Alberta is telling its financially ravaged forestry sector not to expect any bailouts or subsidies but to prepare for major changes to the way it does business.
Provincial Sustainable Resources Minister Ted Morton said selling the rights to large tracts of timber to companies and the forestry tenure system have created problems that must be addressed.
Morton told the Alberta Forest Products Association in a speech that a new business model proposal that will better position the industry to flourish in the future is being developed and will be presented to cabinet late this year "These are hard times, but they are also exciting times. I do not expect to see substantial improvement in the U.S. housing market for another two years," Morton said in the prepared text of his speech.
"We stand at the threshold of a new model for the forest industry that we will have engineered together."
Morton did not disclose details of the new business model proposal, which has been worked on by a joint government-forest industry committee.
As he spoke, the government released an interim report on Alberta's forestry sector that was completed last year.
The report recommends that government help the industry by charging firms cheaper commercial lending rates for outstanding timber fees, excluding carbon emissions from wood biomass projects, skills training for displaced workers and promoting the use of Alberta wood products in government building projects.
Alberta's forestry sector, the third-largest industry behind energy and agriculture, estimates it has lost $1 billion over the past two years, leading to mill closures and the loss of thousands of jobs in small communities.
The situation is so dire that the forest products association's website features a picture of a big red alarm bell with the caption "Situation Critical."
Alberta's joint government-forest industry committee acknowledges the situation in the conclusion of its interim report.
"At no time has Alberta's forest industry been in a more difficult situation," the report says.
"Global markets, increasing competition, trade agreements, strengthening Canadian dollar and operating costs are having a significant impact on the sustainability of the forest industry.
"While the industry is in a difficult position, it is important to ensure that government actions do not exacerbate the situation."
The United States has challenged the Ontario and Quebec governments over financial support given to their struggling forest industries.
The U.S. is taking Canada to arbitration provided for under the softwood lumber agreement over the provinces' actions.
Morton said Alberta's new business model is being designed to avoid such challenges.
Brady Whittaker, president of the Alberta Forest Products Association, called the interim report a significant step forward.
He said the industry is placing much of its hope on the proposed new business model expected to be announced next year.
The association hopes the plan will include minimizing government regulations while setting the stage for the industry to develop new products, such as using wood for generating electric power.
"That business model will look at just not selling two-by-fours," he said. "It is a business model that we expect is more diverse, where we will use fibre from the forest to generate power, to use fibre from the forest to produce fuel."
Whittaker said the changes could also set the stage in the longer term for fewer but larger forestry companies that can compete with the U.S. and in emerging international markets.
He said the changes being considered by the province will eventually help dispel some of the doom and gloom the industry has been operating under over the past few years and will likely experience over the next 12 months.
"There are a lot of opportunities," he said.
"If we can hold ourselves above water over this time we will be very successful when this cycle goes to the upturn."
