UPDATED CONTRACTING RULES IN TIMBER HARVESTING

An amended Timber Harvesting Contract and Subcontract Regulation, which governs the relationship between major forest tenure holders and independent contractors they hire to do harvesting and road building, will take effect June 21, 2004.

The regulation, commonly called Bill 13, also governs the relationship between contractors and their subcontractors. As part of the Forestry Revitalization Plan, government committed to work collaboratively with contractors and licensees to improve the regulation.

This collaboration has led to a regulation that establishes a new method to set contract rates that reflect market conditions, and a more efficient and effective way to resolve disputes. It also establishes a process to address, in part, the impacts of timber reallocation on contractors.

Maintaining certainty for contractors

The new regulation offers contractors certainty by:

• Maintaining the replaceability rights of existing contracts. Contracts that are currently replaceable (or "evergreen") will continue to be replaceable. However, there will be no new replaceable contracts in the future.
• Maintaining assignability of replaceable contracts when a contract is assigned (or sold) to another party. Now, when a contractor decides to assign his contract, that assignment will move forward until a licensee can demonstrate it has reasonable grounds to withhold consent for that assignment.
• Guaranteeing successorship of contracts if a forest tenure is transferred to another party. Through amendments to the Forest Act, contractors will now move with the tenure. Previously, successorship was subject to the minister including this provision in approval of a licence transfer.

Greater role for market forces

British Columbia's forest sector must be globally competitive to be sustainable. The amended regulation allows forestry operators to manage their businesses in ways that better reflect the markets. For example, the regulation:

• Offers two new options for dispute resolution. These simplified and streamlined processes - each tailored for Coastal and Interior operators - will reduce the time and cost of resolving disputes.
• Introduces a new test to determine market rates, ensuring negotiated rates fairly and reasonably reflect market conditions.
• Enables parties to opt out of certain regulatory requirements, only if both parties agree. This flexibility will allow parties to explore innovative business relationships.

Process for determining impacts of AAC reductions

Under the Forestry Revitalization Act, about 20 per cent of the long-term logging rights held by the largest tenure holders in B.C. will be taken back by government. This timber will then be reallocated to other parties to support market-based pricing of public timber, and to increase the role of First Nations and small tenures in forestry.

As a result, contractors working for a major licensee subject to the reallocation may be impacted by AAC reductions. The amended Timber Harvesting Contract and Subcontract Regulation now includes a process that will guide the parties in dealing with AAC reductions due to reallocation. The process was developed jointly by licensees and contractors, and gives replaceable contractors a vote on the licensee's AAC reduction proposals.

Until timber is reallocated, licensees are expected to operate according to their approved forest plans and cutting permits. Once timber is reallocated, contractors will have access to additional timber volumes through BC Timber Sales and new licence holders. Impacted replaceable contractors and their employees will be eligible for assistance from the B.C. Forestry Revitalization Trust, a $75-million fund designed to assist individuals impacted during the transition to a more competitive forest sector.

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