Clayoquot Green Economic Opportunities Project

Overall assessment of potential Despite many problems in this sector, particularly with fiber supply but also with the discouragement of local industry leaders, there appears to be opportunities for expansion. Increased local control over resources is increasing local supply and there are new initiatives being undertaken by the forestry companies.

Wood from Iisaak and Interfor may become more readily available in the future. Opportunities have been identified for smaller dimension specialty products, alternative wood species as well as materials, furniture and crafts linked to tourism, new residential and commercial construction. Cooperation at the regional and sub-regional level is needed to support the sector, not just among the industry players themselves but within the community at large. A

Ed. Note: These estimates of industry potential are conditional on industry changes that will enable more and better wood to remain in the community for processing.

Overview: Current status and trends in the industry

"In essence, value-added amounts to getting more mileage out of the same resources. Whether we are talking about fish or wood, adding value means bringing the resources closer to their consumer states before exporting them out of the community". Valerie Langer, Friends of Clayoquot Sound

The "value-added wood sector" is a diverse group of activities and industries that involve wood products manufacturing. The sector is often thought of in terms of a process chain, beginning with pre-harvest activities such as silviculture, moving into logging, and after the logs are harvested any activity that adds some level of additional value to the timber is typically considered value-added.

The goal of those supporting the sector is to find the "highest and best use" for all timber harvested. Neither commodity lumber production nor pulp (both considered primary processing rather than secondary or tertiary processing) are typically included in this category.

Figure 1.

The concept of "highest and best" use is, of course, a value-laden one. The further along the production chain (see Figure 1, above) and the higher the price tag on the final wood product when it leaves the region, the better. From a sustainable development perspective we must consider business ventures that not only maximize the economic value (jobs and revenue) generated from the forest resource but also the social, ecological and cultural benefits. Sawmilling ventures that help supply badly needed housing or wood used for cultural purposes such as carving canoes or regalia are examples.

The Table below further illustrates the benefits of moving wood as far as possible along the production chain.

• Semi-finished/remanufactured wood products such as crates, decking, edge-glued products, furniture cutstock, pallet stock, specialty cut lumber, siding, veneer, shingles
• Structural and engineered wood products and building components such as floor trusses, I-Beams, plywood
• Factory build or pre-fabricated housing and structures
• Furniture, cabinets,
• Windows, doors, flooring and other millwork
• Specialty items (crafts, toys, musical instruments)

A more extensive list of potential value-added wood products is provided at the end of this analysis.

A 1999 survey by the Canadian Forest Service estimated that 744 firms were involved in the value-added sector in British Columbia. Sector employment was estimated to be 20,191 (full-time equivalents) and total sales were $4.68 billion. This was an increase from $1.94 billion and 14,000 employees in 1994[2]. This 140% revenue growth translated into only 44% employment growth, indicating increased mechanization and/or consolidation in the industry during this period.

The industry is concentrated in two major Forest Regions: Vancouver (61%) and Kamloops (22%). It relies on exports to the United States and Japan. In 1999, 73% of BC companies exported to the US and 43% to Japan.

In the Clayoquot biosphere region there are more than 15 value-added manufacturers, over 40 when creators of specialty products are taken into account. These manufacturers include:

• sawmills that are producing custom and rough lumber,
• cabinet and furniture makers (garden and indoor),
• specialty producers of toys, bowls and other craft and art work

Well known local canoe carver Joe Martin at work. Photo: Tofino Times

The largest of these firms (Looker Industries) employs 16 people. Others are sole operator enterprises or part-time hobbyist/ secondary income producers. There are an unknown number (minimum nineteen - see art sector analysis) of Nuu-chah-nulth carvers from the five area Nations that make at least a portion of their income from carving, including canoes, masks and others items.

While provincial reports demonstrate significant growth in the sector over the past decade the same cannot be said for Clayoquot Sound. The Biosphere Designation nomination (1999: 21) proudly stated, "Value added wood manufacturing businesses (manufacturing of finished wood products rather than raw lumber production) are increasing in number and size". Unfortunately a review of the situation demonstrates this optimism was unfounded.

Since a 1995 study on the region's value-added sector, one of the two largest value-added manufacturers has moved to Parksville. Timber Tonewood and sister company Windfall Cedar Products, operating out of Ucluelet had 20 employees in 1995 producing cedar shake blocks and dimensional lumber used in making guitar tops. Looker Industries and Roofteck Shake and Shingle, also based in Ucluelet, downsized from 45 employees in 1993 to 20 in 1995 and since then to 16. In 2000 Ucluelet First Nation purchased 51% ownership of the 20-year-old company. A furniture manufacturing enterprise, operated by a Past President of the West Coast Value-Added Wood Society, has moved to Port Alberni.

After ten years of effort and the loss of several participating businesses, members of the Value-added Association are frustrated and have lost heart in what can be accomplished. Further, funding for staff support that was once available through Forest Renewal BC has dried up. The Association is longer operating, although some members believe it will someday be revived. The mood is somber and frustrated. Despite much talk about the sector industry experts claim that not much has changed over the past decade. Concerns raised in 1995 have not yet been alleviated. The number one barrier to viability in the sector, let alone expansion, is access to wood.

"It's hard to believe in an area such as ours, wood supply would be a problem. With land claims negotiations, Scientific Panel recommendations and the enforcement of the Forest Practices Code, the small time operator seems to have been forgotten." - Patricia Greer 1995

Wood Supply: Provincially some value-added operators harvest their own timber through programs such as the Small Business Forest Enterprise Program or access supply through The BC Wood Fibre Network. The Network was created by the Province of BC as an electronic mechanism of linking buyers and sellers of logs and lumber. However, local firms report that these avenues do not meet their needs because it requires them to source wood outside the region, which is costly and logistically complex. Further, the operation of Small Business licenses requires a large investment, particularly in equipment.

Despite years of lobbying effort not enough has been done, operators say, to provide access to local wood. This situation has been exacerbated by market-based policies. "The government's policy is that it (wood) goes to the highest bidder. Even with wood next door to us we can't compete with the US dollar."

Timber production in Clayoquot Sound has decreased dramatically since 1989 (from 958,000 cu m in 1989 to 81,000 in 2001)[3]. Virtually none of this timber is directed to the local value-added sector, in part a function of government and corporate policy but also because of market competition. Value-added companies must rely instead on salvage wood, either harvesting it themselves or purchasing it from a mill.

Salvage wood is wood left in the forest after logging, or timber that is wind-thrown or diseased. There are several reasons value-added manufacturers use salvage wood. First, it is easier to access than newly cut timber because large logging companies are not interested in processing it. Salvage wood also has the advantage of being quality old-growth timber and is less expensive than new, milled timber. One operator explained, "Second growth is just not the same. It is not structurally sound." The value of salvage wood (shake log) is approximately $150 per cu. m. compared to $300 per cu. m. for lumber. Shake manufacturers can sometimes find music block grade wood in their supply worth $600 per cu. m. But concerns about supply exist even with salvage.

Access Issues: Companies harvesting salvage wood must hold a timber sale license. In Clayoquot, and elsewhere, the major tenure holders (International Forest Products and Iisaak) hold the salvage licenses and then issue salvage contracts to local operators in exchange for a fee/royalty to cover administrative costs. Not many salvage licenses are issued. Road reclamation activity is also making it more difficult to access wood in many areas and increasingly the expense of helicopters is required to bring logs out.

"We invested $400,000 in a stump processing industry and operated for 8 months paying $2.50 stumpage. Then the government decided to call stumps full-length trees and charge $42. We couldn't do it ... Now the machinery is rusting and the training is down the tube." "There's a mountain of bureaucracy on top of the fiber... We don't count at election time."

A third problem with access relates to the complex web of government regulations required to obtain access permits for salvage on the 'open market'. These regulations include, for example, special requirements for the protection of culturally modified trees[4].

Supply Issues: In addition to salvage access, there is also a basic problem with salvage supply. More than 20 years of salvage activity coupled with improved forestry practices that leave less behind for secondary 'takers' has left salvage wood harder to come by. Says one operator, "The opportunity to have something made of the old growth lumber will become rarer, as the recovered wood is used up. Another said, "the Sound has already been gone over two or three times" (for salvage wood).

In April 2003 the Province announced policy changes to salvage licensing to make salvaging more "market-principled" and competitive. This new system means that, unless the major companies in the region continue to hold and sub contract for salvage locally, salvage access permits will be issued to the company willing to pay the highest price (not necessarily local). The only other option will be to organize at the community level to pursue a community salvage license to access areas not under control by the majors.

Salvaging in the Biosphere Region: The current subcontracting arrangement with the major companies is seen by some as a source of security in this new era of market-based pricing. Local value-added companies have established business relationships, particularly with Interfor, that help them secure their supply. The forest companies, with liability on the line, benefit by knowing those who work on the land are people they know and trust as reliable operators.

First Nations in the region have begun to assert their rights to what salvage material remains in Clayoquot's forests, entering the industry through training programs and establishing business ventures, often joint ventures with firms already in the industry. Hesquiaht have formed a partnership with Interfor, Ahousaht with Alliford Bay. Assistance with training and equipment purchase is offered in exchange for access to fiber supply within their traditional territories. Yet no one Nation, one industry expert suggests, has sufficient supply to support viable shake and shingle production. Opportunity does exist however, for a cooperative manufacturing endeavor.

Clearly the success of the secondary wood-processing sector is dependent on more of the timber harvested in the region being left in the region. Some blame wood shortages on the fact that the industry remains in the hands of multinationals, with limited local control. Others talk about the apparent unwillingness of companies such as Iisaak to guarantee supply to local producers. Pressure on Iisaak to meet certification requirements is likely to result in improvements in the future. The awarding of a 75,000 cubic meter timber sale license to the Ucluelet Economic Development Commission in 2002 should provide additional local supply. The objectives of the license include supply to local mills, which will be given first refusal of fiber. In addition, there is a stated commitment by the Province (as of March 2003) to redistribute logging rights to First Nations and other communities, which may further increase local control. Finally, treaty settlement will help secure further access to forest resources for local communities.

Another way to add value to the forest sector and address the issue of wood supply is to harvest and utilize species that are typically underutilized or considered a "nuisance". These might also be called alternative wood products. Alder and yew are two examples. Alder, a common forest commodity in the Clayoquot Biosphere region, (a late 1990s study estimates 3,500 cubic metres per year of alder is available) is fast growing and highly valued by makers of furniture and specialty products. Alder furniture has been produced in the region in the past and a veneer plant has been proposed for the past decade that would include alder as an input and directly employ 75 workers. A report on the concept suggests a large market for clear alder veneer. Alder chips are also popular for smoking fish and meats. Currently, however, mature alder is being chopped down for firewood rather than commercially harvested. One local operator explains, "I had a line of alder furniture but it was totally impossible to get the wood. There's no such thing as harvesting alder." Yew wood is also reportedly being chopped up for firewood from clearcut areas. Yew wood is used traditionally by local First Nations for canoe paddles. It is also used for making bows, furniture and specialty items.

A new initiative by Interfor may provide some access to these "alternative species". The company has opened a log sales yard that makes wood available to local individuals and companies, including alder, yew, hemlock, white pine, red and yellow cedar and other species. A portable sawmiller can be brought in to custom cut. Already area residents and firms have earmarked timber for their operations, construction, flooring and furniture making. Timber at the site is sold at market value with the help of an on-site log grader. Although consistency of supply through this avenue is uncertain and the best quality logs are still shipped out of the region by the company, the yard marks a significant improvement in local wood supply. The initiative is made possible because Interfor is now sorting logs on the roadside based on destination.

Another new venture is The Ucluelet Timber Milling Company. The company plans to employ 5-6 people in logging and another 5-6 manufacturing railway ties. If all goes well, additional products such as beams for lodge and large home construction in the region will be added to the product line. The plan is to focus on second growth materials, particularly fir but also pulp grade timber.

Other Constraints and Developments: "The problems are availability of wood at a price we can afford and affordable workspace. Land is expensive."

The second key issue in the region for this industry is space. The 1995 value-added report identified the need for an industrial park. Here progress has been made. Tofino has since constructed a 20-acre industrial park and the site of the new 40-acre Ucluelet Eco-industrial Park, a joint project of the District of Ucluelet and Ma-Mook Development Corporation, is almost ready for occupancy. "The primary industrial focus is intended to be the production of renewable, certified forest products[5]".

Additional constraints include workforce, investment, transportation costs, market development and technological change.

Workforce: Wages are seen to be low compared to sawmilling and pulp mill jobs (often $7-13 of the forest industry average) and at $15 per hour it is difficult to get long-term employees, particularly in high priced Tofino and increasingly Ucluelet. Seasonal shut downs are also a discouragement. Yet transient workers are not well suited for an industry that requires skill at a craft such as furniture or cabinet making. Further, some entrepreneurs themselves don't want to work full-time at production, let alone expand their enterprises.

Investment: Getting into the business at a full-time production level can be expensive. Local businesses report that, on average, investment required to get into the sector averages about $500,000 (situation dependent). Transportation costs are also cited as a financial consideration but "if you can add the value to the fiber with a high quality product, then the shipping makes sense".

Markets: While markets are a challenge for any venture, industry contacts indicate that for small-scale production and the shake and shingle industry markets are not a significant constraint. One operator suggests marketing is particularly important (and expensive) when you are starting out. For the specialty producers, but also for others such as furniture and cabinetmakers, the growing tourism industry is a major market. Galleries retail local products, representing the majority of some specialty producers' sales. In addition lodges and bed and breakfast facilities support the sector by buying local products, which in turn becomes a form of promotion. Wickaninnish Inn is a good example. The new resort purchased all of their outdoor furniture from Tofino's Clayoquot Crafts. High levels of construction activity associated with the region's tourism boom provide opportunities for sawmill operators and woodworkers in the region to supply specialty materials for building, such as beams, flooring, cabinetry, doors, windows, furniture etc. Some of this activity is occurring but the opportunity is not being fully capitalized upon.

The Internet is proving its potential for international marketing in the Sound. One local manufacturer estimates 50% of his sales are on-line, many from the U.S. but also from all over the world. Opportunities may exist for further Internet marketing. A search of the Clayoquot producers listed below indicates only few have an Internet presence. Some people order because they have been to the region notes one furniture manufacturer, but many don't even know where Clayoquot Sound is. They are simply looking for high quality cedar products.

Yet another market opportunity is the green market, expected to be a boon for the area after Iisaak gained certification by the Forest Stewardship Council. Iisaak joined 11 other firms in Canada ad 452 around the word. There is some frustration that a premium for certified product has not been achieved and that some markets, such as China, are not interested in certified products. Sarita Furniture in Port Alberni has struggled despite adding a line of certified products while another local producer suggested, "Tourists don't really care about certification". It was suggested as another limitation that shingles from salvage are not certifiable. Others are hopeful that certification coupled with the region's international reputation will carve out a niche and protect markets that are environmentally sensitive for certified wood and wood products. An emphasis on green building standards could be used to promote certified wood products in building construction, interior and exterior design. Harmonization of FSC standards around the world will also play a role in export markets for certified products. The BC standard is reportedly the most demanding anywhere.

Also promising for marketing of local value-added products is the proposed creation of a Forest Resource Center at the Junction adjacent to Interfor's new log sales yard. Evolved from a long-time dream of Value-Added Association members and others for a Clayoquot Wood Village, the current concept will link the Junction Tourism Information Center with forest trails, a carving shed and gallery with value-added items displayed and information about where to find their producers. Central West Coast Forest Society has recently completed the business plan for the Center. For those who prefer to focus on their craft rather than marketing, this and other cooperative marketing ventures are helpful. Also suggested is the need for a consistent logo or image reflecting products made in the region. "We need branding, a logo that says this was made sustainably in Clayoquot, certified through harvesting and processing".

Technology: Continuous investment in technological improvements in this industry is critical. There is already a need for more precision technology in the region. One local mill gets approximately 30% recovery rate, for example, compared to 65% in Japanese operations.

Assessment of the sector by SCED Criteria

Environmental criteria: The need to make the most out of precious natural resources makes value-added, in principle, ecologically beneficial compared to alternate uses. Best practices in environmental management must also be adhered to in the harvesting of salvage and alternative species, however, and in the production of value-added items. These practices must be determined on a case-by-case basis, with attention to issues such as chemical use and waste management as well as sustainable wood supply. Industry participants explain that under the Forest Practices Code salvage practices are regulated such that only 2-3% of course woody debris is removed, leaving enough in the forest for biomass requirements. However, increasing pressure for access as supplies shrink will require careful monitoring and operator diligence. Studies show that salvage operators in the region are concerned about maintaining ecological processes, taking steps to minimize impacts (e.g. by helicopter removal, retaining wildlife habitats) and are interested in research findings about the role of downed wood and resulting guidelines developed for their operations[6]. Certification offers ecological benefits as a tool for monitoring and promoting environmental responsibility. Finally, harvesting alternative species will require an understanding of their ecology and implications of harvest (e.g. alder is important for adding nitrogen to soil and discouraging erosion).

Economic criteria: Long-term economic viability of the sector is subject to a sustainable, long-term wood supply. Wages vary in the industry but are generally at a medium level (often higher than the service sector but lower than unionized industrial forestry jobs). There is clearly potential for year-round employment and expansion in the region, although there are a number of significant barriers to be addressed in the development of any new enterprise. Two existing initiatives have identified potential for an additional 20 jobs with other opportunities not yet explored. For multi-unit production significant investment is required (often in the $500,000 range). Salvage harvesting, on the other hand, is labour intensive and requires relatively low capital investment. Finally, the sector is subject to market fluctuations. Specialty, luxury items are subject to economic fluctuations as are products such as shingles, evidenced by prices fluctuations of the past few years (up last year, down now). Innovation and monitoring of the market and the industry are success factors. Some impact from an expanded industry might be felt by those using downed fiber for firewood, but ample supply not of commercial interest is likely to remain present for these purposes.

Social criteria: The sector meets social criteria in that it is likely to be locally owned and controlled. Larger ventures should examine joint ventures as a model for ensuring partial local ownership at a minimum. For smaller scale producers it also provides opportunities for people to live an alternate lifestyle, and to increase earning for people marginal to the mainstream economy. Value-added and alternative wood products also provide job potential for First Nations communities (see below). For a number of craftspeople this is a multi-generation family business, a sign of local commitment and appreciation for careers in working with wood and of hope for the future of the sector.

Opportunities for First Nations: There are clear advantages and a good "fit" for First Nations entering or expanding their role in the value-added sector. First Nations have always been leaders in value-added processing. The Nuu-chah-nulth used the bark and every part of the tree harvested for uses as diverse as building, clothing, tools and art. Canoes, masks, clothing and other items are still produced today by Nuu-chah-nulth crafters. Asserting their rights to timber resources the Nuu-chah-nulth are also entering non-traditional wood sectors, including salvage, shake and shingle along with larger-scale harvesting through Iisaak. Increased access to resources for First Nations has multiple benefits, including the ability to make decisions locally about the highest value use of these resources - ecological, cultural or economic. There is opportunity for expansion of First Nations involvement in the value-added sector, both with specialty products tied to cultural themes (such as furniture, art) and more mainstream products. There is also a desire to move in this direction and various initiatives underway that should be encouraged and supported.

_________________________________

[1] Mater Engineering, 1997
[2] Canadian Forest Service, 1996
[3] Friends of Clayoquot Sound, 2003
[4] Greer, P., 1995
[5] Quinn, 2002
[6] Newsam and Beasley, 2000

• Central Westcoast Forest Society. 2003. Forest Centre Business Plan (forthcoming).
• G. E. Bridges & Associates. 1998. Regional District of Alberni-Clayoquot Ucluelet thin-sliced veneer plant feasibility study.
• G. E. Bridges & Associates. 1993. Feasibility Study for Alder Based Manufacturing Centred in the Alberni Valley
• Ford Foundation. 2002. A Community's New Enterprises Restore a National Forest: Hayfork, California. Sustainable Solutions: Building Assets for Empowerment and Sustainable Development.
• Greer, P. 1995. Value-added Wood Products Report. Prepared for the People and Communities of the Long Beach Model Forest Society.
• Mater Engineering Ltd. 1997. Value-Added Wood Products Presentation, Clayoquot Sound Symposium, Ahousaht
• McIlveen, K. 2003. Green CED Case Studies from North America's Resource Dependent Communities. Project document.
• Natural Resources Canada. 1996. Directory to Secondary Manufacturing of Wood Products in British Columbia
• Newsom, D. and B. Beasley. 2000. A Review of Salvage Practices and the Ecological Roles of Downed Wood in Clayoquot and Barkley Sounds. Prepared for the Long Beach Model Forest Society
• Quinn, S. 2002. "Eco-Industrial Park for light industry" West Coast Business Link. Jan. 2002
• R.M. Jeffrey and Associates Ltd. 1995. Long Beach Model Forest Needs Assessment Survey Economic Component. Final Report. Prepared for the Long Beach Model Forest Society.
• Van Allen, K. 2001. An Assessment of the Amount and Characteristics of Coarse Woody Debris in the Temperate Old Growth Rainforests of Clayoquot Sound, Vancouver Island, British Columbia. Submitted to the LBMF Society.

Contacts:

* Clayoquot producers

Sawmilling & Shakes:
- Afjord Estates, Arnold Hansen (Tofino, portable sawmill, custom-cut lumber)
- Dave Isenor (Ucluelet, mobile dimension milling for his own use)
- Toquaht sawmill (shakes, rough lumber)
- Len O'Dell (Ucluelet, mobile dimensional sawmill)
- Looker Industries/Roofteck Shake and Single/KD Custom Lumber (shingles, shake blocks, lumber, looking at packaging cedar bark waste)
- Ahousaht mill (Frank family)
- Neil Buckle, custom milling

Cabinets:
- Brian Steven (Tofino, cabinets, furniture and toys)
- J. Sadler and Sons Construction (construction, build own cabinets)
- Sean Mcconnell (Ucluelet, doors, cabinets, etc.)

Furniture:
- Clayoquot Crafts, Daniel Lamarche (Tofino)
- Sabine Hotz (Tofino)
- BCBG Creative Wood (indoor and outdoor furniture, Catface Range, Clayoquot Sound)
- Billy Keitlah (Ahousaht, furniture with Nuu-chah-nulth design)
- Robinson Cook (Strawberry Island/Tofino, furniture, glasses, tools, light fixtures etc.)
- Jan Janson (builder, also garden/outside furniture)

Specialty Items:
- Keith and Sam Plumley (Tofino area, spoons, bowls, jewelry)
- George Yearsley (Tofino, feathers)
- Henry Nolla (Tofino, doors, bowls etc.)
- Gail Duchene (Tofino, wood bowls)
- Richard Menard (masks, sculptures)
- Terry Mckinnon (Ucluelet, wildlife art)
- Paul Petrosky (Strawberry Island/Tofino, guitars)
- Cal Kalkan (carver, Catface, Clayoquot Sound)
- Numerous Nuu-chah-nulth carvers (listed under art sector analysis)

* Forintek: Under contract with Natural Resources Canada (Canadian Forest Service-CFS) since 1998 to deliver research on value-added products designed to increase knowledge on secondary and tertiary wood manufacturing applications and processes. The program is now being delivered by a research Consortium that brings together Forintek and the University of British Columbia, Laval University (Quebec), and the University of New Brunswick. Research findings are available to members. Technical support services are also available on a contract basis.

* BC Wood: BC Wood is a not-for-profit trade association dedicated to growing British Columbia's secondary wood-products manufacturing industry. Established in 1989 as a partnership between industry and government, BC Wood provides marketing programs to over 600 registered value-added manufacturers, which includes cost-shared participation in international tradeshows and events, out-going and incoming trade missions, lead generation through the WorldWide Inquiry System (WWIS) and networking opportunities. In addition, BC Wood members have access to an extensive resource library, both on-line and in our office.

• Vancouver Island Association of Wood Producers
• BC Shake and Shingle Association
• Log Building Association of BC
• Construction Association
• Lumber Remanufacturer's Association

Internet:

• Forestsource.com:www.forestsource.com
• Woodweb:www.woodweb.com
• BC furniture manufacturers Directory: www.wooddesign.bc.ca
• Canadian Wood Council: www.cwc.ca
• Woodcom: www.woodcom.com

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