The growth of First Nations-owned and operated forest companies is being stunted by conditions within Canada's troubled industry, says a spokesman for the Aboriginal forestry industry.

"I believe (increased participation in the forest industry) is the direction Aboriginal communities have to go," says Harry Bombay, executive director of the National Aboriginal Forestry Association (NAFA), an Ottawa-based research and advocacy group whose 400 members include First Nations governments and companies, individuals and forest-management organizations.

"It's probably one area of opportunity for them, when you consider most of the (Aboriginal) communities in Canada are isolated with very few resources, other than trees, around them."

Bombay made his remarks in the wake of an Aboriginal forestry law conference in Vancouver staged by the Pacific Business and Law Institute.

The conference heard that recent Supreme Court of Canada and other lower-court decisions have given Aboriginal groups more say over how timber and other natural resources are developed and have created more opportunities for First Nations to participate in the forest sector.

Cases involving the Haida, Tsilhqot'in and Taku River First Nations in B.C., the Mikisew Cree of Alberta and the Kitchenuhmaykoosib Inninuwug (formerly Big Trout Lake First Nation) in northwest Ontario have required government and industry to consult with, and often accommodate Aboriginal communities' interests.

But conference participants indicated many challenges remain as First Nations, forest companies and governments attempt to revise their relationships.

"Many (First Nations) have been involved in the forest industry for many years, but many more are getting involved at a time of particularly difficult economic circumstances," says Billy Garton, a Vancouver lawyer who chaired the conference. "Some ventures will have difficulty getting established and growing mainly because of the timing. That will be a big challenge for First Nations (wanting) to get involved in the forest industry."

NAFA's Bombay says 80 per cent of First Nations communities are located in forested areas and he estimates there are 1,000 Aboriginal forest companies across Canada.

Some First Nations may have three or four forestry-related businesses. But most firms are small; some have as few as one employee.

"Had the forest industry continued performing like it was, say, 10, 15, 20 years ago, I think we'd see a lot more," Bombay says. "But as Aboriginal people gain greater interest in the forest through various tenure arrangements and things like that, the state of the forest economy has gone down.

"The loss of competitiveness in the forest industry in Canada has slowed the rate of Aboriginal involvement in the industry as well."

Some analysts have predicted this will be one of the worst years in the history of the Canadian industry, which is grappling with the after-effects of the controversial Canada-U.S. softwood lumber agreement, the high Canadian dollar, the pine beetle epidemic, consolidation related to mergers and acquisitions of global companies, and increased competition from Southern Hemisphere nations - among other factors.

When stability returns to the sector, Bombay predicts, many new types of development will occur. First Nations, he adds, are looking for companies to show a willingness to try new ways of doing business and develop new types of partnerships.

Companies across Canada are trying to engage First Nations in the production process by hiring them as employees or contractors, said John Desjardins, head of KPMG's Canadian forestry group.

At the same time, Desjardins told the conference, firms are trying to help Aboriginals financially without raising their costs.

"I'm definitely seeing companies that we work with trying to work with Aboriginal groups," said Desjardins, adding companies that have good relationships with First Nations have been able to continue to harvest timber "in an economic way."

Capital costs, he added, are now the biggest factor when it comes to increasing First Nations involvement.

He says making more money available for consultation between First Nations, forest companies and provincial and territorial governments will increase the chances of reaching timber-harvest agreements. But the forest industry's current economic conditions may prevent profitability in the short term.

Mike McDonald, a Vancouver lawyer, told the conference that the question of who will cover the costs of consultation will be a big issue. "Aboriginal people are the poorest of the poor," he said, adding many First Nations do not have the money to engage directly with the Crown and industry. Taxpayers would also face huge expenses if the Crown alone had to cover the costs, he noted.

McDonald said impact benefit agreements (IBAs) that, among other issues, determine how First Nations will gain economically from forestry activities, "make good business sense" and are supported by many Aboriginal groups.

While First Nations will never surrender their forestry-related rights, they will hold them in abeyance in return for contracts, employment and training, he added.

"The more economic clout Aboriginal people have and the more options Aboriginal people have outside the treaty process, the better off the treaty process will be," he said.

Increased dialogue between Aboriginal groups, governments and companies is occurring across the country, even though the court decisions do not specifically cover First Nations commercial forestry rights.

But NAFA's Bombay says such decisions will inevitably lead to First Nations commercial involvement, because past rights infringements have given them a seat at the negotiating table. "It's a sort of indirect way of obtaining economic interests or economic benefits - not necessarily from the right itself, but from the accommodation of the right."

Darrell Robb, head of the B.C. Forest Ministry's Aboriginal affairs branch, predicts Canada's westernmost province will lead the way when it comes to Aboriginal forestry changes across the country.

He told the conference that Premier Gordon Campbell is attempting to introduce institutional and decision-making changes through forest-and-range opportunity agreement and direct-award deals with First Nations. The province has set a goal of allocating eight per cent of the annual allowable cut to Aboriginals.

(Monte Stewart can be reached at monte@businessedge.ca)