2003/04 Annual Service Plan Report -- Ministry of Forests

Forestry generates significant revenues to the provincial government ($0.987 billion in direct revenue in 2003/04) and remains a major contributor to British Columbia's current and future economic health. Approximately 22 per cent of employed British Columbians have jobs associated with the forest sector. As stewards of the forest resources on behalf of government, the Forest Service has a major role in ensuring that citizens of British Columbia benefit from commercial uses of their forests. Sustainable forest benefits rely on a strong forest economy and a globally competitive forest sector, which the ministry supports through its forest revitalization policies.

International buyers are seeking assurances that the forest products they purchase come from well-managed forests. Certification is viewed by buyers and others as an important indicator of whether forests are well managed. The demand for certified forest products is expected to increase. The Forest Service is committed to working with industry and others to support increased certification of BC forest products.

The ministry also recognizes the unique interests of First Nations in forest benefits and in access to the forest for their future generations. Additional benefits from our forest and range resources are generated from the ranching industry, the use of forests for tourism and recreation, including guide outfitting, and the botanical forest products industry.

Key Outcome	Key Outcome Indicator	2001/02 Benchmark	2002/03 Actual	Published 2003/04 Projection	2003/04 Actual
Revenue to the crown	Crown forest gross revenue ($ billions)	$1.164 B	$1.296 B	$1.072 B (Service Plan & Blue Book Forecast) $0.982 B (January 2004 Ministry of Finance revision)	$0.987¹ B

Revenue Categories	Coast	Northern Interior	Southern Interior	Victoria	Totals
(thousands of dollars)
Timber Tenure Stumpage	$213,108	$311,415	$244,955	$1,779	$771,257
Harvesting Rents and Fees	8,305	9,013	8,212	(7,260)	18,270
BC Timber Sales	35,570	68,674	80,912	468	185,624
Export	1,801	226	26	32	2,085
Range	3	432	1,527	2	1,964
Waste	687	31	5	4	727
Penalties	40	38	86	101	265
Interest	301	566	334	1,708	2,909
Miscellaneous²	746	1,493	1,124	31	3,394
Totals	$260,561	$391,888	$337,181	($3,135)	$986,495


²	"Miscellaneous" includes revenue collected for special use permits, scaling fees, log salvage permits, licence of occupancy, publications, maps, manuals, photocopying and miscellaneous items as reported by the Central Invoicing System. Note: Totals may not add due to rounding.

Key Outcome	Key Outcome Indicator	2001/02 Actual	2002/03 Actual	2003/04 Projection	2003/04 Actual
Net Revenue to the crown	Crown net revenue generated from BC Timber Sales ($ millions)	$121 M	$143 M	$142 M (Service Plan & Blue Book Forecast) $71.2 M (January 2004 revision)	$101.07 M

Net Revenue (gross revenue net of capitalized operating costs) is an indicator of the success of the BC Timber Sales program in generating revenue to the Crown. The forecasts for gross revenue, operating costs and net revenue were adjusted downward twice during the year, ending with a final revised net revenue target of $71.2 million for 2003/04. The adjustments were based on a new forecast volume-scaled target of nine million cubic meters and a combination of factors including, the softwood lumber dispute, a stronger Canadian dollar, an oversupply in timber of some areas, and depressed prices for lumber during the year.

Forecast Dates	Gross Revenue	Expenditures	Net Revenue
February 2003	$280 M	$138 M	$142 M
November 2003	$210.7 M	$111.5 M	$99.1 M
January 2004	$180.7 M	$109.5 M	$71.2 M

With actual gross revenue of $185.6 million and operating expenditures of $84.6 million BC Timber Sales achieved Net Revenue of $101.07 million in 2003/04. Actual timber volume scaled in 2003/04 was 7.9 million cubic metres which was 15 per cent less than the average scaled volume over the previous five years and 26 per cent less than last year. As a result, BC Timber Sales did not achieve its original projection of $142 million but did exceed its final revised projection of $71.2 million by 42 per cent.

Gross revenue is provided by the ministry's Revenue Branch. Capitalized operating costs for the program are recorded in the government's Corporate Accounting System (CAS).

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

Key Outcome	Key Outcome Indicator	2001/02 Benchmark	2002/03 Actual	Published 2003/04 Projection	2003/04 Actual
Strong Forest Economy	British Columbia's share of the US softwood lumber market	17%	17.6%	17%	18.1%

The United States 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. Statistics for this indicator are updated on a calendar year basis.

Increased market share from British Columbia reflects increased demand for lumber due to high levels of housing starts in the United States. The demand for imports reflects the inability of US industry to meet this demand. High lumber prices have somewhat offset the effect of the countervailing and anti-dumping duties and increased value of the Canadian dollar on returns to BC lumber producers.

Key Outcome	Key Outcome Indicator	2001/02 Benchmark	2002/03 Actual	Published 2003/04 Projection	2003/04 Actual
Strong Forest Economy	British Columbia's share of Japan softwood lumber imports	45%	43%	45%	40%

Japan is British Columbia's second largest softwood lumber customer. Import volumes are published annually by the Japan Wood Products Information and Research Center. British Columbia's falling market share is a result of a growing preference in Japan for dried lumber and increased competition from Russia and Europe. Statistics for this indicator are updated on a calendar year basis.

Key Outcome	Key Outcome Indicator	2001/02 Benchmark	2002/03 Actual	Published 2003/04 Projection	2003/04 Actual
Strong Forest Economy	Increase in wood product sales to Taiwan, China and Korea	N/A	N/A	20% increase	34% increase

This indicator was added in 2003/04, to track the results of work targeted by the Market Outreach Network under Forest Investment. Increasing wood product sales to Taiwan, China and Korea indicates an expansion into new markets for BC wood products. Data are the value of wood exports from Statistics Canada reports of wood exports in dollars. The baseline from which the increase is measured is $87.1 million in 2001. While the increased exports are from a low base, the increase reflects growing demand for BC wood products as a result of strong economic growth and increased efforts to market BC wood products in these countries. Statistics for this indicator are updated on a calendar year basis.

Key Outcome	Key Outcome Indicator	2001/02 Benchmark	2002/03 Actual	Published 2003/04 Projection	2003/04 Actual
Competitive Forest Sector	Ratio of BC forest industry capital investment to depreciation and amortization	<1.0	<1.0	≤1.0	<1.0

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. Capital investment in the BC forest products industry remained low in 2003. Continuing low wood product prices in 2003 combined with US duties have discouraged investment in the industry. Statistics for this indicator are updated on a calendar year basis.

Key Outcome	Key Outcome Indicator	2001/02 Benchmark	2002/03 Actual	Published 2003/04 Projection	2003/04 Actual
Globally Competitive Forest Sector	Percentage increase in forestland certified by major forest certification processes	7.7 million hectares	17.4 million	≥10% increase	26%

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 was 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, and in 2003/04 the increase was 185 per cent from the baseline to 20.0 million hectares. British Columbia continues to lead all Canadian provinces in certification. This helps the forest industry to meet the interests of its customers and demonstrate the province's commitment to sustainable forest management. Statistics for this indicator are updated on a calendar year basis.

Goal 2: Sustainable Forest Benefits