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District Wood Disposition Strategy

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District Wood Disposition Strategy ...

FMP for Temagami MU 1999-2019Appendix 20 – Harvest Allocation Strategy

    District Wood Disposition Strategy and Associated Information for the

    Temagami Management Unit

     Forest Management Plan

    April 1, 1999 - March 31, 2004

    February 18, 1999Introduction

    This document updates an earlier District Wood Disposition Strategy (DWDS) associated with

    the 1997-99 Contingency Forest Management Plan (CFMP) for the Temagami Management

    Unit (TMU) (found in Appendix XIX of the CFMP) and the strategy put forth in the draft FMP in

    August 1998.

    This updated document (1999 - 2004) consists of three components:

    1) the first is a description of the results of the regional wood disposition strategy and

    mill benchmarking exercise and its implications on wood flow in the Temagami

    MU;

    2) the second part is MNR North Bay District’s recommendations for harvest allocations

    on the Temagami MU with supporting rationale, and;

    3) a brief section on underutilized wood and proposals for its use is included to

    provide the reader with an update and improved perspective on the status of this

    material.

    1)Regional Wood Disposition Strategy

    The regional wood disposition strategy was initiated in 1996 and consists of the following 3

    components: 1) production of a database of information on estimated Crown wood fibre,

    Crown commitments, current mill operating levels and current mill capacities. 2) development

    of a surplus -deficit model and 3) regional recommendations and forecasts for supply into the

    future. This database and associated information is maintained at the regional forest industry

    liaison unit at the Northeast Regional Office in Timmins, Ontario. This ongoing process was

    driven by: Lands For Life, the Forest Resource Assessment Policy, the Forest Industry Action

    Group Report, the Six Pack Report, the Crown Forest Sustainability Act, and the need to

    address wood supply shortfalls in both the short and long term.

    In February 1997 the supply and demand components of the regional wood disposition

    strategy were communicated to the forest industry on a mill by mill basis and resulted in mill

    benchmarks for every mill consuming more than 10,000 m3/yr. Wood disposition criteria was

    discussed with a joint MNR/Forest Industry Committee. Mill productive capacity was defined as

    the volume of forest resources that a mill was designed to consume on an annual basis,

    assuming no shortages of labour or raw materials and operating under the designed work

    environment. MNR recognized operating levels were also defined and represent the current

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FMP for Temagami MU 1999-2019Appendix 20 – Harvest Allocation Strategy

    forest resource supply flowing to a mill from all sources (Crown and Non-Crown). Based on confidential regional wood supply matrices, Crown wood by management unit has been assigned to the various mills in the region, including wood fibre from the Temagami Management Unit. This information was further updated based on the final calculations on wood availability that were produced for this plan.

    A business plan is required if there is any proposed, permanent change in the MNR recognized operating level in either the amount or type of forest resources required by a mill. In addition to this, any individual or company that wishes to create new production capability should contact the District Office in North Bay to get up to date information on fibre availability, facility licensing requirements, and important matters pertaining to the process involved in wood disposition.

    The bottom line on the state of the Northeast Region forest is that mill productive capacity exceeds current consumption and current supply in all sectors. Current consumption (including approved expansions) approximates what the forest can presently supply. The results of the above noted exercise has been extracted from the regional database and are shown in the attached Table 1 - “Desired Wood Flow”. Nine facilities (Norbord Industries,

    Elk Lake Planing Mill (Grant Lumber and Liskeard Lumber co-ownership), Grant Forest Products, Northern Pressure Treated, Malette Inc. (Tembec -Kenogami), Columbia Forest Products, Tembec Inc. (Mattawa), Goulard Lumber and Fryer Forest Products) have been targeted for wood from the TMU. Four of these facilities (Elk Lake Planing, Grant Forest Products, Tembec Inc (Mattawa)., and Goulard Lumber) will access their wood through direct licences, exchange and wood purchase. The remaining five facilities (Norbord Inc., Northern Pressure Treated, Malette Inc., Columbia Forest Products, and Fryer Forest Products) will need to access their wood through exchange and wood purchase. Mechanisms to do this will be incorporated into the Sustainable Forestry Licence (SFL) for this area.

    Through the mill benchmarking exercise it is also significant to note that all allocated red and white pine, spruce-jack pine- fir, and poplar is required to meet current recognized mill operating levels. The remaining species groups (white birch, tolerant hardwoods and other conifer (largely cedar)) have unassigned wood associated with them. The Minister of Natural Resources is considering a “business plan” that could affect the volume of unassigned hardwood pulp and further reduce these numbers. In addition to this, any proponent considering using “other confer” should consider that the silvicultural standards and prescriptions for cedar are still in the early phases of development so that the volume of unassigned wood is probably less that noted. Also, cedar and larch tend to be scattered over the TMU making full utilization of the unassigned volume economically unattractive in today’s market. Finally, much of the “Hardwood All” (tolerant hardwood) is low grade material.The major challenge during the early period of the 1999 - 2004 FMP will be to develop working relationships between each of the licensees in the TMU and the targeted facilities on Table 1

    to optimize the desired wood flow. In addition to this, the desired wood flow will be formalized in the Sustainable Forestry Licence once this is in place.

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FMP for Temagami MU 1999-2019Appendix 20 – Harvest Allocation Strategy

    2) District Wood Disposition Strategy (DWDS) for the Temagami Management Unit

    The strategy for wood disposition on the Temagami Management Unit for this planning term (1999 - 2004) involves some refinements to the approach used in the strategy associated with the 1997-99 Contingency FMP. There are two reasons for this: first, the regional exercise noted above provided a clearer picture on wood demand and second, during the last two years little had changed to improve the viability of operations for smaller operators. The District has taken measures to deal with this.

    It is proposed that tenure to wood fibre be provided in the form of a combination of direct forest resource licences, right-of -first-refusal arrangements and directives.

    A decision on governance was made by the Ontario government early in 1998 - there will be no new governance body and the Ministry will proceed with the establishment of a Sustainable Forest Licence (SFL). At the time of this writing, two proposals have been submitted for establishing an SFL and following an internal review, a decision is expected in the near future. Under the new SFL it is expected that tenure arrangements would mirror the intent of this strategy.

    It is expected that during the term of this plan tendered sales will not be an important vehicle for making wood available for harvest. In fact, the nine per cent unallocated area noted in the contingency FMP will be used now to deal with problems and issues as outlined below.All licensees are expected to harvest as much of their allocation as is economically feasible. The ministry may direct wood to wood processing facilities that require it, in accordance with the provisions of the Crown Forest Sustainability Act, should it not be required by a licensee.

    Temagami Management Unit Disposition Strategies by Licensee

    1. Grant Forest Products

    The objective with Grant Forest Products is to:

    -provide direct licence areas consistent with the companies previous involvement in the area.-target all available net merchantable aspen poplar except veneer to the facility-on the harvest area not licenced to GFP to put a directive in place to have the wood flow to the mill.

    This maintains Grant Forest Products as the largest licensee in the TMU with potential to harvest approximately thirty eight per cent of the available wood fibre during planning term. As outlined in Table 2 Target Harvest Allocation for the Temagami Unit this company also

    harvests significant volumes of species not required in their processing facility which are targeted for facilities noted in Table 1. An important goal is to have most of the SPF harvested

    by GFP flow to the Elk Lake Planing Mill and the Mallette Inc (Tembec) mill in Kenogami.April 19993

FMP for Temagami MU 1999-2019Appendix 20 – Harvest Allocation Strategy

    Two thousand cubic metres of poplar previously benchmarked for Tembec (Mattawa) has been transferred to GFP for this planning period. This was the result of a regional business plan decision that involved the sale of a Tembec owned OSB facility to Grant Forest Products.2. Goulard Lumber

    The objective with Goulard Lumber is to:

    -provide a secure source of conifer sawlogs (Pw/Pr/Pj/Sp) through direct licensing and to provide opportunities for this company to purchase red and white pine in the TMU to the benchmark levels noted on Table 1. At the request of this company efforts have been made

    during this planning period to increase the overall percentage of white and red pine directed to this company while reducing the SPF. These changes were mutually beneficial to the companies affected (one for one exchange).

    Direct licence areas in the unit make Goulard Lumber the third largest licensee with the potential to harvest approximately sixteen per cent of the available wood fibre in this planning period.

    Goulard Lumber is targeted for 30,000 m3 of red and white pine from the unit during this period. The district recommends that a first right of refusal be arranged to facilitate this goal. This arrangement would not apply to Tembec (Mattawa) or Temagami First Nations red and white pine allocations.

    3. Tembec Forest Products Inc. (Mattawa) and Malette Inc.

    The objective with Tembec Forest Products Inc. (Mattawa) is to:

    -recognize previous targets outlined in the 1997-99 Contingency FMP and to provide for a modest volume of white and red pine and SPF per the benchmarking exercise. A portion of this conifer volume would come from incidentals found in their hardwood dominated allocations. The rest would come from open market purchases or through a wood directive.Tembec (Mattawa) has the potential of harvesting seven percent of the available wood fibre in this planning period.

    The Malette Inc. mill in Kenogami was purchased by Tembec in 1998. Through a regional review of associated business plans , a decision was made to benchmark, for the first time a significant volume of SPF (approximately one third of the available volume) to this facility. This has been possible in this planning period as wood supply analysis has identified a significant increase in available volume of this species group. This facility will secure its wood fibre through purchase or exchange arrangements, as it has no licence on the unit. 4. Independent Operators

    The objective for independent operators is to:

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FMP for Temagami MU 1999-2019Appendix 20 – Harvest Allocation Strategy

    -provide direct licence allocations that meet or exceed the volumes from previous plans -provide local employment opportunities

    -provide socio-economic opportunities for the Temagami First Nation

    Throughout the current 1997-99 planning term, independent operators have consistently expressed concerns with not having sufficient volumes of conifer to maintain viable businesses. Previous strategies to have the independents harvest from the direct licence area of mill owning licensees have not worked. The Temagami First Nation also expressed interest in having a greater share of the allocated area.

    For this planning period, it was decided that the nine percent unassigned wood allocations identified in the associated DWDS for the 1997-1999 CFMP (see FMP-23 Forescast of Wood Utilization by Licensee in the 1997 plan) be partly assigned to address these concerns. In the previous 1997-99 DWDS twently one percent of the area available for harvest was assigned to the independents (excluding Temagami First Nation). The 1999-2004 draft allocation strategy proposed that this be enhanced by increasing the volumes available for harvest to the following licensees: Temagami Contractor, A. Welsh, Hudson Lumber and S. Denis. The C. Guppy and P. McDonald licences were maintained at their previous percentages.

    Since this decision was made Temagami Contractor, Hudson Lumber and the S. Denis licences have been transferred to Liskeard Lumber. These changes have been incorporated under Liskeard Lumber on Table 2.

    The Temagami First Nation licence area will be doubled taking them from one to two percent. In addition to this, all the wood in their licence except aspen poplar can be either sold or used in an approved wood processing facility for the purposes of their socio-economic development. This fibre is not benchmarked to any other facility. The TFN also has potential to access more fibre in the “lands set aside”.

    5. Liskeard Lumber

    The objective with Liskeard Lumber has been to:

    -increase its direct licence area in recognition of its traditional dependency on wood from the TMU and its need for more secure wood supply.

    -continue with Liskeard Lumber’s traditional right-of-first refusal for SPF in the TMU.Liskeard Lumber was re-established as a licensee in the TMU in the 1997-99 DWDS. Through elimination of the unassigned allocations established in the 1997-99 DWDS, the district increased this company’s direct licence area by two percent. The 1999-2004 draft wood supply strategy originally provided Liskeard Lumber with the opportunity to directly harvest six percent of the available wood fibre in the TMU. Subsequent to this, Liskeard Lumber secured the harvesting rights of the three independent operators noted above and is now the second largest licencee on the unit. This company now has the potential to harvest twenty-six per cent April 19995

FMP for Temagami MU 1999-2019Appendix 20 – Harvest Allocation Strategy

    of the area available during this planning term. Liskeard Lumber no longer needs a right of first refusal arrangement in place to meet the needs of the facility.

    The ministry no longer requests Liskeard Lumber consider contracting the harvest of their allocations to independent operators, as was stated in the 1997-99 DWDS.

    6. Grant Lumber Corporation

    The objective with Grant Lumber is to:

    -off set timber supply shortfalls at the Elk Lake Planing Mill and to increase the direct licence area available to the company.

    -to recognize this mills traditional dependency on SPF from the TMU (continue with Grant Lumber’s traditional right-of-first refusal for SPF in the TMU)

    Grant Lumber’s association with the unit has been similar to that of Liskeard Lumber except that Liskeard Lumber has historically been more directly involved in the TMU and has a more consistent purchasing history with independent operators in the TMU. Grant Lumber was introduced as a licensee to the TMU via the 1997-99 DWDS. At that time it was provided with the potential of harvesting two per cent of the available wood fibre. Under this plan it is proposed that this be increased to three per cent.

    The ministry no longer requests Grant Lumber consider contracting the harvest of their allocations to independent operators, as was stated in the 1997-99 DWDS. While Grant Lumber’s licence area is not large, it is clear from Table 1 that the ministry’s strategy for supplying the mill involves having a significant portion of the harvested SPF on the unit (38,0000 cubic metres) go to this facility. This volume includes a target volume of 8,000 cubic metres of fibre that was formerly identified for the E.B. Eddy facility in Espanola.Appropriate tenure arrangements now need to be put in place to bring about the desired wood flow.

    Unassigned Wood and Proposals to Increase or Create New Industrial Capacity

    In addition to the nine per cent in identified allocations from the previous plan that was distributed as described above unallocated volumes identified in this planning term (see Harvest Allocation for the Temagami Management Unit –4/8/98 Draft Plan (12% volume adjusted per final SSFM run)) has been redistributed to the existing licencees on the unit. All existing licencees benefited in terms of having additional volumes in their harvest targets. This has been done to provide a more stable environment for establishing an SFL and effectively means that there is no room for additional licencees on the unit. The new Target Harvest Allocation for the Temagami Unit with Per Cent Breakdown is attached. Percentages for each species group are outlined. It is the per cent breakdown by species group and not

    absolute volumes that drive the target harvest allocations. In other words, now that the licencing situation on the unit is settled, future increases or decreases in volumes are to be distributed according to the percentages shown. While the licencees have the

    harvesting rights to this wood, through this strategy the Ministry is now declaring a wood April 19996

FMP for Temagami MU 1999-2019Appendix 20 – Harvest Allocation Strategy

    surplus totaling the unassigned volume shown on Table 1.. During the term of this plan MNR

    will consider its disposition to provide additional economic opportunities in the area or region.The ministry is reviewing a 1995 business plan and is considering a formal commitment of a portion of the low grade dense hardwoods from the Temagami MU for this purpose.Fibre may also be required to mitigate other wood supply issues that may result from the Lands for Life project even though this project is not expected to have significant direct impact on wood availability from the TMU.

    It is expected that some, and hopefully all of the above matters can be resolved by the spring of 1999 so that other proposals can be considered for industrial expansion. At this time there are two known proposals that involve new industrial capacity.

    One is a specialty mill in Temagami, proposed by the Wood Opportunities Group. This has good potential if the wood supply is still available as it depends on utilization of low grade birch. By declaring the underutilized wood on the unit surplus, the ministry can now consider the preparation of a request for proposals for some of this fibre. It should be understood however that other proposals would also be given consideration through such a process and existing business plans and process must be addressed prior to making a recommendation to proceed.

    The second proposal is from the community of Latchford and involves an Artisans Woodworking Facility, a Heritage Sawmill, a Dimensional Stock Mill and a Log Home Building Company. This second proposal involves requests for direct licences, particularly for pine, that cannot be accommodated (a 23% drop in white pine/red pine harvest potential is planned for this period). The ministry is however, interested in working with the community in support of the Heritage sawmill concept and is prepared to work towards incorporating into the requirements of the business plan for the Temagami Sustainable Forest Licence an agreement to supply, at fair market value, up to 300 cubic metres per year. This would be provided to run this facility for education/tourism purposes only, with the understanding that this would not be a new commercial operation. The 300 cubic metres has been identified in Table 1.

    A remaining wood supply issue of significance involves recent concerns by Rexwood Products Ltd related to fibre availability. While options do not exist for a licence on the TMU , the ministry has presented alternatives to this company that involve private land wood and obtaining wood furnish from other wood processing facilities. The ministry will continue to work with this company with the goal of establishing a long term solution to the supply problem. Philip Brennan R.P.F.

    Donald Farintosh R.P.F

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FMP for Temagami MU 1999-2019Appendix 20 – Harvest Allocation Strategy

    Table 1. Desired Wood Flow for Temagami Unit

    Mill NamePw/Pr%SPF%Other Conifer%Poplar (Aspen)%Hwd All%White Birch%

    Total Volume352051020648087723891955349773GFP00000068689950000Grant Lumber00380003700000000Tembec (Kenogami)00335323300000000Tembec (Temiskaming)00000000001500030Tembec (Mattawa)2500729003000010005500010Goulard Lumber30000850000000000Liskeard Lumber00200002000000000Northern Pressure200064000400000000Columbia00000000500322004Norbord Industries000000370050000Temagami First Nation60121732254270052939432Temagami Fuel00000000500300Latchford Heritage20010000000000Draft Benchmark35301100100164995427723891002529142314347Unassigned00190017545930017024862663053

    During the term of this plan, MNR will consider disposition of the unassigned wood.

    Temagami First Nations harvest is charted here to provide an opportunity to develop a

    wood processing facility to utilize their licenced allocations except for poplar.

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FMP for Temagami MU 1999-2019Appendix 20 – Harvest Allocation Strategy

9April 1999

FMP for Temagami MU 1999-2019Appendix 20 – Harvest Allocation Strategy

10April 1999- 10-

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