital costs' of their investment sufficiently to be profitable again. That didn't happen there, though.

But there are bound to be other effects. For one thing, if the plant was operating on, or had been financed by, bank credit, and the bank gets burned in the bankruptcy their losses will have to be made up somehow.

And they will be. The largest component of 'interest' charged on bank financing is a premium for risk of default. The concept is actuarial, like insurance. If the risk of default has risen, interest rates not only on loans to the forest industry, but on all loans, will trend higher. Or those loans simply will not be made.

Since 'operating costs' are always more important than 'capital costs', and most mills with timber tenures operate on a credit line, this rise in the 'cost of money' will directly effect their profitability.

And it is from that profitablity that the loan principal advanced will be repaid, and 'credit worthiness' for more funding in the future will be maintained. We are entering into a very vicious circle here, I think.

Many opinions on this subject but, most support Danny Williams. I too agree that it is refreshing to see a leader with "Balls" and itegrity! The same situation has happened on the BC coast with one of the latest facilities being a sawmill in Campbell River which also had timber tenures tied to it. This company controls one of the largest tracts of private land of which some was granted years ago by the "Crown". This company also has TFL rights and the timber that they harvest is primarily exported. Now lets go back in history and reflect on how these companies aquired this "Private Land"? Like TFLs these private land deals were once tied to an obligation that was related to processing timber which resulted in jobs. Nobody forced these companies into these agreements, they saw them as profitable arrangements and entered into them.
The subject of smaller operations creates a very strong argument when there are so many of them still operating and profitable while they struggle against the tenure holders for timber supply. Let's ask ourselves what the currently un-profitable companies all have in common? They all have a large corporate infrastructure which equals huge financial overhead.
If a company is going to invest in our communities with infrastructure they should be given a fair shake at survival but, that company should be held accountable for the promises and commitments they make. A public resource is just that and nobody should be given any control over such a thing without giving back a commitment to the public.
Another form of timber supply that is available to all companies on a competetive bid basis is the BC Timber sales program and realistically all of the the provincial timber supply should be administered this way. Unfortunately during the past few years it has come to light by the MOF that this program has been cheated and manipulated by some companies to the tune of millions.
Long and short Danny did the right thing and the rest of the provinces especially BC need to see this as a Very good example of public representation. Unfortunately Hon. Pat Bell seems to be the only one in the BC cabinet who cares and he doesn't entirely agree with Danny's move either.

For all the rants (logical or whimsical) about the forest industry i have not noticed much emphasis placed on the fact that BC's forests are not run strictly for profit. Reforestation, harvest allocation, 5 year plans are all aimed at managing the forests for long term sustained yield. These things are generally not favoured by industry as they are NOT PROFITABLE. Do the math on tree planting for example, it is first year economics.
WE do have few companies holding the licenses to manage most of our forests. These companies do a lot better job than the MOF used to. Their size lends stability and that is a good thing when you are trying to hold them to long term responsibilities, such as establishment to free growing requirements which can span 20 years or more. The 100 companies of old were, by comparison , short lived. How do you get then to pony up for silviculture on lands they harvested when they have long since gone out of business? Please dont suggest the MOF do it instead. I remember the days before 1987. If you dont, review the stats on reforestation before and after the responsibility for silviculture passed to licensees.
It is easy to rant and use a lot of rhetoric (banksters, evil multinationals, american interests , etc.) but lets not get carried away. You can't really expect us to revamp our whole tenure sytem for an experiment with something that might have worked in alberta and austria 60 or 70 years ago.

Socredible; I cannot agree with your perspectives on this subject.
You state that no sense in making a pulpmill company operate because it will force it into bankruptcy. Well the news of the day is that most companies have unprofitable periods and if they all simply just quit when they started to lose money, we wouldn't have many businesses would we.
How do you suppose that any company could envision signing onto a longterm or evergreen timber tenure and therefore be obligated to operate a 25yr term or perpetual business, and to not lose money in a cyclical market, periodically? Now that just doesn't make sense does it?

Even the government understands that the obligation to continuously operate includes periods when it is unprofitable to do so because it is clearly stated in BC pulpwood licence agreements.
Why this contract is entered by a company and the government is that the majority of times these companies are allowed to make enormous profits because the government has agreed to give these pulpwood operations basically free stumpage...so that they can operate through the tough times. Remember that everyone knows before signing a longterm agreement..that tough times will surely happen and that they must ensure a "rainy day fund" which can carry it through.

If you consider the security on investment which these pulpmills/OSB plants needed to be financed and built and you consider the governments intent to serve the will of the public, and you consider the economic development stability needed in small town Canada...this tenure requirement as it applies to pulpmills and pulpwood consuming facilities makes perfect sense.

What must also be realised is that when the pulpmills or pulpwood consuming facilities such as OSB plants close, it further jeopardises the viability of all other types of wood processing facilities, such as the sawmills which depend on the revenues from their pulpwood or pulp chips.
The stumpage rate charged to the sawmills includes the value which is supposed to be generated from chip sales. So no revenues from chips means losses to sawmills or further reduction of stumpage charged to the sawmills.
Stumpage rates are also calculated on the basis that a pulpwood market exists which must pay the costs of harvesting it. No pulpwood markets mean that a sawmill must spend its money on harvesting pulpwood which is part of the areas needed to be logged, only to have to burn it or let it rot.This couldn't be good for economics or the environment now could it?
The annual allowable cut which is established, includes the timber types which contain pulpwood which is supposed to be harvested and utilized concurrently. How do you do that when there is no pulpmills or pulpwood consuming facilities? Does the government just let them harvest and burn half of the forest because a pulpmill is losing money for a while, OR do you shut down all the other sawmills because the pulpmills stopped?
Do you force all the sawmills to harvest only the very best stands which do not contain much pulpwood? If this occurred we would have to drastically reduce our current AAC levels. What school of forest management would that approach belong to?
Show me a large sawmill or veneer plant that doesn't need to produce and sell its chips? Should we just burn the chips?

These pulpmills and pulpwood consuming facilities are in fact an essential infrastructure to practically all other forest industry sectors. Governments have structured the entire system around this reality and have provided enourmous profit margins to ensure it can sustain itself.

So..cry me a river about the poor pulpmills and OSB plants which have year after year,for over a decade, made astronomical profits. They are now supposed to honour their agreements...fullfill their part of the social contract..suck it up..for a period of losses which are a small fraction of the wealth which we allowed them to extract from our resources.

This is not a segment of our forest industry which can be allowed to be fairweather exploiters and cut and run when the going gets tough.

If it would be a lot more expensive for them to *cut and run* then to stick around and try to make it through the cyclical downturns we wouldn't be faced with this endless and needless cruel treatment of their employees which results from out of the blue shutdowns!

Employees are routinely treated as if they were a lifeless commodity rather than living breathing human beings and fellow Canadians.

Many opinions on this subject but, most support Danny Williams. I too agree that it is refreshing to see a leader with "Balls" and itegrity! The same situation has happened on the BC coast with one of the latest facilities being a sawmill in Campbell River which also had timber tenures tied to it. This company controls one of the largest tracts of private land of which some was granted years ago by the "Crown". This company also has TFL rights and the timber that they harvest is primarily exported. Now lets go back in history and reflect on how these companies aquired this "Private Land"? Like TFLs these private land deals were once tied to an obligation that was related to processing timber which resulted in jobs. Nobody forced these companies into these agreements, they saw them as profitable arrangements and entered into them.
The subject of smaller operations creates a very strong argument when there are so many of them still operating and profitable while they struggle against the tenure holders for timber supply. Let's ask ourselves what the currently un-profitable companies all have in common? They all have a large corporate infrastructure which equals huge financial overhead.
If a company is going to invest in our communities with infrastructure they should be given a fair shake at survival but, that company should be held accountable for the promises and commitments they make. A public resource is just that and nobody should be given any control over such a thing without giving back a commitment to the public.
Another form of timber supply that is available to all companies on a competetive bid basis is the BC Timber sales program and realistically all of the the provincial timber supply should be administered this way. Unfortunately during the past few years it has come to light by the MOF that this program has been cheated and manipulated by some companies to the tune of millions.
Long and short Danny did the right thing and the rest of the provinces especially BC need to see this as a Very good example of public representation. Unfortunately Hon. Pat Bell seems to be the only one in the BC cabinet who cares and he doesn't entirely agree with Danny's move either.

Woodchipper:-"So..cry me a river about the poor pulpmills and OSB plants which have year after year,for over a decade, made astronomical profits. They are now supposed to honour their agreements...fullfill their part of the social contract..suck it up..for a period of losses which are a small fraction of the wealth which we allowed them to extract from our resources."

Which firms have made "astronomical profits, year after year, for over a decade", Woodchipper? Ainsworth, which was, and is, one of the biggest in OSB, has finally undergone a 'restructuring' which has seen the founding family's equity in it vanish. Hardly a sign of "astronomical" profitablity, I'd say.

Pope & Talbot? Bankrupt after over 150 years in business. Crestbrook? Sold to Tembec, which has hardly been a picture of robust financial health itself since acquiring it. Domans? They had a couple of pulp mills, how astronomical were their profits? A financial basket case since 1981. I know, I had shares in them.

Catalyst, nee NorskeSkog, nee MacMillan Bloedel's & Fletcher Challenge's coastal pulp mills, nee Crown Zellerbach Canada? Has it EVER been a picture of financial health?

Lets just take that last named corporate entity, Crown Zellerbach Canada, since I have a certain personal familiarity with it, and it pre-dates the "decades" of "astronomical profits" you're going on about.

CZC was purchased, the WHOLE company, for LESS than the 'book value' of the Elk Falls pulp and paper mill alone in the mid-1980's by New Zealand based Fletcher Challenge! Quite a bargain, huh? For something that's "astronomically profitable".

Crown Zellerbach Corporation, the American parent company that owned slightly over 51% of CZC was so "astronomically profitable" itself it doesn't even exist anymore! But we'll stay on this side of the border in our little discussion, and not get into that.

For years, certainly all through the 1970's, right up until CZC was acquired, nearly every Annual Report it issued contained the following words, in effect, from the CZC Chairman and CEO, Bob Rogers:- "The return on corporate investment remains inadequate, and will have to be improved if the long-term viability of the Company is to be maintained."

People that worked for CZC, when asked about that little statement, used to 'pooh-pooh' it. "That's just ol'Bob's way of trying to scare the boys into not asking too much of a wage increase when the contract's up," was a commonly heard response. "They're making LOTS of money. How could they keep going if they weren't?"

Well, it turned out that in spite of appearances, (and 'appearances' are very important in business when you're putting the touch on your banker for some more funding!), they WERE'NT making 'lots of money' at all. Their returns on investment were abyssmal.

And efforts to improve them, like buying out S. M. Simpson Ltd. in Kelowna, and a number of other Okanogan area mills, and rationalizing and expanding some of them, as well as their foray into 'big-box' building supply store retailing in major urban centres (you might not remember the "Home Town" stores), did precious little to improve them.

So you tell me, in your argument which reminds me very much of another fallacious one, i.e. that the 'poor' are poor because the 'rich' are rich, just which companies have made such "astronomical profits", even if we INCLUDED ANY DIVIDENDS PAID-OUT TO THEIR SHAREHOLDERS in the last couple of decades, that could afford to keep their mills open all through this downturn out of 'retained earnings' alone. I'd really like to know.

Caranmacil:- "You can't really expect us to revamp our whole tenure sytem for an experiment with something that might have worked in alberta and austria 60 or 70 years ago."

I agree with all the rest of your post, Caranmacil, except for this last sentence. My part in this discussion isn't to promote that we "revamp our whole tenure system" that way at all.

It is rather an effort to better understand "why" our tenure system has evolved as it has.

I do not know what kind of 're-vamping' we could successfully do to our tenure system with our FINANCIAL system organized as it is.

In my humble opinion, it's unlikely that we could make very many meaningful changes to the 'tenure system' we have, (largely for the reasons which you've explained in the body of your post), unless we first change some of the features of our current 'financial system'.

If we did that, we may very well be able to have a modified 'tenure system' that has a chance of being succesful and more in line with what I believe Woodchipper envisions. Without doing that, we're simply "dreaming in technicolour".

"This means that whatever industry we might have is absolutely dependent upon the provincial tenure system. Pretty hard to make wood products without trees and pretty hard to build any sort of plant without a secure source of trees....when there is no real open market source either. This is entirely different than what you infer as actually happening and this is where the US has its biggest problem with the softwood issue"

My underlying point was that if a company is provided access to our resources, there is an expectation that they will harvest those resources, provide jobs, make a profit, do it in an environmentally responsible manner, etc. If they choose not to operate for whatever reason, they are essentially in conflict with those expectations and the access to those resources should then be made available to others who would fullill our expectations.

Many opinions on this subject but, most support Danny Williams. I too agree that it is refreshing to see a leader with "Balls" and itegrity! The same situation has happened on the BC coast with one of the latest facilities being a sawmill in Campbell River which also had timber tenures tied to it. This company controls one of the largest tracts of private land of which some was granted years ago by the "Crown". This company also has TFL rights and the timber that they harvest is primarily exported. Now lets go back in history and reflect on how these companies aquired this "Private Land"? Like TFLs these private land deals were once tied to an obligation that was related to processing timber which resulted in jobs. Nobody forced these companies into these agreements, they saw them as profitable arrangements and entered into them.
The subject of smaller operations creates a very strong argument when there are so many of them still operating and profitable while they struggle against the tenure holders for timber supply. Let's ask ourselves what the currently un-profitable companies all have in common? They all have a large corporate infrastructure which equals huge financial overhead.
If a company is going to invest in our communities with infrastructure they should be given a fair shake at survival but, that company should be held accountable for the promises and commitments they make. A public resource is just that and nobody should be given any control over such a thing without giving back a commitment to the public.
Another form of timber supply that is available to all companies on a competetive bid basis is the BC Timber sales program and realistically all of the the provincial timber supply should be administered this way. Unfortunately during the past few years it has come to light by the MOF that this program has been cheated and manipulated by some companies to the tune of millions.
Long and short Danny did the right thing and the rest of the provinces especially BC need to see this as a Very good example of public representation. Unfortunately Hon. Pat Bell seems to be the only one in the BC cabinet who cares and he doesn't entirely agree with Danny's move either.

NMG; I agree with what you refer to as the expectations which we should have for companies which hold tenure.
However, my point was that this expectation is no longer a legally binding requirement of BC forest licences or tree farm licences..and therefore we should no longer expect companies to operate within the community which they did. I don't agree with it, but that is the way it is until we the public demand our government to change back to what is was.
The second important part in all this is the notion of ownership. We definitely own the resource, but our resources have been licenced to companies which have legal rights to largely do what they decide to do with it.This includes where it might be processed.
What is confusing about this blog is that the issue of pulpmills or pulpwood consuming facilities which hold pulpwood agreements is an entirely different matter. The original social contract which obligates continuous operation of these types of facilities did not change and therefore must operate locally as well as consistantly.. as per our expectations.
My overall disagreement with your earlier post was the inferance that this "live or die" fate of a facility is simply economics and shut downs or closures can be simply fixed with a replacement company. A combination of government objectives pointed towards the corporate elite which have the majority of the resource already and the very limited opportunities to provide resources to others, makes it difficult and unlikely that anything new can start any time soon.

Socredible;I have a couple of answers to your question of profitability in the pulp and OSB sector.
How do you suppose that Ainsworth became "one of the biggest" in OSB so quickly? Is it possible that they spent all their earnings on expanding and borrowed themselves in a hole?
Their operations were very profitable and so profitable that they and their bankers expanded too quickly.The second that the market dropped,they went through the windshield in debt which couldn't be serviced.

My next answer involves the "accounting" which could be used to coordinate the objectives of what and where profits or losses are represented. When a large integrated forest company dominates the supply as well as the demand for chips,in any given area, what exactly is the value at the sale point or the price paid at the pulpmill?
Is either one of these the actual "market" price or actual cost and how could you verify this?
While there is certainly financial strength available by integrating several facilities under one corporate roof, there is also great opportunity to shift the economics of each on paper.
The retained earnings of these integrated forest companies does not illustrate exactly what one particular plant made or lost or exactly why it made or lost money.

The recent era trend of rapid consolidation,takeovers and expansion has done to most integrated forest companies the same as what happened to Ainsworth. Their overly aggressive persuit of dominating their timber supply areas and their markets IS THE MISMANAGMENT that has left them without the cash reserves which they were supposed to have to weather the downturns in this cyclical industry.

The government has helped to coordinate this by allowing unlimited conglomeration of our resources into a few hands which had no restraint or respect for their committments they had already made.

Many opinions on this subject but, most support Danny Williams. I too agree that it is refreshing to see a leader with "Balls" and itegrity! The same situation has happened on the BC coast with one of the latest facilities being a sawmill in Campbell River which also had timber tenures tied to it. This company controls one of the largest tracts of private land of which some was granted years ago by the "Crown". This company also has TFL rights and the timber that they harvest is primarily exported. Now lets go back in history and reflect on how these companies aquired this "Private Land"? Like TFLs these private land deals were once tied to an obligation that was related to processing timber which resulted in jobs. Nobody forced these companies into these agreements, they saw them as profitable arrangements and entered into them.
The subject of smaller operations creates a very strong argument when there are so many of them still operating and profitable while they struggle against the tenure holders for timber supply. Let's ask ourselves what the currently un-profitable companies all have in common? They all have a large corporate infrastructure which equals huge financial overhead.
If a company is going to invest in our communities with infrastructure they should be given a fair shake at survival but, that company should be held accountable for the promises and commitments they make. A public resource is just that and nobody should be given any control over such a thing without giving back a commitment to the public.
Another form of timber supply that is available to all companies on a competetive bid basis is the BC Timber sales program and realistically all of the the provincial timber supply should be administered this way. Unfortunately during the past few years it has come to light by the MOF that this program has been cheated and manipulated by some companies to the tune of millions.
Long and short Danny did the right thing and the rest of the provinces especially BC need to see this as a Very good example of public representation. Unfortunately Hon. Pat Bell seems to be the only one in the BC cabinet who cares and he doesn't entirely agree with Danny's move either.