1998/99 Legislative Session: 3rd Session, 36th Parliament
HANSARD

The following electronic version is for informational purposes only.
The printed version remains the official version.

Official Report of

DEBATES OF THE LEGISLATIVE ASSEMBLY

(Hansard)

TUESDAY, JUNE 22, 1999

Volume 16, Number 8

[ Page 13875 ]

The House met at 10:06 a.m.

Prayers.

G. Abbott: I have, actually, quite a number of guests here from the Shuswap today. I'm delighted to welcome them. And I'm delighted, since they came to observe the proceedings of government, that some government members are actually able to appear in the Legislature this morning to participate in this process.

The Speaker: Remarks about the presence or absence of members are not appropriate.

G. Abbott: The guests are the graduating class -- the grade 7 class -- of Parkview Elementary School in Sicamous. It's always a pleasure to welcome guests from my constituency, but it's especially a pleasure when they are from my hometown of Sicamous and when one of the 48 that are here today is my son Wade, who is a participant in that class. Accompanying the 48 students from Parkview Elementary are their teachers, Ms. Strecheniuk and Mr. Lynka, as well as chaperons Mrs. Allen, Mrs. Chmilar, Mrs. Miller, Mrs. Niemi, Mrs. Oddy, Mrs. Prystai, Mrs. Ross, Mr. Wold and Mr. Wood. They are all here to enjoy the Legislature and Victoria.

An Hon. Member: It's the entire town of Sicamous.

G. Abbott: Yes, actually; much of the town of Sicamous is here. I would like the House to make them all welcome.

Orders of the Day

The House in Committee of Supply B; W. Hartley in the chair.

[1010]

ESTIMATES: MINISTRY OF FORESTS
(continued)

G. Abbott: This morning we continue our discussion of the jobs and timber accord. For the information of my friends from Sicamous who are here today -- just so that people understand where we're at in terms of these estimates -- we are, over the course of a number of hours and days, reviewing the policies, procedures, revenues and expenditures of the Ministry of Forests, just as we do with other ministries of government. Just coincidentally, we are on the Ministry of Forests today.

One of the important policy elements in the current government's forest policy framework is the jobs and timber accord. What we are doing is going through it and looking at some of the provisions in the accord which may or may not have been achieved over time. At this point, I'd like to ask the minister to tell us what has been done with respect to a provision on page 4, which reads: "Consultation will be undertaken between government and industry for a B.C. forests job creation tax credit to hire youth, with additional incentives to employ women and aboriginals." Can the minister advise whether those consultations have been completed and what the result has been?

Hon. D. Zirnhelt: Yes. There were some consultations undertaken. By mutual agreement between government and industry, we decided not to proceed at the time. It has budget implications, so it's being held in abeyance.

G. Abbott: The industry, as I understand it, has been a proponent of broad-based tax credits -- for expansion and so on. Is that the case, as the minister understands it? The industry may not be keen on tax credits, for example, to hire particular groups, but they have generally been very supportive of the concept of tax credits or job creation tax credits. What would be the reason why the industry and the government decided not to proceed with this particular provision in the jobs and timber accord?

Hon. D. Zirnhelt: Industry was advised that they should have consultations with the Minister of Finance on these matters of general taxes. Yes, it's not surprising that industry would want a general tax break, which benefits their bottom line. Government's interest is slightly different. We have been interested in targeting some of it to address some of the inequities out there -- to target some of our objectives around youth hire and to try to get the participation of women and aboriginals up. Industry has been urged to pursue that with the Minister of Finance, and I understand that they have.

[1015]

The third point that I want to ask about -- again, it's on page 4 -- is under the job-maintenance-and-creation section. It reads: "Industry and government will work in good faith and cooperatively to achieve an increase in major licensee harvest volumes to reduce the gap between the actual cut and the AAC. Job creation will come from" -- and the first bullet is -- "increasing major licensee harvest volumes towards AAC by 3 million cubic metres by 1999-2000." Has that been achieved? I would gather from our previous discussion that it has not and that in fact harvest volumes have fallen off since June '97. If that's the case, by how much?

Hon. D. Zirnhelt: We have achieved approved permits, so if industry wants to cut the full AAC, they can; they're permitted to do that. If it were costs, industry competitiveness, that was in their way, then we've addressed that through the log cost reduction strategy and the short-term forest action plan. The primary limitation here now is markets. As I said yesterday, you could cut the timber, but you'd have trouble marketing it. That seems to be the problem: there are market limitations. I would argue that considerable progress has been made on removing the barriers to cutting and that it is not an AAC or a cutting approval problem. It's essentially a market problem.

[ Page 13876 ]

Hon. D. Zirnhelt: The information on what spatially demonstrated means is as follows. "Spatial data" is a technical term that refers to the geographic location of a forest stand within a GIS -- geographic information system -- database at a specific time. It's important to spatially demonstrate the AAC, or where harvesting will take place or has taken place over time, to recognize the conflicts with other resource values or code requirements, such as visual green-up or a harvested block prior to harvesting an adjacent block. That's the definition.

G. Abbott: Clearly the intent here is that government establish a way in which they can measure the impact of a particular policy initiative on the AAC. Has that been achieved? When we're contemplating landscape unit planning or identified wildlife management, for example, is there that ability now to quantify, to measure, the impact of that particular policy initiative on the AAC, as set out in this section of the jobs and timber accord?

[1020]

G. Abbott: There has been a certain amount of debate and controversy around, for example, the Kootenay-Boundary land use plan and its elevation to, I guess, what's termed a "higher-level plan." To use that example of the KBLUP, does the Ministry of Forests have a clear idea as to the cabinet or caucus or ministry debates about whether that should be a higher-level plan? Do we have a clear idea of what the implications of that will be for the AAC if indeed it is adopted as a higher-level plan?

Hon. D. Zirnhelt: The answer is basically yes. We do analyze the impact on harvest rates of the land use plans. But until the determination is made by the chief forester, we don't know the impact on the AAC. When he makes his determination, he'll look at the land use plans and the objectives in the lands and how, for example, the cut levels would be spatially distributed in order the achieve the AAC in an operable sense. He has to be able to see that there is a harvest available as a result of the plan. So the more spatially relevant information he has, the better he can make his determination. You won't have a number until the determination is made, as part of the timber supply plans are incorporated into the AAC determination. You may have the chief forester sitting with a determination waiting for five years to incorporate information that happens during that five-year period. So the AAC remains static. So yes, a lot of analysis has gone on. It is not an exact science. We make it as exact and as precise as it can be given the status of science and knowledge and information that we have.

G. Abbott: We'll likely come back to that specific example, and I don't want to get too far off the track here in terms of proceeding through the jobs and timber accord.

The next question I have revolves around the second-last paragraph on page 5. This is under initiatives by Forest Renewal B.C. The accord offers the commitment that -- and I'll quote the sentence -- "the maximum funding to government land-based-related activities will be 20 percent of the available funding for this category." This is about expenditures for land-base-related activities both by the licensees and by the government. The commitment is that government land-base-related activities will be 20 percent of the available funding. Has that been achieved? My understanding from the information I have from the FRBC business plan meetings and so on is that it has been closer to 40 percent rather than a maximum of 20 percent. Can the minister comment on that?

[1025]

In 1997-98 Forest Renewal B.C. invested $405 million in land-based programs. In '98-99 FRBC's business plan called for $356 million to be invested in land-based programs, and the corporation planned to invest $240 million in land-based activities in each of the next two years -- which will meet the 70 percent target as outlined in the accord.

Forest Renewal has surpassed the $300 million maximum in two of the three investment years and is on track to fulfil the 70 percent allocation commitment in future years.

G. Abbott: There's no disagreement on that. The question, though, is around whether FRBC funding for backlog reforestation, etc. -- the government's land-base-related activities -- has been 20 percent or more. Again, I think the funding for the governments land-base-related activities has been closer to 40 percent. That's the particular area in question here.

Hon. D. Zirnhelt: The government has been phased out of this program, leaving FRBC doing the silviculture work.

R. Coleman: I'm just going to continue on while the critic takes care of something else -- deals with a school group. He'll be back in a few minutes.

I'd like to talk about the item on page 6, basically, where it says: "Priority funding of $25 million for existing experiments will be set aside to finance activities conducted under

[ Page 13877 ]

Hon. D. Zirnhelt: In general terms, I have to say that no, we haven't been able to maintain that. It was for a year or two, but with the demand by everybody -- including the opposition -- to reduce the cost and stumpage, FRBC doesn't have the same budget level. We're not going to be able to maintain this commitment past the first couple of years.

R. Coleman: My understanding is that the level is actually less than one-half of the $25 million target in 1999-2000. Is that correct?

[1030]

R. Coleman: I have notes here that would indicate to me -- and I just want to confirm the information with the minister -- that the number of IFPAs has doubled from three to six since 1997, but funding for IFPAs and EFMPs has fallen to less than $12 million in '99-2000. Would that be a correct assumption from the comment the minister made just a minute ago?

Hon. D. Zirnhelt: I just said that the funding has gone to $12 million, which is less than half, and the reason is because the stumpage revenues going into FRBC have been reduced -- by popular demand, you might say -- in order to fix the general cost structure of industry. We have less to spend on them, and to the extent that there are more of them being approved, the companies that are involved in them either have to use their multi-year agreement funding or share this smaller pie.

R. Coleman: The next item I want to touch base with on the jobs and timber accord is the next paragraph, actually, which basically summarizes it as being to provide funding to the forest industry of $50 million for operational inventory, planning and code-related road costs. I'm wondering what's been done with that, what the status of it is and where we're going with it.

Hon. D. Zirnhelt: That $50 million was part of the budget available in the discussions around the accord and in subsequent discussions. Industry chose to take that marker and say: "All right, if you reduce our costs through stumpage, we'll take it out of that." So the $600 million in reduced stumpage has included in it part of what would have been in this budget.

R. Coleman: Maybe it depends on who you talked to in industry, but was this funding not promised to offset the costs of the code? Are you saying that you've bundled it into a stumpage reduction? Was this not something targeted in the accord to reduce the costs of the code, in addition to whatever stumpage reductions you may pass on to industry?

Hon. D. Zirnhelt: Yes -- that was then, and things changed. Industry was given an approximate target for stumpage reduction of $140 million. Then the stumpage reduction became $200 million, as you remember. The source of the additional reduction. . . . Rather than have it collected and spent on these items, industry opted to have a reduction of the stumpage overall.

R. Coleman: One of the interpretations that I've read was that funding has never been provided for this, and that the forest industry has contributed its own funds. Is the minister saying that that reduction in stumpage of $200 million includes the $50 million, and therefore they wouldn't have contributed their own funds?

Hon. D. Zirnhelt: The question was whether industry would get it directly through a stumpage reduction -- that is, that $50 million -- or whether they would get it indirectly by contributing it first to Forest Renewal and then having it distributed this way. Whichever way you look at it, it really is an accounting question. They pay less stumpage and therefore have more money to spend on this. The alternative was to collect it as stumpage from them and then return it. The decision was to leave it with them to spend on their planning -- whatever they have to spend on planning -- to achieve their own objectives.

R. Coleman: The concern, I guess, would be twofold. One is that the industry maintains -- or some of the industry maintains -- that they're forced, on one hand, to shoulder the cost of maintaining roads built by the Forest Service and carry out the strategic planning. The minister says that there's additional stumpage that's been reduced to the industry, which was. . . . You know, we've had the discussion about how high-cost a producer we were. I'm just wondering whether we're playing with apples and oranges here, in actual fact, and whether we've just passed one cost on to industry and reduced their stumpage on the other side -- a cost that we would have been burdened with anyway -- or whether we were actually. . . .

[1035]

Hon. D. Zirnhelt: It is no more complicated. . . . They achieve this value of $50 million one way or the other. It was either they pay it through FRBC and get it back, or they retain it and have the benefit of $50 million less in stumpage to pay. Originally we set a target of $140 million. We opened up our discussions with the Americans around $293 million in terms

[ Page 13878 ]

R. Coleman: I would suspect that that $50 million is more powerful in the hands of the companies than it is in the hands of FRBC, given that whenever I've sat on the Forests Committee watching their business plans, they can't measure the outcomes. At least maybe companies can measure the outcomes of the value of that money and report it back to the ministry.

Interjection.

R. Coleman: I didn't catch that comment. If the minister wants to pass comment, that would be fine. I just wanted to know how this money was flowing. I will allow him now to make that comment before I move on to my next point.

Hon. D. Zirnhelt: My response was asking whether the member thought that industry could measure the outcomes of what they spend on roads or environmental values. I don't think they can. All they can produce is Pricewaterhouse's highly aggregated data. When we were looking at the costs of the code, they couldn't and wouldn't produce auditable information. We accepted their accounting information, which was rolled up because it varies so tremendously.

I'm just saying that industry can't measure the outcomes. You're asking that FRBC measure the outcomes. We can talk about that when we get to the FRBC part. As I said, our attempts to measure the outcomes will come to fruition some time later this summer.

R. Coleman: I guess that this bodes another question before I move on. Is the minister comfortable that anybody can measure the outcomes? If we have problems with FRBC and he says the companies can't measure the outcomes, how are we going to, in some way, manage the outcomes?

Hon. D. Zirnhelt: I think that when it comes to measuring outcomes, you can do an infinite amount of work on measuring and measuring and measuring. It's often called research. As soon as you spend the money on the research, people say: "You shouldn't be spending it on the research. You should be spending it on goals. You should get out there and just do the work. You don't have to measure, measure, measure."

I'm saying that we will do the best we can without spending an inordinate amount of money on documenting the achievement of goals. You can't measure outcomes until you have some objectives. We did not begin this process with an elaborate blueprint and an analysis of what watersheds should be restored. But we did the work. We did watershed analysis work. Having had the analysis, we can then decide which are the priority watersheds. Once you've got that in place, you can measure the outcomes. Forest Renewal is working on the measurement of outcomes.

R. Coleman: I guess the key is that when you do the work, you do the right work. You don't waste money on the wrong work. That's what that's all about.

The next point I want to make is relative to the jobs and timber accord eliminating the small business community undercut through non-replaceable forest licences. I'm wondering what the status of that is. Could the minister give us an update?

[1040]

R. Coleman: For some reason, that doesn't jibe with my notes. Maybe I can just phrase the question a bit differently. Has the cumulative undercut been reduced significantly?

Hon. D. Zirnhelt: Let's do a detailed explanation; it might paint the picture for you. A plan for selling 2.1 million of the accumulated undersold volume has been developed, and the volume will be sold over four fiscal years. A critical component of this plan was the introduction of non-replaceable licences and partial timber sale licences with cutting permits. Those were introduced into the small business program. Both types of licences are now in place. It took a legislative amendment, which we made in previous sessions. Under these licences, the licensees will gain long-term timber rights but are required to undertake many of the management development silviculture activities previously undertaken by the ministry. In other words, they agreed to do a lot of the planning work in exchange for a longer-term licence. The proportion plan for sale in '98-99 was 957,000. We planned to sell 957,000 of the 2.1 million -- just under half. The fourth-quarter results for '98-99 indicated that 915,000 cubic metres of the undercut were sold. That's 96 percent of the target that was set out for '98-99. The shortfall was really due to a weak demand market for the timber in the first three quarters. In the fourth quarter there was extremely strong demand for the undersold volume.

R. Coleman: That actually leads into the second point of what I want to ask. I'm just going to wade through my notes here as I do that. The next point is related to the next paragraph, which is the tendering of any current SBFEP undercut not sold by the SB agency through non-replaceable forest licences and other forms of agreements. My information was that that has not been done since June of 1997 -- the accord. The undercut still occurs each year, largely opportunity cost in terms of lost revenue to the Crown and forgone job creation opportunities. That's the note that I have on that particular paragraph, and I wonder if the minister would care to comment.

[1045]

[ Page 13879 ]

R. Coleman: Just some general comments on some of the key elements of the jobs and timber accord, which is now two years old. . . . I wonder if the minister would have a general comment on how successful it was on the job creation side, relative to the accord and the outcomes that were announced in June of 1997 -- just a general comment. The general comment goes back more to the idea of creating 22,400 new direct jobs and also to the breakdown of 6,500 new ones in the small business and secondary industry, 5,000 new jobs renewing our forest, 5,900 new jobs from forest companies and 3,000 from new work arrangements. The reason I ask is because this information in this accord still sits on various web sites and information of government. I'm sure the people of B.C. would like to know how we're doing on that and also whether the minister is comfortable with the success of his accord to date.

Hon. D. Zirnhelt: Well, yesterday I went into it. I said that we had a number of initiatives. One was the job creation side; that's the accord. Then we had an initiative around costs and an initiative around stumpage. They all work together, because the economics and competitiveness had to be there for the industry to survive. That's also in the accord. When the accord was announced, I'll remind you, industry members said: "If something happens in the market, then we have a problem. We will not achieve these objectives."

I think it's safe to say that I have given the numbers time and time again. I say that some parts of the accord have been effective and other parts not. The timber jobs advocate will be reporting out on the whole accord, and we expect his report this summer. When he does that, he will have gone through and measured various aspects with respect to the jobs in the various categories.

R. Coleman: At that time, will the ministry update its web site as to what has worked and what hasn't, so people who are asking these questions can visit the site and find out what portions of this accord work and which ones haven't, whether it be the small business program -- where we indicated we were going to have a wood fibre transfer program of 18 percent on the coast and 16 percent in the interior -- the silviculture aspects of the accord, the full delivery of the small business cut or those types of items? Or will this just stay as it is, and will people still be wondering what the success of the accord is?

Hon. D. Zirnhelt: We have reported to the timber jobs advocate, as has industry. The advocate will report out, and he may choose to put his report on the web site. If we get a report from him, we would put it on our web site.

R. Coleman: I think that unless the critic has another comment or one of the deputies has a comment on the jobs and timber accord or some questions, that probably covers that. As the minister knows, I have a series of reports that I've read and analyzed or gone through personally for estimates this year. I spoke briefly with the minister yesterday about them, and there was some indication that staff would provide briefing packages to me about those various reports, if I provided the names of the reports to the ministry. What information would be provided? I guess that would be the question. To save time, maybe the minister could elaborate on it.

[1050]

There are two ways we can do it. You can read the questions into the record; I can then go away and prepare the answers, if I don't have them here today. Or outside the House, you can prepare and give me a list of the questions or even just the names of the reports. Then I'll be prepared to have those reports here along with answers to any questions that we think come out of them. So it just depends on how specific you wish. . . . It's my desire to give you as complete and full information as I can. The more prepared I am with respect to advance notice, the better the answers will be. I will do my best to pull up any answers. But if I have to bring in six or seven different staff, it all takes time to bring the staff in. I'll do it that way if you choose.

R. Coleman: Wouldn't it be just as simple to. . . ? If I were to provide you with the report, you would provide me with your analysis, and I could just read your analysis. That would save a lot of time and difficulty for everybody.

Hon. D. Zirnhelt: Yes, we can brief you. I can have people brief you on the various reports. Still, I need to know what it is, because an analysis of a report doesn't necessarily mean it's government's policy. So if you want our response on any given report, you just let me know.

R. Coleman: I'll provide the list of those reports this morning. If I could have an undertaking from the minister to have some response back before the end of estimates, I won't enter into long discussions on the reports. Otherwise, I'll just have to go into the lengthy analysis of each one, and since there are about six or seven of them, I think it could take some time. So it would be simpler if I just got your analysis back, and then I would probably be satisfied with that. I recognize that an analysis doesn't necessarily mean it's government policy. But at least I'd know how the response to one reaction in industry is understood by the ministry, which would be very valuable to me.

Hon. D. Zirnhelt: We will make best efforts to provide the information. Because we don't know when estimates are going to end. . . . We will make best efforts to provide the information.

J. Wilson: I'd like to go back here; I had one question on the undercut to the small business forest enterprise program. The minister stated that they have identified the areas where there is an undercut. Could the minister tell me which districts have been identified as having an undercut, and what would the volume be in those districts?

Hon. D. Zirnhelt: We don't have that information here; we will get it.

J. Wilson: Then I would like to have that data. If the minister is willing to provide me with it, it would be good and helpful.

[ Page 13880 ]

G. Abbott: We'll have an opportunity to talk about the small business forest enterprise program specifically later on in the estimates. So we won't go too far away from the accord at this point in time on that particular area, but we will certainly be back to it. There's just a few more questions I have on the progress related to the accord.

[1055]

If I recall it correctly, the historical context is that around about 1997 the Premier acquired an affection for the ideas of Jeremy Rifkin, contained in the book The End of Work. It showed up in the throne speech, for example, that year -- that he'd like to see more people working shorter weeks, etc., etc. I think that was probably the guiding light that prompted this particular section of the accord, but I could be wrong and off the mark in my historical analysis here.

But I guess the question is whether in fact we have moved in any respect towards alternative work arrangements. I'd be surprised if we had, given the struggle that the industry had -- particularly in '98 -- in surviving. I would be surprised if there was much happening on the alternative work arrangement front. But perhaps the minister can advise what, if anything, has occurred with respect to these arrangements in the accord.

Hon. D. Zirnhelt: I would go back to the preamble, which is something that's important. I'm going to read it, because I think I have to keep reminding members. This is the second bullet in the preamble. It says: "Whereas industry and government recognize that the creation of sustainable jobs by the forest sector will depend on an internationally competitive industry and a healthy and productive land base, jobs can be created if industry and government work together to create an economically viable expansion of the forest sector." I would submit that that is part of the work in progress.

With respect to alternative work arrangements, it is not a new idea that you can distribute work by getting rid of overtime. But the truth is that no firms have yet approached the advocate's office with respect to setting up alternative work arrangements. I do know that some of the unions raised this during collective bargaining, but essentially, this is a collective bargaining matter. Government committed to work with anybody who wanted to advance this notion. So the ideas around alternative work in the layoff provisions of the accord have evolved and expanded as a result of discussions that have been held between the advocate's office, industry and labour.

Now, those discussions were reflected in the mill closure review. So when I say that you can't be stuck in a point in time without saying where we've moved on. . . . We have brought in the mill closure review process, which is part of the spirit and intent of the jobs and timber accord. When we look at it through viability reviews and so on and look at solving problems around mill closures, then we do bring into account a discussion around alternative work arrangements -- if you can get management and the unions to agree that alternative work arrangements are things you can do to mitigate layoffs. So we did use these discussions in those areas where we've had closures -- Eburne, Merritt and Lumby. Those were factors in the discussion. Ultimately, it's a matter between the unions or the workers and the employers. Government has not been approached with respect to any alternative work arrangements.

G. Abbott: I do have some questions around the jobs accord advocate. But given that -- if and when the Select Standing Committee on Forests meets again, and it certainly will meet again to discuss the FRBC business plan -- we are in the middle of a discussion of the jobs accord advocate's office, I'll save my questions for that point in time, since we do have that additional opportunity.

I do have just the one point to make. That is that the last line, actually, under the jobs accord advocate indicates that the advocate will report annually on progress made toward the implementation of this accord. I don't recall any previous report from the advocate on the progress made toward implementation of the accord. I think the one that the minister mentioned -- due, I guess, in July -- will in fact be the first of the reports from the advocate, and that comes something more than two years after the accord was unveiled. Is that the case, or are we just overdue in terms of an annual report from the accord advocate?

[1100]

G. Abbott: The forest worker agency is to some extent, I guess, an unfinished piece of business in the accord, as well, in that the accord sets out a process for the extension of the forest worker agency into the interior and the north of the province. Again, to put the matter in context, in the coast region of Forest Renewal B.C. there was some acceptance by government and industry that the forest worker agency would be put in place and that it would adopt the so-called HCL model for negotiating, training and placing people in the silviculture sector. The interior of the province and the north refused to accept that suggestion, and a process that involved the appointment of a mediator to deal with that was put in place and set out in the accord. I think that a Mr. Don Johnson was the mediator that was appointed.

As I understand it, to this date there is still no resolution with respect to the issue of the forest worker agency -- now titled New Forest Opportunities Ltd. -- on the coast and the provision of the so-called HCL model for the placement and training, etc., of workers. This has been a significant political issue in the interior. Actually, it's a significant political issue on the coast as well, given that not everybody is pleased with New Forest Opportunities and particularly not pleased with

[ Page 13881 ]

The minister was quoted in a recent Vancouver Sun article -- he can tell me whether he was misquoted or accurately quoted -- to the effect that with the new fiscal reality facing Forest Renewal B.C. in British Columbia, we really could no longer afford to see an extension of NFO and HCL into the interior. The minister can correct the record if in fact he was misquoted or misunderstood, but that seemed to be the upshot of the suggestion that was being made.

The question here is a complex and convoluted one, I suppose. What's the current situation with respect to the extension of NFO and HCL into the interior? Where does that sit? Was the minister accurately quoted when he indicated that it was likely that FRBC could no longer afford to extend this particular model to the entire province?

[1105]

G. Abbott: If it's the case that the new fiscal situation facing FRBC is such that we do have reductions in program expenditures -- and clearly we do -- would it also be fair then to conclude that the government and FRBC should be reviewing whether a structure as onerous and complicated as NFO and HCL is necessary to deliver silviculture programs in the coast region of FRBC? If we don't need to do it in the interior anymore, do we need to be doing something as elaborate as we are on the coast?

Hon. D. Zirnhelt: Well, there is a disagreement. We're prepared to put instruments in place that achieve the objectives of local employment and good family-supporting jobs. The opposition is not prepared to do that. I think that's where we agree to disagree. That's the difference between you and us. We're prepared to do it in as cost-effective a way as we can, but we do want to achieve the objectives. We're confident that the costs are in line with the objectives that we want to achieve.

With the industry running at an improved level in the interior, the demand to give FRBC-funded jobs to displaced forest workers has dropped off. At the coast there still is a problem, though it is reviving a bit. There still is a problem, and therefore where the need is the greatest, we have an agency in place that will step in and do what it can to place displaced forest workers in jobs that are as long-term as we can make them under the programming, given the objectives of the land-based programs.

G. Abbott: I'm glad that the minister posed his answer as provocatively as he did, because it certainly wakes me up and gets me angry about a point that I think is a fundamental difference between the government and the opposition: how they treat workers in the province of British Columbia and generally how this government views its role in terms of social engineering and so on. I've had this argument with the Ministry of Transportation and Highways, because they are imposing this absolutely ridiculous HCL model on small highway contractors in the interior of British Columbia as well. Frankly, you know, I guess HCL is a great thing, because it reminds us so pointedly, so bluntly, of what the differences are between the government side of the House and the opposition side of the House around things like workers' rights, contractors' rights -- these kinds of things.

HCL is just fundamentally wrong in its conception. The idea that government should tell workers in this province that they have to join a union in order to work on a job is fundamentally wrong. I don't care how many. . . . The government said: "Well, we won't have local hire if we don't impose the obligation to unionize." If we don't impose the obligation to go through a centralized, bureaucratized system in order to get employment, somehow we won't have local hire. Well, that is absolute nonsense. It's absolute nonsense in the case of the Ministry of Transportation and Highways, which has had local-hire policies for decades. It's absolutely ridiculous and absolutely wrong in terms of the siliviculture industry on the coast, which has always hired people -- whether they're local or otherwise, people get jobs

[1110]

The minister is right: it really does point to a fundamental difference between the government and the opposition. This government believes in social engineering from start to finish, and, hopefully, it will be finished soon. But that's the basis of this government. Somehow, unless a job is unionized, bureaucratized, centralized and controlled -- unless all of those things are in place -- it's not a real family-supporting job. Well, that's absolute nonsense. If this government would just get out of the way -- if it would just allow the processes that have worked well in this province to take hold -- we would have more employment. It's this kind of nonsense around the HCL model that kills jobs in this province.

Frankly, I hope that the government has abandoned the notion that HCL is going to be extended into the interior. Obviously they ran into a brick wall in terms of the employers in the interior. They said: "Take HCL and do whatever you like with it, but don't impose it on us." I say: "Good on them." They showed some sense in resisting this absolutely idiotic incursion into the rights of people and workers. I'm glad they did. I gather from the minister's comments -- and he can confirm it here -- that HCL is a dead duck in terms of the silviculture industry in the interior and that the government is not proposing to proceed with its incursion into the rights of workers and contractors in the industry in the interior.

Hon. D. Zirnhelt: I can confirm that the member is dead wrong and that we never intended to put the HCL model into

[ Page 13882 ]

We have found a compromise on the coast. Industry said and agreed that the HCL model, with respect to FRBC silviculture work, was the model -- industry as a whole. Maybe some silviculture contractors didn't like that. But industry as a whole -- the licensees and so on -- understood that there was a problem and knew that they had to have a way to bridge employment for as many people as we could afford to replace, without working in the woods but were formerly working in the forest industry in some other capacity.

G. Abbott: The biggest job-killers in this province are the people across the way here, in this NDP government. They are the biggest job-killers in this province. This is a government that is obsessed with social engineering. It's a government that's obsessed with controlling every part of people's lives that they can possibly control. This is a government that thinks that by edict out of Victoria, it can create and sustain jobs. Well, it's absolute nonsense. Actually, I'm not surprised to see people like the IWA and COFI and so on going around this government in order to try to secure agreements with Ottawa. I'm not surprised by that, because this is a government that is still locked into old ways of thinking around the maintenance and creation of jobs in British Columbia. They are still locked into the nonsensical, ideological thinking that backstopped the jobs and timber accord in this province.

[1115]

Frankly, this government is not well equipped to turn this province around -- this forest industry around. With their affection for social engineering and for things like HCL, the concern is not with efficiency and productivity -- getting the best bang for the buck or getting as many people employed as we can. It's all about control. That's what this accord is about. It has been a pathetic failure. We can debate it all day long, but frankly, this accord is not part of the solution; this accord is a big part of the problem.

It's reflective of the thinking that brought the forest industry to its knees in British Columbia. It's reflective of the thinking that saw thousands and thousands of forest workers in British Columbia lose their jobs unnecessarily. Frankly, I'll be glad when I don't have to come back for another year. Hopefully, it'll be next year. I'll be glad when I don't have to come back for another year and deal with this nonsense and ask questions again about how it's going, because this is a document which clearly should be consigned to the wastebasket of history as soon as possible. I'll certainly be happy when that day arrives.

Hon. D. Zirnhelt: This member would confine to the wastebasket the objective of getting more jobs out of every tree we cut in British Columbia. That's foolishness. That member would consign to the wastebasket the objective of creating more jobs and getting more timber to the small business program. That member would consign to the wastebasket the objective of having a competitive forest industry, which this document states. Talk about stuck in the past. We've moved on, two years later, to say: "We have to update this. We have to do a better job of some things, because guess what: the market has changed." We have to address industry competitiveness issues. This we're doing.

If you want to talk about what we're doing, talk about the billion dollars in cost reductions that we've brought in. That's the way that we're going to stimulate job creation here. We recognize that. We said it from the beginning. We had to pay attention to costs and competitiveness, and we've done that. But we won't abandon the employment of forest workers and the development of the forest economy in British Columbia solely to those who want to invest and do it their way -- and damn the views of communities and people working in the industry.

There is a role for government, and it isn't social engineering. There's a role for government to set some objectives. If we didn't have objectives, those members over there would be the first to cry and whine that government doesn't have any objectives. We have set out some objectives, and we're prepared to be measured against them. No, we won't achieve all our objectives, but at least we've got the fortitude and the vision to set some objectives and say that there's a direction out there -- that we can work together with industry and communities and achieve some of those goals of more community stability and more employment in the sector.

G. Abbott: The minister likes to talk about his billion-dollar cost reduction. I think there's a lot of skepticism around as to whether anything like a billion dollars has been achieved in terms of cost reduction to date, and perhaps we'll get onto that presently. Even if there had been, the fact is that this government has dumped billions in new costs onto the industry since 1991. It's like a guy who comes along and rips off a $5 bill out of your wallet and then gives you a quarter back and expects you to be really grateful.

That's the kind of situation we have here, where we have a government that just recklessly dumps additional costs onto an industry, eventually realizes that the consequence of all that is that they're losing jobs, losing investment and, most importantly, losing big-time in revenues to provincial coffers. Realizing that those reckless cost additions have resulted in a big price in a number of areas, they're prepared to ease up a little bit on some of those costs. The government can brag all they want about a billion-dollar cost reduction. Until they start bragging about the billions in new costs and taxes that they've imposed on British Columbians, I'm not going to get up and clap.

[1120]

[ Page 13883 ]

The minister talks about more jobs -- and everybody wants more jobs in British Columbia -- but we're not going to get more jobs in British Columbia because we write up a phony, specious jobs and timber accord that says we're going to create 21,000 new jobs. That's not the way it happens. Clearly we've discussed the losses. Since March of '96, I think the minister said, we are in fact 7,900 direct jobs down. If we take it from June of '97, when the accord was actually signed, we're down even more.

[E. Walsh in the chair.]

We don't get jobs in British Columbia because somebody in Victoria signs off on a piece of paper that says: "We're going to create more jobs." We're going to get more jobs in British Columbia because people want to invest here because they see a prospect of return on that investment. People do not invest when there's no prospect of return. That's what this government's fundamental problem is: they have killed, for three years running now, any prospect of return on investment. We can create phony-baloney jobs, short-term jobs -- whatever kinds of jobs we want -- but until we get back to a situation where our tax and regulatory structure in British Columbia is competitive with other jurisdictions, until that happens. . . .

Interjection.

G. Abbott: That is a member over there from North Island, hon. Chair. . .

The Chair: Order, members.

G. Abbott: . . .who's attempting to shout me down. But the fact is that he's got all kinds of workers up in the North Island. . .

Interjections.

The Chair: Members will come to order. Member, take your seat.

G. Abbott: . . .who don't have jobs as a consequence of his government.

Interjections.

The Chair: The member will take his seat. Order, members. The member will take his seat. Until order is restored in the chamber, we will not continue the debate.

G. Abbott: We won't create jobs in this province because. . . .

Interjections.

The Chair: Members will come to order.

G. Abbott: We won't create jobs in this province by wishing them.

Interjections.

G. Abbott: The buffoons across the way seem to be losing control, hon. Chair. You might want to bring them to order.

The Chair: Members will come to order in the House. We will not continue the debate until order has been brought to the House.

On a point of order, the Minister of Transportation and Highways.

Hon. H. Lali: I think the hon. member should withdraw his recent remarks.

G. Abbott: Hon. Chair, I withdraw my remarks.

The Chair: Thank you, member. You may continue.

G. Abbott: We won't get jobs in this province by wishing them. We won't get jobs by fatuous, presumptuous, preposterous documents like the jobs and timber accord that purport to create jobs that they never will create. We will only create jobs in this province by getting our tax and regulatory structure back in line -- back to being competitive with other jurisdictions. Certainly we're going to be talking about that presently, once we've finished the venting here with respect to the jobs and timber accord. We need to be competitive with other jurisdictions in order to attract investment, in order to see that investment create new jobs here in British Columbia. That's where the struggle is.

[1125]

Hon. D. Zirnhelt: Well, I'm happy to move on as long as there's a recognition that when you bring in a forest practices code, it is brought in in order to protect the jobs that come from market access, and that it would have been irresponsible for any government to go on with the forest practices of the past. I think the opposition has to understand that they can't get stuck over there. They risk being accused of not protecting the environment, not protecting the soils, not protecting the forest for future generations. That's what the Forest Practices Code is about, and that's what that regulation is there for.

British Columbia is under more scrutiny than any other jurisdiction, and as a result, it is responsible of us -- not reckless -- to have a tough and enforceable code. And I submit that no one -- not that member, not the member for Cariboo North, who had an opportunity to make a contribution to what a results-based code is, not industry -- has come forth with an alternative, in spite of being invited to do that by me continually over the years. We are going to make progress on that as we're able and as we prove up people's compliance with the Forest Practices Code.

But while there may be a cost to the code, there's a benefit to the code. There's a benefit in not destroying soils, in not destroying biodiversity, in ensuring that there is a land base on which a tourism industry can operate. These are matters that have economic importance. So while there are costs, there are benefits.

The question is: what's the reasonable balance between the costs of the code and the benefits from the code? We have to achieve that balance, and we do that by continually refining it. I would say that there are many elements in the jobs and timber accord, like more wood -- which will create more jobs in the small business program -- and like getting the standing

[ Page 13884 ]

G. Abbott: The issue of the code is an important one, and we'll be dealing with it specifically. I don't know whether it's a good time now; perhaps we'll leave that. Let me make my comments on the issue of the code.

I have never, in the time I've been in provincial office -- and I don't think anytime during the time I was in local government either. . . . I have never, to this time, heard from anyone in government, in industry or in local government anywhere who said: "We think that the forest industry should destroy soil, should destroy biodiversity." No one says that. Frankly, the suggestion that anyone would offer that up as an alternative is nonsensical; it's a non-starter.

Where the concern is -- and I think that it is a legitimate concern and that even the minister has to acknowledge that it's a legitimate concern. . . . This government here, over the past couple of years, has realized that -- in its first permutation, at least -- the Forest Practices Code contained far too much process, too much regulation. One of the reasons why the minister can get up and claim the billion-dollar cost reduction, and so on, is that the Ministry of Forests and the Ministry of Environment now acknowledge that in the form that it was in for the first three years, it was too process-oriented, too regulatory.

I haven't heard anybody say: "We want to wreck the environment, and therefore we want to get rid of the code." What they do want is a results-based code that sets out clearly the penalties for not achieving the goals, which are equally clearly set out. The professional foresters, the industry and others involved in this just want to have an opportunity to achieve the goals, but in a way that makes sense for the local conditions that they're working in.

[1130]

But the code is not actually the next thing on our list of discussion topics. Presumably we'll come back to it, and the minister, as I would expect him to do, is going to defend the code in its current form. That's great, and we can talk about how that will be done.

I want to talk at this point about stumpage costs. We are on section 4 now, on fibre costs, and the biggest component of fibre costs -- or at least a major component -- is the stumpage that is levied against the fibre.

Can the minister tell us, with the reductions that were announced last June 1, where British Columbia currently sits in comparison to Alberta, Ontario and Quebec on stumpage costs? Are we now competitive with them, or are British Columbia's stumpage costs still significantly higher than those in Alberta, Ontario and Quebec?

Hon. D. Zirnhelt: I would ask the member to tell me by what timber type. It's apples and oranges. You need to zero in and tell me. I hear this, and I respond and say to industry: "We've got different types of wood in British Columbia, so we really have to get down to it." I would say that our stumpage on pine -- 26 to 30 percent of the interior cut -- is 25 cents, and I'd say that it's comparable and averages down the cost of wood.

G. Abbott: I don't have the KPMG report in front of me. But the KPMG report did some comparisons of stumpage costs in British Columbia -- compared with Alberta, Ontario and Quebec. I think that the IWA has done some work with respect to this. I don't have the materials here to go into different timber types. If we want to do a comparison of apples to apples, the minister can do the comparison between similar timber types in Alberta, Ontario and Quebec. But the issue is around the. . . . We know that there was a reduction in stumpage on June 1, 1998. We know that prior to that reduction, we had -- broadly speaking at least -- stumpage rates in British Columbia which were close to double those of Alberta, Ontario and Quebec. The question is: to what extent has that gap been narrowed?

Hon. D. Zirnhelt: The reason I introduced my comments by saying that we need to be specific about what region, what timber types, and so on, is because the averages don't mean anything. But I can tell you that our sawlogs, on average, are higher. Sawlog stumpage rates are higher, but our pulp log prices are lower. So we need to know what timber types you're talking about. To our knowledge, the KPMG report did not give a cross-provincial comparison.

[1135]

Hon. D. Zirnhelt: We've tried to do it. I've asked the ministry to try to do some of this work, and the advice I get back is that it's very difficult to do. You have to do it monthly for it to mean anything. We have a completely different stumpage system than they have, and we basically have the comparative value pricing system. That's the system we're using in British Columbia. We basically committed to using that system back in '87. We've used it ever since and don't feel that we can change the system until we have dealt with the issues around the international trade problems, market access problems and the softwood lumber agreement. So we've asked to do some of this work, but it's very expensive. Quite frankly, I don't know what it would prove.

If the member would like to give us some more details, we will do it. We have done some analysis, I recall -- I don't have it here -- across the border in Alberta. We did find that the reported differences were exaggerated. There was a slight difference. Sometimes it was in our favour, when you compared apples and apples across the Alberta-B.C. border in northern British Columbia. Again, we have to look at what it is.

Industry always asserts that it should pay less. The opposition accepts that they should pay less. We say that there are consequences to paying less stumpage. The people in British Columbia want an adequate return from the resource. That is a return that we set when we set the stumpage. If it

[ Page 13885 ]

I don't know what you prove by making the assertion that costs are too high, except to say that industry needs a bigger and bigger tax break. That seems to be the argument that the opposition is making. We reject that in the sense that we have given various advantages to industry, and as a result, they are in a position to be more competitive. I would submit that the first- and second-quarter results will show that the industry is profitable.

May I go back and say that based on the stumpage system we have in British Columbia, we've had a major investment decision by Weyerhaeuser, which operates in the United States, across Canada and in British Columbia. They have said that they're prepared to invest at a premium in British Columbia because they can deal with the cost of doing business here and make a return for their shareholders.

G. Abbott: I guess there are all kinds of ways of interpreting particular investment decisions. For example, some would say that the decision of Tembec to invest in Crestbrook was prompted by the bargain-basement price that they got for Crestbrook Forest Industries Ltd. That's one way of analyzing a sale. I don't know whether M&B was a bargain, relatively speaking, to Weyerhaueser. Perhaps; perhaps not. I guess that's one for the history books to decide.

The reason why I advance the issue of our relative stumpage burden in B.C. compared to other provinces is not to advance any particular point about taxes being too high or too low or whatever. Clearly they are too high in a range of areas. Whether they are here or not, I don't know. But I think the ministry should have an interest, as it administers the stumpage program in British Columbia, in ensuring that the stumpage system and the stumpage levies that we have in British Columbia are competitive with those in other jurisdictions. If our stumpage level, for example, was 75 or 100 percent higher than it was elsewhere, clearly that other jurisdiction would have a competitive advantage in relation to British Columbia. That's the reason why I ask the question. Surely, if we are interested in enhancing the competitiveness of the B.C. forest industry, we have to ensure that we are not penalizing the industry in British Columbia to a greater extent than they are in other jurisdictions in Canada.

[1140]

Further, I guess, as we're looking down the line -- and this gets back to the process issues that we discussed yesterday -- if we want to prove to the Americans that we have a market-sensitive and accurate stumpage system, then we presumably want to look at some of the systems that the Americans appear to find satisfactory. I guess that's the reason why. Would the ministry not be concerned, from a competitiveness perspective, about ensuring that we know what the relative weight of stumpage is? Would we not also want to be clear on how other stumpage systems respond to those market changes?

Hon. D. Zirnhelt: We made changes to stumpage in '94. We were faced with countervailing actions; we were faced with the United States collecting taxes on our lumber at the border. With the full agreement of industry, we raised the stumpage. With the full knowledge and full agreement of industry, they agreed to raise stumpage. They agreed to raise their costs; they agreed to raise what is, in effect, a tax. They agreed to do it in exchange for a benefit: market access. It was done. When we found out that there were some costs related to the code that were higher than predicted, we took action with the agreement of industry.

What's the consequence? We reduced stumpage on June 1 of last year. To the industry, we reduced the tax called stumpage in order to be more competitive, in order to be more in line. What's the consequence? Arbitration. The Americans have said that it was not right to do that, and they are arbitrating it. I'd be very interested in knowing what the opposition would do, if faced with that. I would say that if they would be pretenders to government, they owe it to the public in British Columbia to say what they would do. It's not sufficient to say: "Our answer is only rhetoric." They say that all the time without being in any way specific.

So yes, we are concerned about competitiveness. We said we'd address the competitiveness issues, but not at the risk of closing off the pre-eminent market that brings health to the industry in British Columbia. We have no jobs, no revenue, no employment and no return on investment if we don't have access to the U.S. market, and it would be irresponsible to take an action further. Industry has not asked for a reduction in stumpage. Let's make it absolutely clear: industry has not. It has been the opposition that implies that our taxes are too high -- that is, stumpage is too high. Then what would you do? Industry has not asked for it, because they know they would further risk their access to the U.S. market.

L. Reid: I beg leave to make an introduction.

Leave granted.

L. Reid: We're joined in the gallery today, just directly behind, by students from Dogwood School in my riding -- Mrs. Arnot and approximately 15 students. I would ask the House to please make them very, very welcome.

[1145]

[ Page 13886 ]

Hon. D. Zirnhelt: We had information, which was the KPMG study, and it was to '96. We'd have to replicate the study. We're putting our efforts into reducing the costs. These are average costs; they don't mean much. It varies company by company. When we collected that information, industry itself did not know, except on a highly aggregated basis, what it was. So you can aggregate this up. It's known that there are costs to the code. It's known, on average, that it's higher. We've taken steps to do it. But say we found that the stumpage was higher than in other provinces; so it's double, say, for the sake of argument; so we find the code costs. . . . What would the member have us do, and where would he have us reduce it? That's the argument. We're looking at getting efficiencies in every single aspect of the code that we can. With respect to the stumpage, so you find it's hard. Yes, you want to be competitive. Do we want to reduce the stumpage again, if it happened to be higher, and risk further actions by the United States? I think the answer is no.

G. Abbott: Prior to June 1, 1998, we continuously heard from the government that stumpage wasn't too high. It wasn't until the Premier came up to Kamloops, along with the minister, and announced the stumpage reductions that the government was prepared to acknowledge that stumpage was too high. Again, we seem to be seeing more of the same -- that no, it's not too high, and it's not too high because we say it's not too high.

Well, what's the comparison to elsewhere? We don't know; we don't know what the comparison to elsewhere is. Furthermore, it doesn't matter to us. From this government's perspective, until they announce that it's too high, it's not too high. Until they announce that they're lowering it, it doesn't need to be lowered. So it seems to me it's an argument that really goes nowhere, because I can ask all day long for comparisons with other jurisdictions, and he's going to say: "It doesn't matter. We can't bring them in, anyway" -- even though on one occasion they have done that. So I don't think we're getting very far very fast here.

[1150]

Again, let me pose this broad question, and I'm sure I'll get another answer that says: "The opposition is bad, and they never give us any useful suggestions, therefore we can't make any changes." Does the ministry compare the experience or the cost or the regulatory structure around forest practices management in Alberta, Ontario and Quebec? Again, looking at our principal competitors in other Canadian provinces, has the ministry looked at the regulatory structures around forest practices codes that they have in those jurisdictions? Again, in reviewing that, do we find that what we have in place here is competitive with elsewhere?

Hon. D. Zirnhelt: What matters is whether or not we can find a way to reduce costs. We have recognized that our cost structure is high in British Columbia. We've recognized that. Having recognized it, we say that there are benefits. Do the benefits warrant the cost? Can we reduce the costs and still have the benefits? And where we find the answer to that is yes, we're prepared to move and try to reduce costs.

We found that in '97 the average cost of logging on Crown lands was $88. It went from $70 in '94 to $88 in '97. It has gone down. This is Pricewaterhouse that says it's gone down to $79 in '98. I would submit that it may go down more unless stumpage goes up, because the market has returned. So we're going in the right direction. What matters is that we reduce the costs. We have reduced the costs through a joint effort between industry and government. We have done that.

The June 1 reduction last year was based on a determination -- or, really, an agreement -- between industry and government that we think we can make the case under challenge by the United States. We are still facing that challenge. We made the reduction based on the fact that we said we thought the costs got out of line with the benefits. So we reduced stumpage differently on the coast than in the interior in order to bring them more into line.

Noting the hour, hon. Speaker, I'd like to move that the committee rise, report progress and ask leave to sit again.

Motion approved.

The House resumed; the Speaker in the chair.

Committee of Supply B, having reported progress, was granted leave to sit again.

Hon. D. Streifel moved adjournment of the House.

Motion approved.

The House adjourned at 11:55 a.m.

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