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

Objective 3b.1: Promote compliance and ensure statutory obligations are enforced.

Strategy	Performance Measure	2003/04 Target	2003/04 Actual	Variance	Achievement
Implement a new compliance and enforcement regime for pricing and revenue	Per cent of high and very high priority inspections for pricing and revenue compliance	95%	83%	–12%	Substantially achieved

Inspections, or site visits are targeted to very high and high priority sites where environmental, social and/or economic values have been identified as being at high risk. Data are from the Compliance Information Management System.

The shortfall in achieving this target is attributed to the need to maintain a higher level of effort than expected on forest practices inspections due to the transition to the new Forest and Range Practices Act. This resulted in the planned increase in effort expended on pricing and revenue activities proceeding at a more cautious pace than initially anticipated. Clarity with respect to new definitions and targets for this measure was not achieved until mid-year and this has contributed to the slightly lower than expected achievement. As a result, the target in the 2004/05 Service Plan has also been adjusted to the more realistic 85 per cent.

Objective 4b.1: Promote greater returns from the utilization of public timber through secondary manufacturing and marketing of BC forest products.

Strategy	Performance Measure	2003/04 Target	2003/04 Actual	Variance	Achievement
Develop and implement new international marketing initiatives	Measured by the Key Outcome Indicator — Per cent increase in wood product sales to Taiwan, China and Korea — see Page 31

Objective 5.1: Maintain access to export markets for British Columbia forest products.

After recessions in many areas, the world economic situation improved in 2003/04; the International Monetary Fund estimate of world GDP growth rose to 3.9 per cent in 2003 and is projected to be 4.6 per cent in 2004 as compared to three per cent in 2002. World prices for lumber, plywood and pulp increased substantially over 2003/04, but the Canada/US exchange rate appreciation in 2003 dampened some of this increase for Canadian producers. European exports to the US lumber market, while still quite small, have increased significantly since the introduction of the countervailing and antidumping duties. Competition from Russia and other former USSR countries in world forest product markets is expected to grow over the next decade and may threaten some traditional British Columbia markets.

Strategy	Performance Measure	2003/04 Target	2003/04 Actual	Variance	Achievement
Continue to pursue free access for British Columbia forest products to the United States	Measured by the Key Outcome Indicator — British Columbia's share of the US softwood lumber market — see Page 30 and 31

Objective 5.2: Ensure that the public receives fair value for the use of its forest and range resources now and in the future.

Strategy	Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance	Achievement
Implement a market-based pricing system to generate appropriate revenues to the Crown	Status of implementation of market-based pricing system	N/A	Govern-ment decision on appropriate system. System not imple-mented.	Imple-ment	MPS on Coast. Imple-mented Feb 29, 2004.	MPS Interior imple-mentation now planned for 2004	Partially achieved

The Coastal Market Pricing System was finalized and implemented on February 29, 2004.

Interior analysis is ongoing with the forest industry, and no further implementation decision has yet been made by the government. The revised schedule projects implementation of an Interior Market Pricing System by the end of 2004.

Objective 5.3: Provide opportunities to generate wealth from forest resources.

Strategy	Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance	Achievement
Ensure that timber apportioned in TSAs is available to licensees through tenure	Per cent of timber supply area AAC under a form of tenure	97%	97%	96%	94.7%	-1.3%	Achieved

This is a measure of the effectiveness of the ministry's apportionment of the Annual Allowable Cut (AAC) within a timber supply area to various programs, and its issuance of tenures under these programs. Tenures are issued under programs such as forest license and for community forest agreements. Tree farm licences, woodlot licences and tenures under the BC Timber Sales program are not included. Data are from the Apportionment System.

The slight reduction in achievement is attributed to large AAC uplifts to address the mountain pine beetle epidemic in some of the Southern Interior timber supply areas. This increased the administration needed to make this timber available to licensees through tenure.

One of the strategies added during the course of 2003/04, which contributes to the achievement of the above objective, was the refocusing of the Small Scale Salvage Program to be more market-based. The strategy was slightly revised during the year (see the Strategic Shifts section, page 20), but the ministry well exceeded its goals to sell 210,000 cubic metres of timber and generate revenue of $2.5 million.

Objective 5.4: Provide a reliable and safe forest road network through legislation, policy and standards.

Strategy	Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance	Achievement
Maintain priority public use Forest Service Roads until 2005	Kilometres of Forest Service Roads maintained by the ministry to a public use standard	9,356	1,166	1,149	1,271	+122	Achieved

This measure is for Forest Service Roads (FSRs) that the District Manager maintains. The Ministry of Forests maintains Public Use FSRs that access year-round communities or are school bus routes. Public Use FSRs do not include roads that provide access to isolated residences or cabins, commercial operations, parks or recreation sites, permitted or BC Timber Sales managed roads, closed roads and wilderness roads. The variance of 122 kilometres represents a more accurate number of kilometres rather than an over-achievement of maintenance performed by the ministry. Data on Forest Service road maintenance are from current records at forest district offices.

Objective 5.5: Increase First Nation participation in the forest sector and ensure forestry operations respect First Nation interests on the landbase.

Strategy	Performance Measure	2003/04 Target	2003/04 Actual	Variance	Achievement
Negotiate consultation agreements with First Nations	Number of agreements	64	47 consultation agreements and 22 accommodations agreements	+4	Over-achieved

The ministry works to establish agreements with First Nations to ensure that Crown land and resource decisions are informed by First Nations.

At the beginning of 2003/04, the government announced that it would be sharing forest revenues and creating greater access to timber for First Nations. The ministry developed a policy framework, the First Nations Forest Strategy, around these new tools and about halfway through the year, began implementing this initiative through the negotiation of forest and range agreements. Twenty-two agreements were concluded in the second half of the year. These agreements incorporated consultative arrangements, and therefore are considered part of the achievement of the consultation agreement performance measures in 2003/04.

In the future, consultation agreements will be largely incorporated into accommodations agreements, and therefore this measure was changed, beginning with the 2004/05 Service Plan, from the "number of consultation agreements" to the "number of accommodation agreements".

Strategy	Performance Measure	2003/04 Target	2003/04 Actual	Variance	Achievement
Increase First Nations participation in the Forest Sector	Number of tenures offered to First Nations	19	32	+13	Over-achieved

To increase First Nations participation in the Forest Sector, under the Forest Act the Minister may invite, without competition, applications from First Nations for a forest tenure. This performance measure is the number of invitations from the Minister.

More tenures were offered than expected in 2003/04, due to the introduction of the First Nations Forest Strategy. The strategy allowed for tenures to be offered through accommodation agreements as well as interim measures, treaty-related measures, and economic measures agreements between First Nations and the province.

Objective 6.1: Make BC Timber Sales (previously the Small Business Forest Enterprise Program) more effective and put it on a commercial footing.

To make itself more effective and put it on a commercial footing during the year, BC Timber Sales:

In support of the ministry's initiative of revitalizing the forest sector, BC Timber Sales implemented a significant legislative and regulatory change agenda. It completed the alignment of its legislation and regulations with the government's Forest Revitalization Initiative with the passing of Bills 27 [Forests Statutes Amendment Act, 2003], 29 [Forest Revitalization Amendment Act], and 45 [Forest (Revitalization) Amendment Act (No.2), 2003], as well as the complementary regulatory changes in 2003 and the completion of a smaller package of legislation and regulations in 2004.

BC Timber Sales made substantial progress towards the achievement of its strategy to certify operations to support market access and excellence in forest stewardship. During the year, an ISO 14001 certificate was recommended for all three forest districts in the Chinook Business Area (Chilliwack, Squamish and Queen Charlotte Islands). As well, the Fort St. John Timber Supply Area within the Peace Liard Business Area achieved Canadian Standards Association (CSA) certification. In 2004/05 BC Timber Sales will continue with its current ISO certification efforts and expand the implementation of the Environmental Management System (EMS) across the province by 2005/06.

Strategy	Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance	Achievement
Provide a credible reference point for costs and pricing of timber harvested from public land in BC	Average cost per cubic metre of volume sold	N/A	N/A	$13.09	$12.19	–$0.90	Over-achieved

The average cost per cubic metre of volume sold (total operating costs (cash basis) divided by total timber volume advertised) is a measure of BC Timber Sales' performance in containing costs and providing a credible reference point for costs and pricing of timber. Contracting efficiencies and other operational cost containment strategies during the year contributed to the achievement of significant budget savings which, combined with a slight over-achievement in the volume of timber advertised resulted in BC Timber Sales exceeding its target by 6.9 per cent. BC Timber Sales' operating costs are recorded in CAS while Timber Sales offices track the volume advertised.

This measure is being replaced in 2004/05 by "average cost per cubic metre of volume developed". This change from volume sold to volume developed is to reflect that costs are incurred for development of a timber sale rather than its sale.

Strategy	Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance	Achievement
Generate the best possible revenue to the province, recognizing the above strategy	Net revenue measured by Key Outcome Indicator — Crown net revenue generated from BC Timber Sales in $ billions — see Page 30

Strategy	Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance	Achievement
Provide opportunities for customers to purchase timber in an open and competitive market	Per cent of BC Timber Sales volume advertised for sale	97%	99%	100%	104%	+4%	Achieved
	Per cent of sales refused	N/A	9% (target)	2%	19%	+17%	Not achieved

The per cent of volume advertised for sale (the total volume offered for sale) is a measure of BC Timber Sales' success in providing opportunities for customers to purchase timber in an open and competitive market. In spite of an unusually severe fire season and poor deciduous markets, BC Timber Sales was able to provide extensive opportunities to purchase timber by advertising 11.2 million cubic metres, slightly exceeding its target volume of 10.6 million cubic metres by 2.8 million cubic metres or four per cent.

The per cent of sales refused (volume of sales refused divided by volume advertised) is an indicator of market conditions and prices and is tracked by Timber Sales Offices. An oversupply of lower quality timber in beetle management zones, and depressed prices for lumber during the year contributed to the lack of demand in the market and resulting high precentage of sales refused. Approximately 60 per cent of the sales volume refused occurred in three business areas located in the north and central areas of the province. These are the areas most affected by the mountain pine beetle epidemic. In the Fall of 2003 the market was also substituting lower-priced timber for BC Timber Sales volumes.

Mitigation strategies to reduce the volume of sales refused in 2004/05 include client and licensee consultation (e.g., Public Advisory Board), and improvements to sales scheduling and packaging. However, the per cent of sales refused is an indicator that is for the most part not under the control of BC Timber Sales, as market conditions will affect results.

Strategy	Performance Measure	2003/04 Target	2003/04 Actual	Variance	Achievement
Meet or exceed all requirements of the Forest and Range Practices Act	Instances of significant non-compliance with the Forest and Range Practices Act	0	1	+1	Substantially Achieved

This measure shows BC Timber Sales' success in practicing sound forest management. During the year the Forest Practices Board noted one instance of significant non-compliance with the Forest and Range Practices Act in its audit findings for one program business area. The Forest Practices Board is the independent watchdog of forest practices within BC. The audit finding was related to the accuracy of silviculture reporting of free-growing declarations — a transition issue associated with the move from the Small Business Forest Enterprise Program to BC Timber Sales. Although the Board's final report has not yet been issued, BC Timber Sales has taken steps to rectify the issue and has implemented standard operating procedures and a new management information system to prevent future occurrences.

Goal 2: Sustainable Forest Benefits