Forest Investment Account (FIA) - Land Base Investment Program
FIA Project 2347003

    Economic operability logic and methodology documentation
Project lead: Slocan Forest Products Ltd.
Author: Forest Ecosystem Solutions Ltd.
Imprint: North Vancouver, B.C.: Forest Ecosystem Solutions Ltd., 2005
Subject: Forest Investment Account (FIA), Economic forecasting, British Columbia
Series: Forest Investment Account (FIA) - Land Base Investment Program
Operability, in the strategic timber supply context, refers to a classification of the land base as either suitable or not suitable for timber extraction. Suitability for timber extraction is influenced by the physical characteristics of the land, social and environmental concerns, and the potential economic return generated contrasted with the costs incurred during all phases of production. Economic operability can be a difficult element to quantify. This report, instead of focusing on an single economic operability result outlines a logic to economic operability analysis using actual cast and value data, such that the process can be refined over time following a consistent methodology. This project was undertaken in part, as a result of the Chief Foresterís direction during his review of the 2001 Timber Supply Review of the Mackenzie TSA. In his determination, the Chief Forester directed that; the licensees review and redefine the economic operability data, in particular in balsam-leading stands and stands in the far zone', and 'attempt to quantify the extent of isolated areas in the special planning cells, and any impacts to timber supply'. Following this direction, CanFor initially contracted Forest Ecosystem Solutions Ltd (FESL) and D.E. Gyton and Associates (DEGA) to conduct an economic operability analysis for the Mackenzie TSA. Through preliminary discussions between CanFor, FESL and DEGA, and later discussions with Abitibi Consolidated and the Ministry of Forests District office and Forest Analysis Branch, it was decided that developing an innovative process to defining economic operability in the Mackenzie TSA would be more appropriate given the timing of TSR 3. Also, the project participants agreed that using actual economic data from the Mackenzie TSA would provide more value than simply conducting an economic operability assessment that would be outdated prior to TSR 3. The logic described in this report has been designed to define the market value and costs of production using real selling prices and actual operating costs. This approach differs from previous economic operability studies (see section 1 for a review of other recent economic operability studies). Instead of using defining value and cost from the appraisal system, as developed for stumpage determination, the logic described in this model, uses actual localized data to calculate the economic margin or (conversion return) of harvesting and milling a given forest stand while consider stumpage as a cost item in the calculation.
Forest Ecosystem Solutions Ltd.


Economic Operability Report (0.5Mb)

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Updated August 16, 2010 

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