Jeff's Blog

Those who advocate for even further restrictions on log exports from BC (and who aren't otherwise inherently opposed to logging in the first place) would take us in exactly the opposite direction that we need to pursue. Aside from the fact that forest economists such as Dr. Peter Pearse argue that log export restrictions are a wash in terms of net gain or loss of jobs if both logging and sawmilling jobs are considered in the equation, and aside from the principle that people should have the freedom to trade their goods and services where ever they can obtain the highest economic return, the absence of free trade in logs on both sides of the border is a cancer on our ability to maintain both a healthy logging industry and a healthy sawmilling industry.

Restrictions on exports of unmanufactured timber are a subsidy to the domestic sawmilling industry. Period. There is simply no other reasonable view the matter: they serve to reduce the cost of fibre for domestic sawmillers by insulating that fibre from the demands of the larger international and national markets. That's why they were imposed in the first place: to ensure a cheap source of fibre to encourage people to invest their capital in timber manufacturing facilities in BC.

But we are now a century past the time when log export restrictions were imposed. We have an over-abundance of manufacturing capacity. What we lack is free access to our biggest market--the United States. While we should pursue the potential rejuvenation of our Japanese markets, and continue to invest in the development of Chinese markets, for now and the foreseeable future the health of both our logging and timber manufacturing industries is tied to the American market.

Yet, so long as we do not have free trade of logs, we will not have free trade of lumber. And this, I would suggest, hurts both the logging and manufacturing sectors of our forest industry. The effect on the logging industry is straight-forward enough: as noted, export restrictions limit the demand for logs and, therefore, the value the logger is able to receive for its logs, and its ability to grow its business (or even survive). However, given that export restrictions are a subsidy, they harm the manufacturing sector due to the fact that they restrict the access of BC softwood lumber to the US. It's a lose-lose for BC.

Elimination of log exports would allow us to obtain exemptions to the penalties imposed on exports of lumber under the current Softwood Lumber Agreement between Canada and the US, and make future protectionist actions from the US Department of Trade and Commerce difficult to justify. In terms of logs from private lands, the federal export restriction on unmanufactured timber (the so-call "Notice 102") is the only possible subsidy to domestic lumber production. In terms of logs from public lands, the export restriction under Part 10 of BC's Forest Act is the only provincial subsidy of consequence left standing in BC--we have already delinked public tenures from manufacturing facilities, eliminated cut control requirements, and have implemented market-based stumpage.

One important difficulty is the fact that exports of American logs north of the border are also subject to restrictions. Logs from private lands in the US are subject to the so-called "substitution rule" whereby those who export private land logs across the border are not entitled to acquire public land logs for their own use. Exports of logs from US federal and state public lands are prohibited. The elimination of log export restrictions south of the border needs to accompany the elimination of Notice 102 and Part 10 of the Forest Act. The goal is the free flow of logs and lumber in both directions across the border, not a one-way street headed south.

While the contemporaneous elimination of log export restrictions on both sides of the border is not necessarily a simple matter, the answer is surely not to adopt a policy that takes us in the exact opposite direction and increases the restrictions on our own exports of unmanufactured timber. Once thing is certain: we will not get the Americans to eliminate their log export restrictions if we do not eliminate ours; almost equally as certain, until this happens we will not obtain the free access to the American softwood lumber market that our manufacturing sector truly depends upon.

A level playing field requires the elimination of log export restrictions on both sides of the border, and the elimination of restrictions on Canadian softwood lumber south of the border. We cannot expect to have one without the other. Only when all these restrictions are removed will the BC timber manufacturing industry have the opportunity to compete on a level playing field in the US market. And only then will it have the potential to pay our loggers what BC logs are actually worth in the absence of artificial market restrictions on domestic logs. This is a path that will benefit both sides of our forest industry - the logging and manufacturing sectors. Those in the BC forest industry who advocate for log export restrictions should abandon the short-term and superficial appeal of their position, and advocate for policies that are less antiquated and in the long-term interests of the entire forest industry--specifically, the unrestricted flow of logs and lumber in both directions across the border.

The commentary in this blog is general in nature and does not constitute legal advice. Persons requiring further information or advice should contact Jeff Waatainen at 250.758.9485 or jeff@bcforestrylaw.com

Last week I attended the annual convention of the Council of Forest Industries. Along with the TLA convention in Vancouver, this is the second of two industry conventions I typically attend each year. In accordance with the every-other-year rotation that COFI has established between Prince George and Kelowna for this event, this year’s convention was held at the Civic Centre in PG.

The Ice Breaker

On Thursday evening I attended the networking reception formerly referred to as the "Ice Breaker" in the old NFPA days. There was good food and beverage, and they appeared to have plenty of everything. I remember a few years back at an ILMA convention in Kelowna when the caterer ran out of ribs before everyone had their fill. A riot nearly ensued--rule No.1 when working with the forest industry is that you don’t leave a bunch of loggers hungry! This year the event had a martis gras theme to it with numerous Cajun food stations (as well as a good variety of other food options). As usual, this event made for a pleasant evening with all the usual faces in attendance. The one comment I kept hearing was that the organizers should have pulled the pirate ship and dry-ice used at the last NFPA Ice breaker out of storage—it would have fit right into the martis gras theme!

Softwood Lumber and Log Exports

I thought the Friday morning program was excellent. It began with a discussion of the “Softwood Lumber Agreement 2006: Six Months In”. For me, the most thought-provoking presentation in this particular session came from Don Wright, the former Deputy Minister of Forests who now operates his own consulting firm, Analytica Consulting. Mr. Wright asked the question: “Is there an appetite for fair trade in the log and lumber industry?” Mr. Wright has had (and continues to have) extensive involvement with both the log exports and softwood lumber files, and is uniquely situated to consider this question. By “fair trade”, Mr. Wright means a “level playing field”.

Mr. Wright’s question was largely the result of an analysis of log export restrictions on both sides of the border. At its core, the American position with respect to Canadian softwood lumber is based upon the allegation of subsidization. Exempting lumber from private land timber under Article X.4 of the SLA is, therefore, a no-brainer except for the export restrictions on private land logs. Mr. Wright suggests that to level the playing field for private log exports, Canada could eliminate the Notice 102 surplus test in exchange for the elimination of America’s “substitution rule” that restricts US private log exports from the US north of the border. Softwood lumber from private lands on both sides of the border would then compete on a level playing field, and no justification would exist to deny BC an exemption under Article X.4 for softwood lumber from private land timber sources.

But Mr. Wright goes further and suggests that BC could eliminate the export restrictions that currently exist on timber from provincial Crown lands in exchange for the elimination of the export restrictions that exist on logs from state and federal lands in the US. BC softwood lumber from public land timber sources would then become eligible for an exemption under Article XII.4 of the SLA. Mr. Wright suggested that changes to BC forest policy over the last few years (market-based stumpage, elimination of appurtenancey, and so on), have otherwise eliminated any other basis for the US to claim a subsidy against softwood lumber from public land timber in BC.

Consequently, the existence of a clear path towards a level playing field between the US and BC in the log and lumber industries leads Mr. Wright to ask whether there is an appetite for fair trade between the parties. The other side of the question that is left unstated, of course, is that if an appetite for fair trade really exists, then why don’t we have it?

Mr. Wright is obviously very expert in this particular field of public policy. The one comment I would offer is that recent changes in BC’s forest policy may not necessarily eliminate American accusations of subsidy with respect to BC’s public land timber supply. The BC forest industry is still highly regulated and, undoubtedly, there is plenty of ammunition in those regulations to allow creative American protectionists to assert claims of subsidy (the validity of these claims does not seem to matter particularly, so long as there is at least a pretext). More importantly, while the Province as moved towards “market-based” stumpage, MPS is still a complex administrative pricing system. So long as we have administrative pricing, we are exposed to accusations of subsidy. And the elimination of administrative pricing is probably a tougher nut to crack then log export restrictions.

Lobbying the Minister

Another highlight of the morning program for me was the Minister’s speech. Minister Rich Coleman filled his speech with humour, both of the self-effacing and pointed varieties. The Minister touched on a number of policy areas, offered a defence of the SLA, and made it perfectly clear that if any group wanted him obtain government funding for any kind of construction project, then that project better have a sizable component of wood in it. He also indicated that he would make a significant policy announcement with respect to log export policy in the next few weeks after he receives an experts report from Don Wright and Bill Dumont.

What I found particularly interesting was the view the Minister takes towards his meetings with representatives of the forest industry. Paraphrasing the Minister, he stated that, inevitably, every issue that anyone from industry brings to him in a meeting seems to boil down to the following: “I want wood for free ... When are you going to get me wood for free? ... I want all obstacles between me and my free wood removed for free”. He went on to explain how this approach could really put him in trouble with the Minister of Finance who expects the Province’s forests to generate a billion dollars of revenue annually for her coffers. He then went on to recall a specific meeting he had with a group of industry leaders, and how he started out the meeting by asking: “So ... what do you guys want?”

While the Minister was going for humourous effect, I wonder if his humour revealed a shortcoming in how the forest industry in this province relates to government. The most effective government relations do not come from self-centred demands made of government that appear to benefit only the person making the demand. Yet, judging by the somewhat cynical view the Minister appears to take towards his meetings with industry, I wonder if this is too often industry's approach. In my view, a far more effective approach towards government relations is to emphasize the benefits of your proposal from a public policy perspective: don’t tell government what it can (must) do for you; rather, tell government what you can do for it.

Next Year

So I’m already looking forward to next year’s convention April 16 – 18 at the Grand Okanagan in Kelowna. While I always enjoy my visits to PG, the Kelowna conventions have a great Texas Scramble golf event at Kelowna Springs Golf Club that really adds to the value of the convention from my perspective. If you are planning to stay at the Grand, don’t delay – I made my reservation yesterday, and space was already getting tight.

The commentary in this blog is general in nature and does not constitute legal advice. Persons requiring further information or advice should contact Jeff Waatainen at 250.758.9485 or jeff@bcforestrylaw.com

I spent yesterday at the TLA’s annual Convention & Expo under the sails at Canada Place in Vancouver. The Suppliers Night was even more popular than usual, and actually sold out (I’ve never seen scalpers hanging outside the entrance of this event before). The little pulled-pork buns were irresistible, as were the salmon skewers and the penne pasta dish.

Earlier in the day I attended the “Progress Panel Lunch”. I thought each of the speakers made a good presentation, and I enjoyed the occasional good-natured shot Mill & Timber’s David Grey aimed at some of those in the audience (“I’m paying $90 for utility ... well, not for your utility!” - finger pointed at some log-broker off to the side). Unfortunately there was a “no debating” rule in effect. Too bad – allowing the panelists to test the underlying assumptions of each other’s position could have turned a good event into a great event.

The one theme that really stood out for me was the acknowledgement from most (if not all) panel members that an entirely new model for the way we conduct business in forests is needed to improve the industry’s outlook. I sensed a wide-spread acknowledgement that the changes of the last few years were, in retrospect, just so-much tinkering around the edges, and that what we really need is complete paradigm shift. To paraphrase Bob Simpson’s comments, we need to ask how we would go about forestry in BC if we could just start all over from scratch today, and get rid of everything else.

While several panel members referenced the need for tenure reform in this regard, I didn’t hear anyone on the panel whisper word-one about a truly revolutionary notion for this province: more private ownership of the province’s timberlands. The one characteristic of the BC forest industry that stands out above all else in comparison with other jurisdictions is the fact that the Crown virtually owns the entire land base. As Garry Mancell points out, the only jurisdiction in the Western world where the government owns a greater portion of the land base is Russia – probably not the model we want to emulate. One TLA member I spoke with suggested (hopefully tongue in cheek) that BC was probably now ahead of Russia.

Apparently, a move to area-based tenures is on the way. But is this truly a paradigm shift? Aren’t our TFLs, TSLs, woodlots, and community forest agreements already “area-based”? I think if we truly want to explore “fundamental” change, we need to consider the fact that 96% of the land in this province is publicly-owned, and whether this staggeringly high number might just have something to do with our problems.

The commentary in this blog is general in nature and does not constitute legal advice. Persons requiring further information or advice should contact Jeff Waatainen at 250.758.9485 or jeff@bcforestrylaw.com

Last fall, the ABCFP invited me to write a regular column called "The Legal Prespective" in its magazine, BC Forest Professional. My first column is titled “Due Diligence Under the Forest and Range Practices Act: Keeping it Real”, and appears in the current edition of BCFP (January – February 2007). The column looks at the early indications of how the Forest Appeals Commission will approach the defense of due diligence in the context of administrative penalties imposed under FRPA. I hope everyone was able to check it out – if you missed it, give me a call or drop me an email, and I’ll see that you get it.

The commentary in this blog is general in nature and does not constitute legal advice. Persons requiring further information or advice should contact Jeff Waatainen at 250.758.9485 or jeff@bcforestrylaw.com

I hope everyone saw Derek DeCloet's article in last Saturday’s Globe & Mail Report on Business Weekend ("Pattison Goes Deeper into the Woods" p.B5). The article examines the apparently counterintuitive phenomenon of Jimmy Pattison and others significantly increasing their stake in the BC forest industry when the industry’s immediate outlook seems particularly bleak. The article is definitely not blue skies and sunshine--there’s still the requisite doom and gloom that must accompany any story on the BC forest industry these days. But the article does contain a nugget of Lennonist (that would be John, not Vladimir) optimism: it couldn’t get much worse.

The article provides a nice survey of where the investment community sees the industry’s future and, somewhat surprisingly, there is actually mixed opinion. I suppose there is some comfort in fact that at least a few big players seem to think that this is a good place to park their money long term (certainly, I don’t think anyone is expecting a quick return on investment). The most interesting aspect of the article for me, however, is how much change it suggests that investors still expect from the industry. After a period of sweeping regulatory changes and large merger after large merger, the expectation is for ever further regulatory changes and even larger mergers.

I’m not sure whether the public is prepared to accept this. I don’t think the public, in general, appreciates how small our forest companies in BC and Canada are compared to their international competitors. And if they do not appreciate this basic premise, then I’m not sure they would even begin to consider the need for a further reduction in regulations to promote even bigger forest companies. In any event, these policies will require skilled and determined political leadership, both in Ottawa given that competition is a matter of federal jurisdiction, and also on the ground where the voters reside. The question then becomes: are there any political leaders at the federal level who are willing to champion the case for larger forest companies? Or is it easier and more politically profitable, especially at a federal level, to fall back on bashing large companies?

If you missed the article, send me an email at jeff@bcforestrylaw.com, and I’ll forward a PDF to you.

The commentary in this blog is general in nature and does not constitute legal advice. Persons requiring further information or advice should contact Jeff Waatainen at 250.758.9485 or jeff@bcforestrylaw.com.

In late September, 2006, the BC Coroners Service held an inquest into the tragic death of a faller who was killed while on the job. A Coroner’s jury sat through five days of evidence, so there was a lot of information for the media to pick and choose from as it reported on the proceedings. I will resist the urge to comment on the media’s sampling of that evidence—I have spoken with people who attended the hearing, but was not there myself. I’ll just say that my cynicism with the notion of a detached, objective media remains fully intact.

However, I am able to comment on the continued misapprehension in the media over the legal obligations of a “prime contractor”. A review of the media reports of this Coroner’s inquest would leave one with the impression that a prime contractor is solely responsible for all aspects of workplace safety. For example, on September 19, 2006, The Sun reported that the prime contractor was “part of a new WorkSafeBC policy to designate one contractor as ‘prime’ contractor, being responsible for all safety on the worksite”. On September 22, 2006, The Sun again reported that the “prime-contractor designation has been applied to the forest industry by WorksafeBC in an attempt to ensure that one contractor on multi-company worksites accepts full responsibility for supervising safety.”

First, the “policy” is not new. The current incarnation of the “prime contractor” concept came into existence in the Workers Compensation Act (the “Act”) eight years ago with the Workers Compensation (Occupational Health and Safety) Amendment Act, 1998. I suspect that the description of the Act's prime contractor policy as "new" is simply an effort to link that policy to last year's dismal safety statistics for the industry.

But, more importantly, a prime contractor is not responsible for “all safety” at a workplace; it is responsible for some aspects of safety at “multiple-employer workplaces” only (those workplaces where workers of two or more employers are working at the same time). Specifically, at a multiple-employer workplace, the prime contractor is required to “coordinate” the safety activities of employers, workers, and other persons, and to establish or maintain a “system or process” that will ensure compliance with the occupational health and safety requirements of the Act and regulations. In other words, the prime contractor serves a coordination function and establishes systems or processes designed to ensure compliance with the Act when multiple employers are operating at the same workplace.

While this is undoubtedly an important slice of the occupational health and safety pie, it’s still just one slice. Owners, directors and officers, employers, supervisors, workers, and suppliers each retain their own specific obligations and liabilities under the Act, and the designation of someone other then the owner as the prime contractor does nothing to alter these obligations and liabilities. And while the Act allows an owner to contract out of its default designation as the prime contractor, it cannot contract out the remainder of its obligations as an owner under the Act, just as an employer similarly cannot contract out its obligations as an employer under the Act. While an owner or employer may contractually engage someone else to fulfill their obligations as an owner or employer under the Act, if these obligations are not met the owner or employer, as the case may be, is still liable under the Act regardless of any contract and regardless of any prime contractor designation.

The commentary in this blog is general in nature and does not constitute legal advice. Persons requiring further information or advice should contact Jeff Waatainen at 250.758.9485 or jeff@bcforestrylaw.com.

Welcome to Westhaven Forestry Law, and thanks for checking out my website. While my intent is to use this blog as a forum to provide quick commentary on legal developments and other issues of interest to those in the forest industry, please allow me to use this first entry to introduce myself, and what Westhaven Forestry Law is all about.

My name is Jeff Waatainen. I graduated with my LLB from the UBC Faculty of Law in 1995, and was called to the bar in 1996. Prior to law school I completed the Political Science Honours program in the UBC Faculty of Arts, and subsequently earned an MA in political science from UBC as well. During my "poli-sci days", the primary focus of my studies was the BC forest industry. While at graduate school, I studied under Dr. George Hoberg (now with the Faculty of Forestry at UBC), and my MA thesis was a comparative study of endangered species habitat protection between BC and the American Pacific Northwest.

Long before I ever applied to law school I became familiar with court decisions that were important to the forest industry through my undergraduate and graduate research. From these decisions I began to develop an interest in the valid exercise of legal discretion and the significance of jurisdiction. I began to appreciate how the mere fact that a government official might claim the authority to make a particular decision didn’t necessarily make it so.

I mention all of this only to point out that, unlike most who enter into the legal profession, a career in the law was not an end in itself for me: it was a way for me to work in the forest industry. While I have developed a great appreciation of the law over the years, my initial decision to go to law school served a more practical purpose. My dad, Bernie Waatainen, RPF (ret.), worked in the BC forest industry for close to 30 years, so it was always around me growing up. After I began to study forest industry issues at university I came to the conclusion that this was the field where I wanted to establish my career. The law seemed to provide a natural path for me towards this goal.

I summered, articled and spent my entire legal career prior to this past July with the forestry practice group of Davis & Company in Vancouver. My decision to leave Davis to make a go of it on my own back in Nanaimo was probably one of the hardest of my life. One does not give up a good job with excellent colleagues for the uncertainty of a new future without some amount of anxiety. The reasons for my decision were personal rather than professional, and related almost entirely to a desire on the part of my wife, Paula, and I to return to the Island (where we had both grown up) to raise our kids.

After a busy summer with the move, setting up my office, and client work, I am now ready to formally declare myself open for business, and to respectfully ask that you keep me in mind as an option when it comes to who you call for legal services. For over a decade I worked closely with some of the best in the business: Brian Hiebert on corporate and commercial matters; Peter Voith, QC on stumpage matters and administrative reviews and appeals; and Garry Mancell on logging contracts, tenure issues, regulatory compliance, and all other aspects of what we might loosely refer to as "forestry law". Over this time I have gained a wide variety of legal experience in the forest industry. With this training and experience, I am able to provide personalized, quality legal services that are of value to the forest industry at significant savings.

So, thank you once again for taking the time to visit my website. I hope I get the opportunity to work for you sometime soon.