B.C. Timber Sales

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About BCTS
	BCTS Structural Review
	Brochure
	Corporate Overview
	Corporate Commitments
	Business Plans
	• Performance Info
	Advisory Council
	People Practices
	FAQs
	Mandate
	Organization Structure
	Policy & Legislation
	Timber Reallocation
	Marketing Pricing System
	Environmental Management
	Silviculture Activities
	Certification & EMS
	Location Maps
	Employment

Frequently Asked Questions - Fall 2004

Mandate & Strategic Direction
Q1.	What is BC Timber Sales?
	In March 2003, the Ministry of Forests embarked on a program to revitalize British Columbia’s forest industry. A key component of this revitalization effort was the creation of BC Timber Sales (BCTS). BCTS was designed to transform the Small Business Forest Enterprise Program (SBFEP or small business program) and to make it more effective and put it on a more commercial footing. BC Timber Sales became fully operational on April 1, 2003.

How does BC Timber Sales differ from the small business program?

While the small business program was successful in achieving its goals, BCTS is focused on supporting new forest sector opportunities. BCTS aims to generate the best possible financial return to the Crown from publicly-owned timber, provide timber opportunities, and set a credible reference point for the price and cost of timber harvested from Crown land.

To achieve these things, BCTS has four major strategic objectives:

To provide a credible reference point for costs and pricing of timber harvested from public land in B.C.
To optimize net revenue to the province, within the parameters dictated by our benchmarking mandate and sound forest management practices.
To provide opportunities for customers to purchase timber in an open and competitive market.
To be a high performing organization with skilled, motivated and proud people.

Q3.	What does it mean for BCTS to be described as more commercial than the small business program?
	BCTS is more commercial than the small business program because of its focus on achieving more value for money on the expenditure side of the operation and increasing financial return on the revenue side. There is an emphasis on wealth creation from the opportunities provided through the program, rather than on job creation and other social objectives.

What is the strategic direction of BC Timber Sales?

The vision of BCTS is to be:

An effective timber marketer generating wealth through sustainable resource management.

The mission of BCTS is:

To market Crown timber to establish market price and capture the value of the asset for the public.

What things influenced the development of BC Timber Sales?

Among the many factors influencing the development of BC Timber Sales were:

registrant and licensee input
forestry revitalization priorities of government
forest policy change
government’s core services review process
establishing BCTS is an independent organization within the Ministry of Forests
requirement to sell timber competitively through auction and support government’s market pricing system
having the capacity to manage a significant increase in program volume

Organizational Structure
Q6.	How is BC Timber Sales structured?
	The main operational centres for BC Timber Sales are Timber Sales Offices (TSO) that are responsible for administration, management and planning. The geographical area managed by a TSO is called a business area. BCTS also conducts its business through field teams, which are comprised of a group of field-oriented staff reporting to a Timber Sales Office. Field teams are located with TSOs as well as in several other communities. BC Timber Sales has 12 business areas and Timber Sales Offices that report to a small headquarters operation under the leadership of three directors. Overall responsibility for the performance of BC Timber Sales rests with an Assistant Deputy Minister. Including field teams, BCTS has a presence in 33 locations. Other information about office locations is available in the ‘About BCTS’ section of the website.

Policy & Legislation
Q7.	What is the policy direction of BC Timber Sales?
	The business focus of BC Timber Sales is to develop and auction Crown timber to establish the market price and to develop a credible benchmark for the cost of developing timber for sale, and to undertake these activities with good forest management from initial planning to free growing. New policy has been designed specifically to help BCTS fulfill its mandate.

Q8.	What kinds of legislative changes have occurred?
	There have been many significant legislative and regulatory changes affecting BC Timber Sales and program registrants. These changes have been integral to the transition of the program and to supporting the goals of forestry revitalization. Details about these changes are available in the Legislation and Policy section of this website.

Why were Section 21 sales eliminated?

A clear, transparent mechanism to determine costs and fair market price for Crown timber is required by BCTS to support government’s market pricing system. Under Section 21, the value added sector bid for wood based on a combination of social, investment and revenue criteria. Under this system it was difficult to determine if the Crown was getting a fair return for publicly-owned timber and the data collected from these sales could not be used in the larger market pricing system.

What does this mean for the value added program?

With the expansion of competitive sales, a larger volume of timber will be available for value added operators to bid on. These operators will also benefit from a greater volume of logs through open log markets because of the reallocation of tenure to woodlots, community forests and First Nations, and the removal of timber processing requirements for major licensees.

During the transition period, value added operators were able to retain exclusive access to the volume previously committed to the value added industry, but sales are now awarded competitively.

Timber Reallocation
Q11.	What is the timber reallocation project?
	The timber reallocation initiative is a central component of government’s forestry revitalization plan and is designed to assist in diversifying the province’s forest economy over time and expanding the uses for timber from public forests. The reallocation of timber from replaceable licences held by major licensees will open up more opportunities for new entrants with innovative ideas for forest management and timber processing. In combination with other revitalization projects, timber reallocation will help ensure that more public logs flow to open markets and position the B.C. forest sector to better compete in international markets. The timber reallocation objectives are to: Reallocate 20 % of the AAC held in replaceable licences. Direct about half of the reallocated volume to BC Timber Sales to be auctioned in support of market-based pricing. Direct the remainder to First Nations to support government’s accommodation strategy and to small tenures to expand opportunities for woodlots and community forest tenures.

What volume will be reallocated? Where will this volume be distributed?

On April 1, 2003, Bill 28 effected a corporate timber reallocation from licensees holding total replaceable licences in excess of 200,000 cubic metres of annual cut. These companies had their corporate total replaceable holdings reduced by 20 per cent of the AAC over 200,000 cubic metres. The 20 per cent of volume for transfer across all licensees translates into approximately 8.2 million cubic metres.

To help achieve reallocation objectives, provincial-level working target volumes were established at:

First Nations accommodation – 3.0 million cubic metres
Small tenures – 1.2 million cubic metres
Marketing pricing (BC Timber Sales) – 4.0 million cubic metres

How does the timber reallocation process work?

Timber reallocation is a complex initiative and is being implemented in three major phases, with each major phase having many detailed steps.

Phase One: establishes volume targets for reallocation from individual licences. With the final licence-level volume targets set for planning purposes, this phase was completed in February 2004
Phase Two: has two main stages: 1) selection of areas for pricing, and 2) selection of areas for allocation to new tenures. The former will generally precede area selection for new tenures and will involve the identification of on-the-ground operating areas for transfer to BC Timber Sales to support timber auctions and establish market price for Crown timber. The latter involves the identification of areas for new First Nations and small tenures. It is expected that the pricing area selection process will also identify some specific areas for First Nations and small tenure agreements. The identification of areas for transfer to support pricing is targeted for completion by December 31, 2004, with area selection to support new tenures to be completed by December 31, 2005.
Phase Three: concludes the reallocation process. Minister’s Orders to effect licence specific volume reductions for all pricing areas and known new tenures will be completed by December 31, 2005. Final Minister’s Orders for remaining licences will be completed by March 31, 2006, as established in legislation.

Q14.	What is the current status of the initiative?
	Reallocation is progressing even though the final details of the additional volume are not known. Phase Two activities have been underway for a number of months and are at different stages throughout the province. Due to the complexity and myriad of issues associated with the area selection process, the pace of this work varies across the areas where BCTS operates.

Q15.	What is pricing area selection?
	Pricing area selection is the step of identifying specific on-the-ground operating areas from which a representative profile of timber will be transferred BC Timber Sales for auction in support of the market pricing system.

What is meant by a representative timber profile?

The principle of having a representative timber profile applies to the timber being reallocated for auction to support market pricing. The selection of volume and areas for pricing must provide a benchmark that is representative, statistically defensible and provides a sound base for establishing costs and pricing timber in the competitive, open market. The integrity of the pricing benchmark is contingent upon the ability to verify that the auction volume and area selected provide a good reflection of the timber profile and operational conditions of the non-auctioned timber.

Representation will be met according to characteristics such as species mix, height, age, site index, proximity to access, slope and Biogeoclimatic zone. Distance to major centres, distance to the coast (except in the Interior) and chart area will also be used in the selection.

Why isn’t all of the area selection process occurring at the same time?

The Ministry of Forests is working to ensure an orderly transfer of tenure and to minimize the transition impacts on companies and the communities where they operate.

BC Timber Sales has been preparing for some time to manage the additional program volume from reallocation. To support the market pricing system, the pricing area selection needs to be completed first so that timber can be transferred to BC Timber Sales for auction. Some areas for new First Nations and small tenures may be identified at the same time as the pricing area selection occurs.

Important policy and program delivery decisions related to the additional volume for small tenures are yet to be made. It is also expected that new legislation may be required for the woodlot program. The creation of new tenures for First Nations will be part of Forest and Range Agreements, many of which are in development or are yet to be developed. Government wants to ensure that new opportunities for First Nations and small tenures expansion can occur as quickly as possible after the transfer actually occurs.

When will BCTS start selling the additional volume that is being reallocated to support the new pricing system?

BCTS has been set up to handle an increase in the volume and the organization is well positioned to develop and sell the reallocated volume. Some timber has already been transferred and BCTS is managing its development and sale. In other situations, the volume will continue to be used by the former holder of the rights. As operating areas are identified, it will become possible to acquire and market blocks already planned for or developed by licensees.

Q19.	Will BC Timber Sales continue to issue non-replaceable forest licences?
	BCTS will not offer new non-replaceable forest licences. Existing sales will continue, but these volumes will be auctioned as competitively awarded timber sales licences when the licences expire.

Q20.	What happens with cutting permits?
	Existing cutting permits, with terms that range beyond March 31, 2007, will expire on March 31, 2007. All new cutting permits will be limited to a maximum term of 4 years. The new legislation allows for existing cutting permits to be extended, if they do not run past March 31, 2007, but there is no automatic extension.

What happens to existing timber sale licences?

Existing timber sales were priced and awarded on a competitive basis and will run to the end of their term. New timber sale licences will be limited to a maximum term of four years.

In support of the new pricing system, excessive market speculation will be minimized by limiting extension terms and requiring a fee for the extension of cutting permits and timber sale licences. This provides greater certainty and predictably of government revenues as well as more efficient achievement of forest development and silviculture operations conducted through BCTS.

Market Pricing System & BCTS
Q22.	What is the role of BCTS with the new timber pricing system?
	The market pricing system (MPS) is based on the auction of timber by BC Timber Sales to establish the price for Crown timber. BCTS will auction about 20 per cent of Crown timber annually through hundreds of timber sales of varying sizes, with terms up to four years in length. BC Timber Sales will auction this timber to the highest bidder and the auction results will be used to determine the stumpage rates of the remaining 80 per cent of Crown timber. Prices received for auctioned timber will require adjustments before they are applied to the timber harvested by licensees. Adjustments will be made for the responsibilities of licensees holding long-term tenures, but not by winners of auction sales. This adjustment is referred to as the ‘tenure obligation adjustment’, which covers responsibilities such as planning costs, road building, reforestation and investment and risks in forest management. Information on prices bid at auction, timber characteristics and prevailing log-price data will be available so that potential bidders can make informed bids at auction sales. The new pricing system and other elements of the revitalization plan will result in public timber going to the highest and best use within B.C. The transparency of the market pricing system will remove any illusion that B.C.’s industry is subsidized, and it may thereby help to open up access to the U.S. market.

If the auction of timber by BCTS is used to set stumpage rates, will the cut profile of BCTS reflect the timber profile in a given area?

One of the key goals of BCTS is to provide a credible reference point for the costs and pricing of timber harvested from public forests. For MPS, a selection model will be used to ensure timber is representative of the overall profile. The selection will be made on characteristics of the remaining working forest, not past harvest. The selection criteria will capture the full spectrum of the operational and value characteristics.

What is the relationship of BCTS to other licensees?

BCTS will sell timber in a way that ensures the prices bid on auctioned timber provide credible data to set the price on all timber harvested from Crown land. To do this, it must function in a manner similar to other licences, ensuring that sales are representative of the costs and opportunities available on the larger Crown land base. While BCTS will emulate the operations of a private sector forest company, it remains part of the Ministry of Forests and government.

Q25.	Will BC Timber Sales sell more volume than has been apportioned through the small business program?
	The timber reallocation initiative will increase the volume of timber managed, developed and auctioned by BC Timber Sales from 13 to 20 per cent of the provincial allowable annual cut.

Environmental & Forest Management
Q26.	What is the BCTS approach to forest management?
	BC Timber Sales (BCTS) is one of the core programs used by the Ministry of Forests to provide sustainable forest benefits to British Columbians. In doing this, the BCTS mandate is to be an effective timber marketer generating wealth through sustainable forest management. An organization-wide environmental policy. Third party certification of our performance Implementation of environmental standards and systems Measuring and reporting our performance annually

Does BCTS have an environmental policy?

BC Timber Sales manages harvesting and forest management activities in timber sale licences and related tenures in public forests throughout British Columbia.

In accordance with our environmental policy, we:

meet the requirements of all relevant environmental legislation, including the Forest and Range Practices Act,
strive for excellence in forest management by continually improving the performance of our forest management activities and practices,
set and review our environmental objectives and targets,
monitor and evaluate our forestry operations,
endeavour to prevent or mitigate undesired environmental impacts associated with our forestry operations, and
communicate our business activities and policies to all staff, program registrants and contractors, and make them available to the public.

Silviculture Activities
Q28.	What does BCTS on the silviculture front do to ensure a sustainable forest resource?
	BC Timber Sales places a high priority on its silviculture activities and is the largest tree planter in British Columbia, with more than 35 million tress planted annually. About half of the seedlings planted are grown from genetically improved A Class seeds and this proportion will increase in the future. BCTS purchases seeds and seedlings of consistently high quality. The 2002/03 silviculture activities of BCTS included site preparation of 10,000 hectares, brushing of 12,000 hectares and planting 24,000 hectares.

Certification & EMS
Q29.	What are forestry certification and an EMS?
	Forestry certification and implementation of an Environmental Management System (EMS) are considered as best practices in forest and sustainable resource management, and for securing market access. As such, forestry certification has attracted significant attention in the market place and among B.C. forest sector stakeholders in recent years. Domestic and international market interest in buying wood products from certified forests has steadily increased and many forest companies in the province have received third-party registration of their forest management programs. While forestry certification is voluntary, it is supported by the provincial government and complements the Forest and Range Practices Act. An EMS is a standard that forestry organizations must achieve and adhere to in order to recognized as a certified forestry operator. For example, ISO 14001 is the EMS standard developed by the International Organization for Standardization. The ISO 14001 standard was published in 1996 and is the result of efforts by a technical committee representing 70 countries. The ISO model commences with an environmental policy and is followed by planning, implementation and operation, checking and corrective action, and management review. While ISO 14001 does not state specific environmental performance criteria, it enables an organization to develop policies and objectives that take into account legislative requirements and information about significant environmental aspects that it can control and over which it has influence. After registration, an organization must demonstrate continuous improvement in order to maintain certification.

How is BC Timber Sales involved with certification and an EMS?

BCTS is committed to achieving third-party forestry certification for its forestry operations and, to achieve this goal, is implementing an EMS in each of its 12 business areas. Each business area will obtain a separate registration certification and all BCTS employees will be required to participate in EMS awareness training. While certification is voluntary, BCTS collaborates with licensees and permittees to achieve full participation in its operating areas.

BC Timber Sales is continuing with its International Organization for Standardization certification (ISO 14001) as well as expanding implementation of the EMS to all Business Areas by 2005/06. The foundation of the ISO certification is having an Environmental Management System (EMS).

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