An Edgewater mill that pumps millions of dollars into the local economy each year is facing permanent closure if a deal with forestry giant Canfor isn’t struck soon.
The WoodEx-operated Edgewater mill, which employs up to 60 workers directly and up to 120 indirectly, has been closed for the past month due to a lack of fibre supply resulting from Canfor’s acquisition of Tembec Industries Ltd. last December.
Although Canfor was required by the Ministry of Forests to negotiate a long-term timber supply with WoodEx prior to approval of the sale and has supplied some wood, the amount of wood WoodEx is currently receiving, about 5,000 cubic metres a year, doesn’t even come close to what the mill is capable of handling, said Douglas Riddell, president and CEO of WoodEx Industries.
“I don’t think Canfor has done anything untoward, but it clearly in my mind comes down to the responsibility of the ministry maintaining and extracting the best value of a public resource, which is the forests,” Riddell said. “The issue comes down to fair and equitable competition.”
When Canfor completed its acquisition of Tembec’s Kootenay sawmills and associated Crown, private land and contract annual allowable cut in March, the minister of forests Steve Thomson stated Canfor would be required to negotiate a long-term timber supply agreement with WoodEx to encourage regional competition, and these requirements were also registered with the Competition Bureau.
“Section 54 of the Forest Act states that the minister is not allowed to transfer tenure if it unduly restricts competition,” Riddell said.
But he is quick to point out he doesn’t want to seem critical of Canfor in any way. He recognizes Canfor’s decision-making is likely made from a business standpoint, and points out they have made reasonable efforts to supply WoodEx with at least some wood.
Columbia River-Revelstoke MLA Norm Macdonald has taken a specific interest in what he perceives as a failure on the part of the BC Liberal government. He said that while he is happy Canfor is reinvesting in the region and will be once again employing people in the Columbia Valley, he doesn’t feel that doing so at the expense of WoodEx workers is in any way acceptable.
“When Canfor first announced its intention to purchase Tembec’s sawmill and woodlot operations in my area, I was concerned about how competition might be restricted as a result,” Macdonald said in a media release. “Having a single company control the flow of wood supply puts everyone else in the marketplace at risk. Minister Thomson has failed to enforce the requirement placed on Canfor and people in my area are now out of work.”
What has particularly incensed Riddell is the inaction on the part of the ministry. Despite repeated promises that the requirements to provide long-term supplies were enforced, the ministry has done nothing to assuage his concerns, and that without the formalization of security of supply, “we’re really just flapping in the wind,” he said.
“We had met with the ministry back in December… and they clearly recognized that unprecedented control in the valley was an issue,” he said. “Since the pressure is off now that the transfers have been approved, nobody is seeming to remember these commitments.”
Canfor now controls roughly 90 per cent of the regional tenure, which creates a large competitive disadvantage for WoodEx when competing to purchase wood on the open market.
“Canfor can get, under the forest licences, they get wood cheaper where I’m forced to go on BC Timber Sales (BCTS) and competitively bid on an open market basis,” said Riddell.
As Canfor gets their wood so much cheaper, they can then bid at beyond fair market price for open market supply and average their costs down. Without the assurance of a long-term supply, he is limited in his ability to cater to vendors and loggers alike.
“What’s happening now, is if you’re a logger in the valley or someone similar, you’re looking at who do I have to side with, the guy who holds 90 per cent of the tenure, or do I side with the guy who’s got nothing right now and can’t equitably compete,” said Riddell. “Canfor has said ‘we’ll work with you on a short-term fibre supply agreement,’ so they are making reasonable efforts at a local level… it doesn’t give us the certainty we need. The ministry has clearly dropped the ball on this one.”
When contacted for comment, the Ministry of Forests said that they continue to encourage WoodEx and Canfor to work together on a fibre supply agreement, pointing out that BC Timber Sales is planning to put up for bid 240,000 cubic metres of timber sale licences in the Cranbrook and Invermere timber supply areas over the next year. The ministry also added that Woodex does have its own forest licence, but is currently choosing not to harvest it.
