Copyright 2001 Reuters
December 20, 2001
Story by Allan Dowd

VANCOUVER, British Columbia - The timber industry on Canada's Pacific coast is doomed to failure unless regulations are updated and many of its sawmills are allowed to close, according to a government report released on Wednesday.

Timber producers must replace obsolete mills with new facilities, but will not be able to raise the needed investment dollars because their current operations are not earning enough to cover the cost of capital, the study said.

"In my view, the forest industry is in very bad shape and is getting worse," said Peter Pearse, a respected natural resources expert who prepared the report for the British Columbia government.

Pearse said the coastal region of Canada's largest timber producing province suffers from excess capacity, outdated regulations and production costs that are 40 percent higher than the international average.

Eleven major sawmills in the region have closed in the past decade, but as many has half of the 47 surviving mills should also be allowed to shut down so new facilities can be built, according to the report.

"If we're going to have an efficient system... we cannot maintain the current capacity of these old and out-of-date (mills)," Pearse told reporters following the release of his report in the provincial capital of Victoria.

British Columbia owns nearly all of the province's forest land and leases logging rights to private companies under a byzantine regulatory system that can even dictate were specific trees are milled.

Pearse agreed with other industry critics that the rules force companies to keep open unprofitable mills, because logs cannot be shipped to alternative facilities. "These mills are now in the wrong place," he said.

British Columbia's Liberal Party government has proposed eliminating regulations that tie mills to specific harvesting areas as part of a settlement in the softwood lumber trade fight with the United States.

The study also chastised the industry for allowing its technology and marketing practices to become outdated, and failing to address international concern that its logging practices are environmentally destructive.

The industry has long depended on logging in old-growth forests, but Pearse said new mills are needed to handle the transition to using younger, second-growth trees.

British Columbia Forestry Minister Mike de Jong said the province is ready to act on the industry's problems. "Our unwillingness to address these policies has landed us where we are today," he said.

De Jong acknowledge that changing the current policies will be "painful," but warned that doing nothing will force the industry to "wither and die." Error: Unable to read footer file.