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Parks Settlement Agreement - MacMillan Bloedel



April, 1999

The Province of British Columbia has reached a Settlement Agreement with MacMillan Bloedel Ltd. (MB) for the timber harvesting rights the company lost due to the creation of provincial parks on Vancouver Island since 1991. This document will provide information on:

  • the parks creation initiative that led to the settlement negotiations;
  • the Settlement Agreement principles and process;
  • land appraisal;
  • the public consultation process; and
  • the candidate settlement lands.

Background: parks creation

For years, Vancouver Island has been a focal point in British Columbia for public debate and environmental concerns over critical land use and forest management issues. The debate usually centered on plans to log the old growth spruce, cedar and hemlock forests found on the west coast of the island.

One of the debated areas of the late 1980s was the Carmanah Valley, home to stands of old growth Sitka spruce. The provincial government resolved the conflict by creating Carmanah Pacific Park in 1991 to protect the Sitka spruce found in the lower valley.

In the 1990s, the B.C. government adopted a comprehensive land use strategy designed to end the valley-by-valley conflicts. In 1992, the Commission on Resources and Environment (CORE) was given the mandate to develop land use recommendations for three regions in B.C., including Vancouver Island. The following year, the Province adopted the Protected Areas Strategy (PAS), affirming its intent to increase, to 12 per cent of the province, the amount of provincial land protected for conservation, recreation and cultural heritage purposes.

On Vancouver Island, the PAS was implemented primarily through the Clayoquot Sound land use decision (January 1994) and the Vancouver Island Land Use Plan decision (June 1994) which was based on the recommendations originating from the CORE planning process. As a result of these two decisions, the Parks Amendment Act of 1995 created 14 new protected areas in Clayoquot Sound and 23 new large parks elsewhere on Vancouver Island.

Many of the newly designated parks, such as the Carmanah Pacific, Strathcona additions, Tsitika River, Tahsish-Kwois, Brooks Peninsula and most of the parks in Clayoquot, were created in areas where MacMillan Bloedel held timber harvesting rights either as timber licences or as tree farm licence agreements. As a result of the creation of these parks, MB lost access to approximately six million cubic metres of timber in timber licenses, and also lost allowable annual cut from Crown land.

The Settlement Agreement

The parks created in 1991 and 1995 eliminated MB's timber harvesting rights on approximately 7,663 hectares of timber licences, and on an additional 43,877 hectares of Crown land within two tree farm licences (TFLs). In addition to the lost harvesting rights, the company lost part of its investment in forest-related infrastructure, including roads and bridges on these lands.

The Province is committed to fair treatment of resource tenure holders affected by the creation of new parks and treaties. Accordingly, in December of 1997, the Province and MacMillan Bloedel initiated negotiations towards a voluntary settlement of MB’s claim in accordance with the parameters specified in the Forest Act. These provide for reimbursement for the loss of more than five per cent of harvesting rights and for lost improvements.

The Province’s evaluation of MacMillan Bloedel’s lost harvesting rights was based the company’s foregone net income after taxes and Crown charges. The following main factors provided the basis for negotiations:

  • The Province estimated the values as of the dates the parks were formally established in 1991 and in 1995 (using price and cost assumptions applicable to those dates) and brought forward to the present with interest.
  • The valuations applied to the foregone harvesting rights over the remaining term of the tenures which, in most cases, was about 20 years.
  • Harvest impacts were based on the nature of the tenure: (a) in the case of the Timber Licenses, the standing timber inventory on the new park lands; and (b) in the case of the Tree Farm Licences, the estimated AAC contribution of the new park lands. In both cases, the harvest impact was adjusted to take into account the five per cent non-compensatory component; operability and environmental constraints; and other losses.
  • Foregone harvest revenues were measured using log market prices for the relevant species. In order to correct for business cycle effects, average prices over a five-year period centred on the valuation date were used. Costs were assessed using coastal appraisal procedures for stumpage determinations.
  • Incomes were adjusted to take into account federal and provincial income taxes, provincial stumpage charges and royalty charges (taking into account the 1995 schedule of projected royalty rate increases).

Following negotiations lasting over a year, the Province and MacMillan Bloedel signed a Settlement Agreement on March 16, 1999.

The Province has agreed to pay MB $83.75 million, which includes interest that has accumulated since the parks were created in 1991 and 1995. That amount was fixed as of January 1, 1999 and interest will accumulate on the principal until such time as it is paid in full.

The Settlement Agreement specifies the settlement amount may be paid to MB in resource rights, land and/or cash. The Province has agreed to diligently pursue settlement by means of one or more of the following three forms of non-cash currencies:

  • About 91,000 hectares of land that MB already owns is managed as part of its two tree farm licences. The company would like to have most of that private land taken out of the tree farm licences.
  • MB would like to acquire fee-simple ownership of some of the Vancouver Island Plantation (VIP) lands between Duncan and Campbell River. These properties were originally privatised in the late 19th Century as part of the Esquimalt and Nanaimo Railway land grant, but reverted to the Province when their owners failed to pay property taxes in the 1930s and 1940s.
  • Finally, MB has an interest in acquiring fee-simple ownership of some the Crown land currently within its Tree Farm Licence No. 39. The land of interest is in two separate areas, near Sayward and near Powell River.

The Province will not use any of these potential non-cash forms of currency without extensive, prior public consultation. To the extent that the settlement amount is not paid by means of the above three types of non-cash currencies by October 31, 1999, the Province will have to pay cash in monthly instalments over a period of up to five years.

Effects of Changes to Land Status

If and when some of MB’s private land is ultimately removed from its TFLs, the company will save on regulatory costs because it will no longer have to obtain Forest Service approval of its logging plans. Instead of being managed under the Forest Practices Code, which applies to public land in British Columbia, the private land will be managed as part of the Forest Land Reserve and according to the pending provincial standards for private forest land. If MB acquires ownership of some VIP lands and/or some of the Crown land currently within TFL 39, forest practices there will not become unregulated, but rather will be subject to the pending standards for private land as well as the current federal laws that apply. As with all private land, the company will not have to pay stumpage for timber cut on that land, but will remain fully subject to provincial log export controls.

Land Appraisal

In all cases, independent appraisals will determine the value to MacMillan Bloedel of having any of its private land removed from its TFLs, and the fair market value of VIP lands and the other Crown land. The Province will take the results of those appraisals into account, along with input gathered during the public consultation phase, and then decide whether to proceed with any changes to land status.

Public Consultation

At the Province’s request, MB has identified more VIP and TFL Crown land than needed to satisfy its settlement entitlement. (The company has identified approximately 19,000 hectares of VIP land, and about 13,000 hectares of TFL Crown land.)

In crafting the Settlement Agreement, the provincial negotiators and MB both anticipated candidate land being eliminated from consideration once First Nations, interested groups, local residents, and government agencies presented their site-specific concerns. The same holds true for the land MB already owns and wishes to have removed from its tree farm licences.

It remains entirely up to the Province to decide whether or not to take any of MB’s private land out of its TFLs, and whether or not to give the company fee-simple ownership of any VIP lands or any of the Crown land now in TFL 39. Decisions in that regard will depend upon the results of public consultation over the coming months.

The Province has retained the services of Victoria lawyer David Perry to consult representatives of interested First Nations, local governments, interest groups, water purveyors, and others. In May and June, the Ministry and MB plan to conduct public open houses. Mr. Perry plans to chair public meetings in several communities on Vancouver Island and the Mainland. The schedule of these activities will be advertised once finalised.

Candidate Settlement Lands

The candidate lands which are being considered as part of the agreement are located on Vancouver Island, the Queen Charlotte Islands and the Mainland coast, as shown on the Key Map.

These land units are currently managed under the Forest Practices Code as part of two tree farm licences (TFL 39 and TFL 44) and as part of the Vancouver Island Plantations (VIP) lands in the Strathcona and Arrowsmith timber supply areas (TSA).

A TFL is a form of tenure established under the Forest Act; it occupies a specific area of land and is managed by the licensee. TFL land is comprised of the licensee’s private forest land (Schedule A land) and Crown forest land (Schedule B land).

VIP lands are Crown forest lands managed by the Province under the Ministry of Forests' Small Business Forest Enterprise Program (SBFEP). They are not part of a TFL.

Any land parcels that form part of the final settlement package will become private land held in fee simple and will not be subject to FPC requirements. However, new regulations will be introduced in the legislature this spring to ensure results-oriented environmental standards of practice are applied to private forest land. Until these regulations come into place, a covenant would be registered against any MB settlement lands to ensure the company manages them to the new standards.

 The breakdown of individual parcels by management unit is as follows:

Tree Farm Licence 39

Block 1 - Powell River:

Lands included in the agreement consist of:

    • approximately 2834 hectares of Schedule A scattered around Lois Lake east of Powell River, and towards the north end of Powell Lake;
    • approximately 6434 hectares of Crown land in Schedule B referred to as "Lois Lake", surrounding Lois Lake.

Block 2 - Adam River

Lands included in the agreement consist of:

    • approximately 466 hectares of Schedule A within the village boundaries of Sayward, and south and west of the MB Mainline known as Plan 287 R/W, and the lands north and east of Highway 19;
    • approximately 5936 hectares of Crown land in Schedule B referred to as "Salmon River", located near Sayward, south of Highway 19 and west of Roberts Lake, surrounding the northern half of Spirit Lake, and extending west to the Salmon River. Buffers around Spirit Lake (100 metres), Dalrimple and Springer Creeks (50 metres each side) and the Salmon River (200 metres each side) are excluded from the agreement.

Blocks 3 and 4 - Port Hardy and Coast Islands

Lands included in the agreement consist of approximately 2860 hectares of scattered pieces of Schedule A, with majority of lands concentrated in blocks south of Port Hardy and Port McNeill, and smaller blocks on various coast islands, including Harbledown and Village Islands. A buffer extending 200 metres each side from the Quatse River south of Port Hardy is excluded from the settlement agreement.

Block 6 - Queen Charlotte Islands

Land included in the agreement consists of approximately 9288 hectares of Schedule A located in one large block north of Queen Charlotte City, east of Yakoun Lake and west of the T’lell watershed. The lands extending 300 metres on each side of the Yakoun and Honna Rivers are excluded from the settlement agreement.

Tree Farm Licence 44

Schedule A Lands

Lands included in the agreement include almost all of the Schedule A land within the TFL (73,829 ha), which is concentrated in two large blocks extending northwest (area of Somass and Ash rivers) and southeast (Cameron river area) from Port Alberni, and the remainder scattered in parcels further west across the TFL. Excluded from the settlement agreement are Schedule A lands at mouth of the Nahmint River, at Mack Creek, extending 200 metres on each side of Draw Creek, and extending 200 metres from the northern and western shores of Maggie Lake.

Schedule B Lands

Lands included are comprised of small scattered pieces of Schedule B in the vicinity of Esary and Lizard Lakes (approximately 828 ha), located near Port Alberni.

Vancouver Island Plantations

Strathcona Timber Supply Area:

Crown land southwest of Campbell River and south of Campbell Lake, excluding buffers extending 300 metres on each side of the Quinsam and Iron Rivers.

Arrowsmith Timber Supply Area:

Parcel of Crown land east of Fanny Bay.

    • Nanaimo South (2126 ha)

Block of Crown land south of Nanaimo along the lower Nanaimo River.

    • Ladysmith (3197 ha) and Chemainus North (1749 ha)

Two contiguous blocks of Crown land west of Ladysmith and Chemainus.

    • Copper Canyon (3823 ha) and Cowichan East (2065 ha)

Two blocks of Crown land northwest of Duncan.

    • Cowichan North (1534 ha) and Cowichan South (1677 ha)

Two blocks of Crown land between Duncan and Lake Cowichan south and north of the river.

    • Koksilah (702 ha)

Block of Crown land northwest of Shawnigan Lake.

For more information

For more detailed information, please contact
Enquiry BC at 1-800-663-7867
and ask to be connected to 751-7106.