OKANAGAN TSA

SOCIO-ECONOMIC ANALYSIS

Executive Summary

Introduction

• This report profiles the Okanagan TSA area and discusses the potential socio-economic and environmental impacts associated with three harvest scenarios selected from the Okanagan TSA Timber Supply Analysis Report, which is one in a series of analyses being prepared for British Columbia's Timber Supply Areas (TSAs). These analyses will be used to assist in the determination of new Allowable Annual Cut (AAC) levels for TSAs.
• The Okanagan TSA, located in the Okanagan/Shuswap area, covers approximately 2 173 000 hectares of the Kamloops Forest Region. It is administered by the Salmon Arm, Vernon, and Penticton forest districts and is one of the largest and most ecologically complex TSAs in British Columbia. Forty-four percent of the TSA is currently available for timber harvesting.

Regional and Community Profile

• The Okanagan TSA encompasses one of the fastest growing regions in British Columbia, with a population of 276 210. There was a 15 percent increase in population between 1986 and 1991, with the greatest concentrations of growth in the larger population centres of Salmon Arm, Vernon, Kelowna and Penticton.
• Ten First Nations bands are located in the Okanagan TSA, with a combined population of 4,515.

Environmental Profile

• The Okanagan TSA has the largest number of rare, endangered and threatened species in BC, with habitat ranging over seven biogeoclimatic zones.
• Most lakes and streams in the TSA are well stocked with rainbow and lake trout, kokanee and dolly varden. Along with salmon these are the primary sport fisheries species.
• Maintenance of good quality water supplies is an important environmental consideration in the TSA, particularly in the drier south.

Economic Profile

• The Okanagan TSA has a relatively strong and diversified economy, with Forestry, Manufacturing and Construction, Agriculture and Tourism being the primary generators of employment income.
• There is also a significant contribution from non-employment income sources such as pensions, unemployment insurance, investments and social assistance.

The Forest Sector

• Under current management practices, approximately 972 000 hectares in the Okanagan TSA are available for timber harvesting. One half of this area has special management requirements to account for wildlife habitat, water conservation, aesthetics and biodiversity. The remaining area is managed for integrated resource management with emphasis on resource development.
• The Okanagan/Shuswap area has a large forestry sector which processes an estimated 4 106 000 m3 per year. Total employment is estimated at 6,047 Person Years (PYs), with industry supply sectors, such as trucking, representing 625 PYs and Ministry of Forests operations accounting for 247 PYs.
• It is estimated that the current AAC of 2 615 000 m3 directly supports a total of 3,086 PYs and generates $147.4 million annually for the region in pre-tax employment income. Indirect and induced employment is estimated to account for a further 3,298 PY and $81.2 million in pre-tax income.
• The predominant merchantable species include lodge pole pine, spruce, balsam, Douglas Fir, cedar and hemlock.
• The current allowable annual cut (AAC) is 2 615 000 m3, the majority of which is apportioned between major licensees and the Small Business Forest Enterprise Program.

Harvest Scenarios

• Three harvest forecasts from the Okanagan TSA Timber Supply Analysis report were chosen to illustrate a range of possible socio-economic impacts. These scenarios are meant for discussion purposes only and do not imply that particular harvest levels are preferred.
• The harvest scenarios presented are all based on the principle of sustainable harvest levels (the harvest level never drops below the long-term harvest level) and incorporate the Okanagan TSA Integrated Resource Management Timber Harvesting Guidelines (OkTHG). In this scenario, the average age of harvested timber gradually declines as the mature timber inventory is depleted.
• Scenario 1: The present harvest level of 2 615 000 m3 per year is maintained until year 20. (This is as long as it can be maintained without dropping below the long-term harvest level sometime in the future). The harvest level then declines by approximately 10 percent per decade, until the long-term harvest level of 2 022 000 m3 per year is reached in year 41.
• Scenario 2: A harvest level of 2 809 000 m3 is established in years 1 to 10 to cope with mountain pine beetle and other infestations. Harvest levels are then reduced by approximately 10 percent per decade until the long-term harvest level is reached by year 31.
• Scenario 3: The harvest level is immediately reduced by 15 percent to 2 222 400 m3, then sustained until year 81, when it falls to the long-term level of 2 022 000 m3.
• In all scenarios the volume above the minimum harvest age (120 years) sustains the higher initial harvest levels. As this volume is depleted, the harvest level drops towards the long-term harvest level.

Figure not available

Impacts of Harvest Scenarios

Economic Impacts

• Summaries of TSA and province-wide forest sector impacts are provided in tables E.1 and E.2.
• Under all three scenarios, progressing to a long-run harvest level of 2 022 000 m3 would eliminate an estimated 1,451 jobs from the TSA economy, 700 of which would be direct Okanagan forest sector jobs.
• The analysis does not consider various income support and income replacement measures which could alleviate some of the impact. While these estimates are based on the industry's present employment structure, Scenario 1 reductions would not commence until 2010 and may, therefore, be offset by new employment initiatives such as the Forest Renewal Plan.
• The economic impacts on non-forestry sectors, specifically agriculture and tourism, would be relatively minor. There may be some decrease in the availability of Crown grazing land, but this is not likely to have a significant effect on the regional economy. Reduced harvest levels would have a modest positive affect on tourism and outdoor recreation.

Environmental Impacts

• All three scenarios incorporate important environmental management guidelines designed to protect ungulate winter range, biodiversity, water supplies and fisheries. They do not incorporate the enhanced environmental protection measures contained in the Forest Practices Code.
• Harvesting of older forest stands would occur most rapidly under Scenarios 1 and 2. The age class distribution of the forest would narrow and populations of species that depend on mature forest may decline, while those dependent on a wide range of habitat types and/or immature forests may increase in numbers. The harvesting of older forest would proceed more slowly under Scenario 3.
• The lower harvest rates in Scenario 3 during the first three decades would allow greater flexibility in future land use planning than either Scenario 1 or Scenario 2.

Table E.1 Summary of Okanagan TSA Impacts

TSA Impacts	Scenario 1
Year (1 = 1990)	CURRENT	1-10	11-20	21-30	31-40	41-200
Harvest ('000 m3)	2 615	2 615	2 615	2 353	2 120	2 022
Variation				-262	-233	-98
Economic Impacts
Employment (PY) Direct	3,086	3,086	3,086	2,777	2,502	2,386
Indirect/Induced	3,298	3,298	3,298	2,970	2,675	2,547
Total	6,384	6,384	6,384	5,747	5,177	4,933
Variation				-637	-570	-244
Employment Income (1993 $ mil.) Direct	$94.9	$94.9	$94.9	$85.4	$77.0	$73.4
Indirect/Induced	$81.2	$81.2	$81.2	$73.2	$65.9	$62.7
Total	$176.1	$176.1	$176.1	$158.6	$142.9	$136.1
Variation		0.0	0.0	$-17.5	$-15.7	$-6.8
Community Impacts	Time to adjust to long-term harvest level. Job losses deferred for 20 years.
First Nations Impacts	Maintenance of harvest level for two decades would allow First Nations time to implement forestry development plans. Integrated resource management, important to First Nations, would not be compromised.
Environmental Impacts	More acceptable than Scenario 2 in addressing future habitat, fish and wildlife and recreation requirements.

TSA Impacts	Scenario 2
Year (1 = 1990)	CURRENT	1-10	11-20	21-30	31-200
Harvest ('000 m3)	2 615	2 809	2 528	2 275	2 022
Variation		194	-281	-253	-253
Economic Impacts
Employment (PY) Direct	3,086	3,315	2,983	2,685	2,386
Indirect/Induced	3,298	3,545	3,189	2,870	2,547
Total	6,384	6,860	6,172	5,555	4,933
Variation		476	-688	-617	-622
Employment Income (1993 $ mil.) Direct	$94.9	$102.0	$91.8	$82.6	$73.4
Indirect/Induced	$81.2	$87.3	$78.6	$70.7	$62.7
Total	$176.1	$189.3	$170.4	$153.3	$136.1
Variation		$13.2	$-18.9	$-17.1	$-17.2
Community Impacts	Short term employment gains but more severe adjustments later.
First Nations Impacts	Higher initial harvest level followed by reductions could hinder First Nations forestry development plans.
Environmental Impacts	Higher initial harvest levels would result in faster depletion of old growth and would lead to habitat loss and other environmental impacts. Scenario 2 would involve the least flexibility to address future habitat, fish, wildlife and recreation concerns.

TSA Impacts	Scenario 3
Year (1 = 1990)	CURRENT	1-80	81-200
Harvest ('000 m3)	2 615	2 222	2 022
Variation	2 615	-393	-200
Economic Impacts
Employment (PY) Direct	3,086	2,622	2,386
Indirect/Induced	3,298	2,803	2,547
Total	6,384	5,425	4,933
Variation		-959	-492
Employment Income (1993 $ mil.) Direct	$94.9	$80.6	$73.4
Indirect/Induced	$81.2	$69.1	$62.7
Total	$176.1	$149.7	$136.1
Variation		$-26.4	$-13.6
Community Impacts	Large immediate job loss, followed by eight decades of stability.
First Nations Impacts	Immediate harvest reduction could hinder First Nations forestry development plans.
Environmental Impacts	Lower immediate harvest level would involve less environmental impact and would create more flexibility for addressing future habitat, fish and wildlife, and recreation requirements.

Table E.2 Summary of Provincial Impacts (includes Okanagan TSA)

TSA and Provincial Impacts	Scenario 1
Year (1 = 1990)	CURRENT	1-10	11-20	21-30	31-40	41-200
Harvest ('000 m3)	2 615	2 615	2 615	2 353	2 120	2 022
Variation			0	-262	-233	-98
Economic Impacts
Employment (PY) Direct	3,400	3,400	3,400	3,059	2,756	2,629
Indirect/ Induced	5,100	5,100	5,100	4,589	4,134	3,944
Total	8,500	8,500	8,500	7,648	6,890	6,573
Variation		0	0	-852	-758	-317
Employment Income (1993 $mil.) Direct	107.5	107.5	107.5	96.7	87.2	83.1
Indirect/ Induced	124.4	124.4	124.4	112.0	100.8	96.2
Total	231.9	231.9	231.9	208.7	188.0	179.3
Variation		0.0	0.0	-23.2	-20.7	-8.7
Provincial Government Revenue ($ mil./ year)
Royalties and Stumpage		28.8	28.8	26.0	23.4	22.3
Personal Income Tax		22.8	22.8	20.5	18.4	17.6
Other Taxes		15.2	15.2	13.6	12.3	11.7
Total		66.8	66.8	60.1	54.1	51.6
Variation		0.0	0.0	-6.7	-6.0	-2.5

TSA and Provincial Impacts	Scenario 2
Year (1 = 1990)	CURRENT	1-10	11-20	21-30	31-200
Harvest ('000 m3)	2 615	2 809	2 528	2 275	2 022
Variation		194	-281	-253	-253
Economic Impacts
Employment (PY) Direct	3,400	3,652	3,286	2,958	2,629
Indirect/ Induced	5,100	5,478	4,929	4,437	3,944
Total	8,500	9,130	8,215	7,395	6,573
Variation		630	-915	-820	-822
Employment Income (1993 $mil.) Direct	107.5	115.5	103.9	93.5	83.1
Indirect/ Induced	124.4	133.6	120.3	108.2	96.2
Total	231.9	249.1	224.2	201.7	179.3
Variation		17.2	-24.9	-22.5	-22.4
Provincial Government Revenue ($ mil./ year)
Royalties and Stumpage		31.0	27.9	25.1	22.3
Personal Income Tax		24.5	22.0	19.8	17.6
Other Taxes		16.3	14.7	13.2	11.7
Total		71.8	64.6	58.1	51.6
Variation		5.0	-7.2	-8.1	-6.5

TSA and Provincial Impacts	Scenario 3
Year (1 = 1990)	CURRENT	1-80	81-200
Harvest ('000 m3)	2 615	2 222	2 022
Variation		-393	-200
Economic Impacts
Employment (PY) Direct	3,400	2,889	2,629
Indirect/ Induced	5,100	4,334	3,944
Total	8,500	7,223	6,573
Variation		-1,277	-650
Employment Income (1993 $mil.) Direct	107.5	91.3	83.1
Indirect/ Induced	124.4	105.8	96.2
Total	231.9	197.1	179.3
Variation		-34.8	-17.8
Provincial Government Revenue ($ mil./ year)
Royalties and Stumpage		24.5	22.3
Personal Income Tax		19.4	17.6
Other Taxes		12.9	11.7
Total		56.8	51.6
Variation		-10.0	-5.2

First Nations Impact

• The maintenance of harvest levels around current levels, as provided for under Scenario 1, would appear to coincide with the general forest development interests of the Okanagan TSA's First Nations. The emphasis on integrated resource management practices is very important to First Nations, and this is not compromised under Scenario 1. Although First Nations desire a larger role in the forest economy, this desire is balanced with the responsibilities of forest stewardship.
• Based on the lead time required to implement the First Nations' forestry development plans, they may benefit from the postponement of any substantial harvest netdowns until 2011 as proposed under Scenario 1. This would provide time to develop a solid forestry base and prepare for future harvest scenarios.

Community Impacts

Community concerns centre upon the level and timing of job losses. Because Scenario 1 defers changes in harvest levels for at least 20 years, it would allow the region's forestry-dependent communities to plan any adjustments which might be required. The impact of future harvest reductions would probably be concentrated in a small number of forestry-dependent areas.

Resource Management Issues and Initiatives

• Water: Ensuring an adequate supply of good quality water for agriculture and domestic consumption is an ongoing concern in the Okanagan TSA. This concern will escalate as the population rises and the demand for water increases.
• Harvesting on private land: Unregulated forest practices on private lands could cause negative environmental impacts, particularly on water quantity and quality in community watersheds.
• Protected Areas Strategy (PAS): The goal of the PAS is to protect 12 percent of the province by the year 2000.
• Wildlife habitat: Wildlife management constraints under the Forest Practices Code will be greater than those in the OkTHG.
• Increasing the operable land base: There are approximately 120 000 hectares of "problem forest and deciduous types" in the Okanagan TSA. The forest industry has indicated it may be able to harvest part of this using specialised processing methods and technology.
• Existing stand volumes: The timber supply analysis indicated that timber supply forecasts were extremely sensitive to changes in existing stand volumes.
• Intensive silviculture: Intensive silviculture treatments, which include spacing, pruning, and fertilisation, can help improve long-term harvest levels.
• Unsalvaged losses (fire, insects, disease, and blowdown): Reducing these impacts would increase the timber supply.
• Silviculture systems: Alternative silviculture systems may be able to increase the available timber supply of an area.
• Value-added wood products sector: Expanding the value-added wood products sector is increasingly regarded as the way to obtain more jobs per cubic metre of wood harvested.

Conclusions

All three scenarios in this study involve a drop in harvest levels from the current AAC of 2 615 000 m3 to a long term harvest level of 2 022 000 m3, a difference of 593 000 m3. The scenarios differ in the timing and magnitude of initial harvest reductions. This study assesses the economic, social, and environmental impacts associated with these scenarios. Each of the scenarios could lead to significant losses in jobs, incomes, and provincial government revenues, although the timing of the losses would differ in each case. These impacts could be mitigated by growth in other sectors of the economy and by in-migration. However, forestry jobs are relatively highly paid, so considerable growth in other areas would be required to compensate for the withdrawal of forest sector income from the economy. The Forest Renewal Plan, announced in April, 1994, was not considered in this report but may offset these impacts.

The analysis in this report considers impacts attributable to changes in the harvest level, and assumes no change in factors such as the land base, management, harvesting and processing technology, and timber prices. A change in any of these variables could change the impacts.

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