Goals, Objectives, Strategies, and Results — Continued

Goal 2: Sustainable Forest Benefits.

As stewards of British Columbia's forest and range resources, the Forest Service has the responsibility to ensure that the use of the forests to generate economic benefits is balanced with the long-term health of the forest and range resources. We will ensure the use of appropriate forest and range management practices to maintain and improve the long-term sustainability and health of the province's forest and range resources.

Key Outcome Indicators:

Revenue to the Crown.

The total amount of money charged by the ministry during the fiscal year.

Net revenue is gross revenue net of operating costs. Net revenue decreases in 2005/06 as higher operating costs are realized. Operating costs increase as fully capitalized costs are brought forward to match volumes scaled.

Key Outcome Indicators:

Diversification of BC Export Markets.

The provincial forest sector is highly dependent on exports. The health and diversity of export markets is a good indicator of the strength of the forest economy.

The US is British Columbia's largest customer for softwood lumber. British Columbia's share of the US softwood lumber market is determined from American Forest Products Association (AFPA) statistics on US consumption and the Statistics Canada data on British Columbia and Canadian exports. Projections have been adjusted to reflect current market conditions. The base in 2002/03 was 17.6 per cent. This indicator will become less significant if a quota-based interim softwood lumber agreement is reached in 2003/04.

Japan is British Columbia's second largest softwood lumber customer. Import volumes are published annually by the Japan Wood Products Information and Research Center. Projections have been adjusted to reflect current market conditions. The base in 2002/03 was 43 per cent.

Increasing wood product sales to Taiwan, China and Korea indicates an expansion into new markets for BC wood products. These areas are targeted by the Market Outreach Network.

Data is from Statistics Canada reports of wood exports in dollars. This does not include pulp and paper. China includes Hong Kong.

Key Outcome Indicator:

Competitive forest sector.

This indicator represents the level of investment by forest industry. A ratio less than one indicates that capital is being depreciated, while a ratio greater than one shows that ongoing new investment exceeds the level of depreciation. A healthy level of capital investment is expected in a competitive forest sector.

Key Outcome Indicator:

Globally competitive forest sector.

Major forest certification processes are the Canadian Standards Association (CSA), Forest Stewardship Council (FSC) and Sustainable Forest Initiative (SFI). ISO is excluded. The baseline for this measure is the 7.7 million hectares that were certified in 2001/02. In 2002/03 the number of hectares certified increased by 126 per cent to 17.4 million hectares.

Core Business Area:

Pricing and Selling Timber.

Objective 1:

Maintain access to export markets for BC forest products.

Strategy:

Continue to pursue free access for British Columbia forest products to markets in the United States.

Achievement of this strategy is tracked by the Key Outcome Indicator "BC's share of the US softwood lumber market."

Objective 2:

Ensure that the public receives fair value for the use of its forest and range resources now and in the future.

Strategies for 2004/05:

Implement a market-based pricing system to generate appropriate revenues to the Crown.

• The market-based pricing system is expected to increase the competitiveness of the forest industry and provide greater incentives for capital re-investment. It may also lead to greater variability in provincial revenues and consolidation in the logging and milling sectors.

• The plan for the implementation of the market-based timber pricing system (including all related e-business applications under development) will be dependent and linked to the outcomes and timelines of the provincial and ministry policy reforms and initiatives (i.e. Softwood Lumber Negotiations) currently underway.

Implementation is subject to Cabinet decisions and the softwood lumber discussions, which are ongoing.

Objective 3:

Provide opportunities to generate wealth from the forest resources.

Strategies for 2004/05:

1. Ensure that timber apportioned in TSAs is available to licensees through tenure.

2. With much of the forest policy reform legislation in place the primary focus for 2004/05 will be with its implementation. This includes:

• The recovery, re-apportionment and tenuring of the 20 per cent AAC recovery from major licence holders as provided by Bill 28. This will occur over the next three years.

• The conversion of Timber Sale Licences (Major) to other forms of tenures as provided for by Bill 45. In accordance with the legislation this must be complete within one year of the legislation coming into force.

• Implement government approved recommendations from the MLA committee review of the small-scale salvage program.

• The Small Scale Salvage Program will be refocused to generate sales volumes in excess of 210,000 m³ and revenues of at least $2.5 million in stumpage through the sale of competitive and non-competitively awarded licences-to-cut and the piloting of a number of new salvage-based non-replaceable forest licences.

This is a measure of the effectiveness of the ministry's apportionment of the AAC within a TSA to various programs, and its issuance of tenures under these programs. Tenures are issued under programs such as Forest Licence and for Community Forest Agreements. Tree Farm Licences, woodlot licences and tenures under the BCTS program are not included. Data is from the Apportionment System.

The baseline for this measure was 97 per cent in 2002/03. The targets for per cent of Timber Supply Area AAC under a form of tenure have been reduced in each of the next three years in recognition of the workload associated with the 20 per cent AAC recovery from major licence holders.

Objective 4:

Provide a reliable and safe forest road network through legislation, policy and standards.

Strategy:

Maintain priority community-use Forest Service Roads until maintenance responsibility can be transferred.

• Complete the rationalized road maintenance strategy in 2004/05 to prepare for further transfers in 2005/06 and following.
• MOF will maintain 10,000 kilometres to the wilderness standard. 2,500 kilometres of this will be maintained in the short-term to a higher standard by MOF with funding from the Ministry of Transportation's Roads Serving Rural Residence Program.

This is a new measure for 2004/05 replacing "Kilometres of Forest Service roads maintained by the ministry to a community use standard". The measure was changed to more accurately reflect the strategy of the ministry in reducing its role in non-industrial roads. The reduction may be achieved through transfers of roads to the Ministry of Transportation, other agencies and industry or by closing and deactivating. The forest road network baseline in 2003/04 was approximately 12,500 kilometres.

Objective 5:

Increase First Nation participation in the forest sector and ensure forestry operations respect First Nation interests on the land base.

Strategies:

1. Consult with First Nations in accordance with legal obligations.

2. Negotiate agreements with First Nations:

• Implement the First Nations Forest Strategy (FNFS) offering access to economic forest benefits to First Nations through accommodation agreements. This is a 3-year strategy with up to a third of the province's First Nations engaged each year.

• Increase First Nations participation in the Forest Sector through direct award tenures. Timber volume will become available for award to First Nations through the timber reallocation as a result of Bill 28.

Accommodation agreements provide a period of stability for forest and range resource development. They include the provision of economic benefits in the form of tenure and revenue sharing as well as consultative arrangements that define an agreed upon process between the Ministry and a First Nation for consulting on and addressing aboriginal interests. In 2003/04, approximately 30 stand alone consultation arrangements were also in place in addition to accommodation agreements. In future years, these arrangements will be incorporated into accommodation agreements.

Funding for accommodation agreements is $15 M in 2003/04, $30 M in 2004/05, $40 M in 2005/06 and $50 M in 2006/07.

Under the Forest Act, the minister may invite, without competition, applications from First Nations for a forest tenure. The criterion measures the number of invitations from the minister. It includes tenures offered through accommodation agreements under the First Nations Forest Strategy. In 2003/04, the target also included invitations made in furtherance of an interim measure agreement, treaty related measures, or economic measures agreement between the First Nation and the province.

Core Business Area:

BC Timber Sales.

Objectives:

1. Provide a credible reference point for costs and pricing of timber harvested from public land in British Columbia.

2. To optimize net revenue to the province, within the parameters dictated by our benchmarking mandate and sound forest management.

3. Provide opportunities for customers to purchase timber in an open and competitive market.

Strategies for 2004/05:

Ministry strategies associated with this core business area are designed to generate significant ongoing revenues for the province.

Program volumes:

• BCTS will grow as volume re-allocated from the major tenure holders is provided to the program to develop and auction. BCTS will expand from about 13 per cent of the provincial harvest to approximately 20 per cent of provincial AAC by April 2007, to address pricing requirements under the Forest Revitalization Initiatives.

Legislative reform:

Legislation will be brought into force to enhance the rate of harvest and revenue return to the Crown (shorter terms, increasing deposits, extension fees).

• Additional legislation will be brought into force to transform BCTS into an auction business only (repeal of bid proposals, BCTS forest licences, direct awards) which will ensure full market value is bid for all timber sold; and,
• BCTS will widen eligibility to bid in the program and will pilot a new variable rate upset to enhance bidding and ensure the most accurate price is obtained across the province.

Financial reform:

• BCTS will develop a cost database and track program costs by timber sale to allow a close matching of development costs and revenue.

Marketing reforms:

• BCTS will move further into electronic marketing with all sales on the web by August 2003 and exploration of E-commerce applications for timber sales transactions on the web in fiscal 2004/05. These moves will increase market exposure and ensure all interested parties have an opportunity to bid for timber;
• BCTS will continue with its current ISO certification and expand the implementation of the Environmental Management System (EMS) across the province by 2005/06 in step with market demands for certified forest products;
• As part of the provincial beetle strategy, BCTS will focus harvest on the recently killed stands to extract the highest possible value while meeting stewardship requirements;
• BCTS will develop and harvest timber within BCTS operating areas killed by wildfires in 2003;
• Staff will move closer to all sales being sold in a fully developed state to remove risk and uncertainty from bidders and increasing revenue return to the Crown;
• BCTS will pilot a cost-based upset and Market-based Pricing System (MPS) pricing for deciduous timber to provide a larger data set for the MPS price model. This larger set will enhance the accuracy of the model and ensure that the Crown is marketing timber at a fair value;
• The ramp up of volume required with the reallocation from major licensees will be accomplished in part, by purchasing planning and assessments from major licensees and auctioning the subsequent volumes; and
• BCTS will continue to offer a range of timber sales suitable for all operators, but will exit direct awards and restricted or proposal driven competitions (except for horse logging sales) to ensure that all bidders have a fair chance to bid openly for timber on the market.

Internal Reform:

• BCTS will continue to streamline operations through the application of continuous improvement principles and the standardization of procedures; and
• BCTS will move all operations to an integrated information management system called GENUS used by many large forest companies in the province. The experience brought by all the users of this system is expected to leverage significant cost savings in BCTS and the ministry.

This is a new measure in 2004/05 replacing the previous "Average cost per cubic metre of volume sold." The change from volume sold to volume developed is to reflect that costs are incurred for development of a timber sale that may not be sold.

This is a new measure in 2004/05.

This is a measure of the volume advertised competitively to independent forest operators. A baseline of 99 per cent was established in 2002/03.

Previously tracked internally to the ministry, this measures the volume of wood that is competitively advertised for sale.

This measure, previously tracked internally to the ministry, represents the volume that is sold to independent forest operators.

The BC Timber Sales program must comply with all forest practices standards and regulations. Data is from the Compliance Information Management System and is based on the number of inspections.

Core Business:

Forest Investment.

The Forest Investment sub-vote provides support to improve British Columbia forest sector performance in existing and new markets through international marketing initiatives and enhance sector competitiveness through the development of new products and manufacturing process improvement.

Forestry Innovation Investment Ltd. is the third party administrator responsible for overseeing the marketing and product development programs, and for developing an independent Service Plan and an Annual Service Plan Report, as required by the Crown Agency Secretariat.