4CRITICALINGREDIENTS

Ontario’s forest economy... adrift in a global marketplaceour northern communities and forests deserve a better plan...As with other resource-based industries in a global marketplace, the forest products sector is responding to interna-tional pressures that have very little to do with anything that is occuring here in Ontario. However the impact of those international pressures on Ontario are the dozens of mills closing their doors, machines idled, workers laid off, and communities in despair. Rarely are community or forest biodiversity impacts significant factors in these deci-sions - to the faceless shareholders at the helm, it’s just “business.” Some light at the end of the tunnel for this current forest sector crisis is already being speculated upon, but only from a company profitability perspective. Unfortunately, our northern communities and public forests are too easily collatorel damage in times like these, where all of the players are desperately seeking business advantages.

Observations such as these noted at the recent Council of Forest Industries 2007 AGM from forest analyst Don Roberts (CIBC World Markets) reflect this grim reality (emphasis added):

g “It will be down and dirty right into 2008, but current prices will force the highest cost players out.”

g “Companies will continue to bleed cash in the short term until we see more closures, but as far as demand goes, lumber will not be a bad business to be in over the mid- to long-term.

g Given that, and the sound balance sheets among major BC Interior players right now, Roberts sees some encouraging opportunities for growth among these companies – Only not very encouraging for the communities they currently operate in.

Along with the continuing corporate consolidation effects on northern communities, rising concerns with climate change and forest protection, and increasing interest in biomass energy are significant reasons for re-examining the way in which Ontario’s public forests are being allocated to industrial interests. It is increasingly important to have a system that puts our communities and forests first.

SPECIALREPORT

inside: a map of ontario mill closures since 2004...

CPAWS Wildlands League1-866-510-WILD www.wildlandsleague.org CPAWS Wildlands LeagueJune 2007

www.wildlandsleague.org

suggestions for a new approach to Ontario’spublic timber use...

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BUILDING RESILIENCE - We need to build resilience and adaptability into this sector, through increasing the capacity for more product diversification. Though a mix of small to large operations is healthy, incentives must support more, and diverse operations, and not fewer opera-tions who simply focus on the same products. This includes better entrepreneurial and community access to timber, where it can be demonstrated that more jobs and less footprint in the forest can be accomplished.

MARKET FIT - focus on markets that can take advantage of Ontario’s brand differentiation potential. A market for “green” products is growing fast in North America, where the vast majority of our current products are destined. Ontario is well-positioned to serve these markets as it has a substantial portion of its forests already certified to the Forest Stewardship Council standard, the only certification that has credibility with forestry industry critics, and there-fore customers. There is a market advantage available in avoiding intact forests and the habitat of threatened species.

EMBRACING QUALITY - quality products, quality environment, quality of life - quality has value. This includes matching log quality to its optimal products. Fundamental to this is an open and transparent system. Re-thinking how logs are directed to their end use is a timely discussion.

ALLOCATION ON MERIT - Wood should be made preferentially available to those enterprises which create more jobs with less wood, who consistently meet the highest environmental standards, have the smallest carbon footprint etc... Similarly, it should be known to users that access to timber may be removed with fair warning if other enterprises demonstrate better performance potential, or when users fail to meet regulatory standards.

A Broken Allocation System...In 2006, the Wildlands League formally requested a review of Ontario’s timber allocation system, through the Environmen-tal Bill of Rights. In our submission, we highlighted many symptoms of a broken system to the Ministries of Environment and Natural Resources, including lack of public transparency and accountability. Our request was turned down.

Without improving our system, wood from mill closures will continue to be dealt with in a manner that doesn’t engender confi-dence that the best use of our public resource is being attained.

You too can examine our request on our website (Request for Review – Allocation of Crown Timber Resources) and ask yourself if now isn’t the BEST time to be re-building the system. By re-thinking now, we can send the right signals to a future forest economy that works for Ontarians, and get there sooner!

Because our forest economy is hinged on using our public forests as raw materials, how we design our system of making timber available to industry is critical to the success of our forest economy and the long term health of that resource.

why are our mills closing?

Global CompetitionThe biggest reason is that it’s a global marketplace, and Ontario is trying to compete with jurisdictions with less rigorous environmental and labour stan-dards and cheaper, faster-growing trees.

Canadian DollarIn a global marketplace, the higher value Canadian dollar raises domestic inputs costs such as labour, energy, and transport costs per unit cost relative to other producing countries.

Low-value ProductsOntario is still geared to producing low value com-modities like newsprint and pulp in a crowded global marketplace, where these functions can always be done cheaper elsewhere.

TechnologyCompanies invest capital and technology in their lowest cost environments, leaving more costly ventures to age without significant upgrading. For the most part Ontario’s mill infrastructure has languished behind most of its competitors.

ConsolidationTo combat our relative global inefficiencies, compa-nies consolidate businesses streamline operations, and shed themselves of unwanted labour and less productive facilities.

This MapThe map included in this report was produced to

illustrate the magnitude of change that has occured in a short few years in Ontario. We have not been able to

�nd this information in one place anywhere, so we have compiled it because we feel that it is a matter of

public interest that showcases the need for a new model that places forests and communities �rst.

Over 50% reduction in Ontario’s forest industry

notes:(1) Not including “Small” and “Medium” sized sawmills(2)Closure and other announcement information is based upon the best public information available to date, subject to further verification(3)Facility timber use is based on 5 year averages published in “Ontario’s Forest Industry Facility (Mill) Statistics 1999 to 2003,” Ontario Ministry of Natural Resources, Sept 2005

Capacity Reductions(equipment, job layo�s, shift losses)

Facility Closures(permanent, inde�nite, not de�ned)

Forest Management Units

TOTAL CLOSURES = 10,000,000 cubic metres of public timber use per year (lost capacity to facility closures)

TOTAL REDUCTIONS = 8,000,000 cubic metres of public timber use per year (when at full capacity - now signi�cantly reduced)

COMPARE TO 2004 CROWN HARVEST = 22 ,865,000 cubic metres of public timber used before these capacity reductions

Thunder Bay

CPAWS Wildlands LeagueJune 2007

Since 2004, half of the demand on our public forests has disappeared as dozens of mills have been closed and thou-sands of people laid o�.

Ontario is at a crossroads. It must imagine a new vision for forestry: one that strengthens northern communities; creates more jobs with less wood, better protects the health of our forests for our children; focuses on emerging green markets; and places less pressure on remote, intact forests.

With half of its capacity idled, it is time to plan for Ontario’s next forest economy, before our public timber is again locked into long-term, low value commodity production that holds our communities and workers ransom.