Southern Interior Beetle Action Coalition Okanagan TSA Socio-Economic Trend Assessment

Transcription

1 Southern Interior Beetle Action Coalition Okanagan TSA Socio-Economic Trend Assessment Prepared by: Southern Interior Beetle Action Coalition 2185 Voght Street Merritt, BC V1K 1B8 August 31, 2009

2 Important Notice Peak Solutions Consulting Inc., Lions Gate Consulting Inc. and Robinson Consulting and Associates Ltd. undertook this project on behalf of the Southern Interior Beetle Action Coalition (SIBAC). This report is the sole property of SIBAC and has been prepared solely for the use of SIBAC. The consultants and the Southern Interior Beetle Action Coalition do not accept liability for any direct or indirect damage caused to any person or organization or property as a result of use of or reliance on this report and its contents. Given the shelf life of information in this report it is advised that individuals and organizations undertake their own research and should not rely on this report for definitive information or direction.

3 Table of Contents Okanagan TSA Socio-Economic Trend Assessment...1 Table of Contents...i 1 Overview and Geographical Description Introduction Geographic Description Population TSA Level Population Population in Incorporated Communities Employment Trend Analysis Labour Force Location Quotients TSA Level Dependency and Income Forest Dependency Local Disposable Income Forest Sector Employment Income Forest Vulnerabilities Community Level Dependency Community Level Dependencies Community Forest Dependency Comparison Historical and Future Forest Implications Description of Historic AAC and Harvest Volumes Forest Sector Employment Impact Potential MPB Economic Implications Summary and Conclusion Summary Conclusions...23 Appendix A - Bibliography...24 Appendix B Local Area Definitions...25 i

4 1 Overview and Geographical Description 1.1 Introduction The Okanagan Timber Supply Area (TSA) is located in the Thompson Okanagan Region of the Southern Interior Beetle Action Coalition (SIBAC) area of interest. As part of the work of SIBAC, this report has been prepared to provide socio-economic insights into the local economy, recent changes within it (from 1986 to 2006), and the TSA s dependence on the forest sector and anticipated implications in forestry moving forward. 1.2 Geographic Description The Okanagan TSA is located in south-central British Columbia and covers approximately 2.25 million hectares. The TSA is about 320 kilometres long and 140 kilometres wide, and stretches from the Seymour River/Shuswap Lake in the north to the US border in the south, and from the Monashee Mountains in the east to the Okanagan Mountains in the west. Figure 1-1 highlights the key features and communities in the Okanagan TSA. Figure 1-1 Okanagan TSA Source: Ministry of Forests

5 2 Population 2.1 TSA Level Population The TSA, SIBAC region, and BC population and the change between 1986 and 2006 are highlighted in Table As illustrated, the population has grown by 33.8% in the SIBAC region, while the province has grown at a slightly faster pace of 42.7%. In the Okanagan TSA growth has been faster than both the SIBAC region and the province over the period with the TSA population increasing by 55.9%. Overall, the TSA makes up over half of the SIBAC region s total population and has seen its population share rise, moving from 47.5% in 1986 to 55.4% in Table 2-1 Population and Growth in the Okanagan TSA, SIBAC Region and BC, 1986 to 2006 Year Okanagan TSA SIBAC Region BC , ,705 2,883, , ,490 3,282, , ,445 3,724, , ,970 3,907, , ,660 4,113,485 Growth (1986 to 2006) +55.9% +33.8% +42.7% Source: Statistics Canada. Census. In 2006, the Okanagan TSA had the largest population of all the TSAs in the southern interior. The growth rate was also number one with the Okanagan TSA growing by 124,810 residents between 1986 and This was by-far the largest population increase in the southern interior. As illustrated in Table 2-2, the growth in the Okanagan TSA represented 78.5% of the total population increase in the SIBAC region between 1986 and In fact, the Okanagan TSA grew by more residents than the total population of the second largest TSA, the Kamloops TSA, which had a 2006 population of 103, The SIBAC region consists of eleven TSAs in the southern interior, including: Arrow, Boundary, Cranbrook, Golden, Invermere, Kamloops, Kootenay Lake, Lillooet, Merritt, Okanagan, and Revelstoke. 2

6 Table 2-2 TSA Population Growth and Share of Regional Growth, 1986 to 2006 TSA Population Growth, Share of Regional Growth Arrow % Boundary 1, % Cranbrook % Golden % Invermere 2, % Kamloops 23, % Kootenay 4, % Lillooet 1, % Merritt 1, % Okanagan 124, % Revelstoke 1, % Total 158, % Source: Statistics Canada. Census. 2.2 Population in Incorporated Communities Within the Okanagan TSA, the City of Kelowna and City of Vernon grew faster than the TSA in general and collectively added 62,950 new residents, 50.4% of the total TSA. The Town of Oliver grew the fastest with the population more than doubling. Table 2-3 highlights the 2006 population for the unincorporated communities and unincorporated area, and the change between 1986 and 2006 for each area. The unincorporated population actually includes the recently incorporated communities of the District Municipality of Sicamous, District Municipality of Lake Country which were both incorporated in 2006, and the District Municipality of West Kelowna which incorporated Collectively these three communities represent 39,635 residents highlighted in the unincorporated population in the table below. 3

7 Table 2-3 Okanagan TSA Communities, 1986 to Population Population Growth Number Share Population Growth Growth Rate City of Kelowna 110, % 46, % DM of Peachland 4, % 1, % City of Salmon Arm 16, % 4, % City of Armstrong 4, % 1, % DM of Coldstream 9, % 2, % City of Enderby 2, % 1, % Village of Lumby 1, % % DM of Spallumcheem 4, % % City of Vernon 36, % 15, % Village of Kermeos 1, % % Town of Oliver 4, % 2, % Town of Osoyoos 4, % 1, % City of Penticton 32, % 8, % DM of Summerland 10, % 2, % Unincorporated 102, % 33, % Total TSA 348, % 124, % Source: BC Stats and Statistics Canada 1986 and 2006 Census. 4

8 3 Employment Trend Analysis 3.1 Labour Force As illustrated in Table 3-1, in 2006 the Okanagan TSA experienced labour force stood at 177,610, an increase of 71% or 73,965 workers since This was the highest growth rate of any TSA in SIBAC, and well above the change in labour force for the SIBAC region as a whole (46%) and the provincical labour force (48%). Due to the size of its labour force, the Okanagan TSA, and secondarily with the Kamloops TSA, tends to dominate the overall SIBAC region employment data. Table 3-1 Experienced Labour Force in Okanagan TSA, 1986 to # % # % # % Unclassified % % % Agriculture % % % Fish/Hunt/Trapping % % % Logging & Forestry % % % Mining % % % Oil and Gas % % % Utilities % % % Construction % % % Wood products % % % Pulp and Paper % % % Printing % % % Furniture % % % Other Manufacturing % % % Wholesale % % % Retail % % % Transportation % % % Finance & Real Estate % % % Business Services % % % Government % % % Education % % % Health % % % Accommodation % % % Other Services % % % Total % % % Source: Statistics Canada. 5

9 Four industries experienced a decline in their experienced labour force during the 1986 to 2006 period, wheras 18 industries increased. Agriculture was the industry with the largest employment decline, losing 845 jobs, or roughly 10% of its job base during this time. Two other primary industries, fishing/hunting and trapping (-65 jobs) and logging (-185 jobs) also contracted. The only other significant loss occurred in the printing industry, which shed 495 jobs, or close to 60% of its 1986 labour force. Although a total of seven goods-producing industries saw labour force growth, the majority of jobs came from construction (+11,820 new jobs, a 153% increase), other manufacturing (+3,870 jobs, a 55% increase) and furniture manufacturing (+1,095 jobs, a 530% increase). More modest growth was turned in by mining, oil and gas, wood products manufacturing and paper manufacturing. In total, the Okanagan TSA managed to increase its goods-producing labour force by 16,905 between 1986 and 2006, a 48% growth rate. All 10 service industries also experienced job growth in the TSA, with major contributions by health (+14,085 jobs), retail (+8,705 jobs), and business services (+8,365 jobs). Other services (+5,985 jobs), finance and real estate (+5,110 jobs), accommodation (+4,920 jobs) and education (+4,720) also performed well. Figure 3-1, which compares the proportion of goods-producing and service-producing jobs. In 1986, 32% of all jobs in the TSA were in goods-producing industries. By 2006, this proportion declined to 27%, with the other 73% service-producing jobs. This shift from goods-producing to service industry jobs was similar to the SIBAC region where by 2006 three-quarters of all jobs were in service industries. It is also evident that the Okanagan TSA has proportionately fewer goods-producing jobs than any other TSA in SIBAC. The transformation of the local job base from goods-producing to services is consistent with national, North American and international trends among developed economies. For many industries, the increasing use of technology and knowledge inputs to improve productivity has been stimulated by liberalized trade and competitiveness factors. Fewer labour inputs into goods-producing industries and the expansion of knowledge-based service employment, for example in transportation, logistics, communications, research and various computer technologies, is reflected in the labour force data. 6

10 Figure 3-1 Change in Labour Force Proportion for Okanagan TSA, 1986 and Primary & Construction 16% Service producing 73% Goods producing 27% Logging & Wood Manufacture Other Manuf. 5% 6% 1986 Service producing Goods producing Primary & Construction 17% 68% 32% Logging & Wood Manufacture 8% 7% Other Manuf. Source: Statistics Canada. 7

11 3.2 Location Quotients Table 3-2 shows location quotients (LQ) for the last five census periods ending in 2006, for 13 industries comprising the Okanagan TSA economic base. The public sector is excluded. Location quotients are a way of estimating industrial specialization as measured by job concentration compared to a reference area, in our case the province of BC. A LQ value of greater than 1 indicates that the Okanagan TSA has, compared to the province, a higher job concentration in the particular industry. This is said to be indicative of a comparative advantage in the specific sector. A value of less than 1 indicates the opposite low job concentration signifies the existence of comparative disadvantages. Table 3-2 Location Quotients for Okanagan TSA, 1986 to 2006 Trend Line 1986~ Agriculture Logging and Forestry Mining Oil and Gas Utilities Construction Wood products Pulp and Paper Printing Furniture Other Manufacturing Transportation Accommodation Source: Statistics Canada Note: A value of 1 indicates that the region has the same proportion of its labour force in the sector as the province. A value of less than 1 signifies a lower proportion, while more than 1 a greater proportion. The benchmark is British Columbia. Due to its size and relative diversity, job concentration in the Okanagan TSA tends to mirror provincial benchmarks and does not exhibit the specialization and dependencies evident in the smaller TSAs in the SIBAC. Agriculture is the only industry that stands apart with a high level of job concentration more than twice the provincial average. Other industries above the provincial norm were construction, furniture, wood products manufacturing, and oil and gas. On the other hand, printing, paper manufacturing and transportation showed the lowest job concentrations when compared to the province. Logging, mining, utilities, other manufacturing and accommodation were close to the provincial benchmark. The trend toward higher job concentration by most Okanagan TSA industries is not reflected by other TSAs in SIBAC. Over the period, only agriculture and printing showed appreciable declines in 8

12 concentration in the Okanagan TSA, whereas most other TSAs experienced declines in at least half of their economic base industries. This is attributable to the fact that the Okanagan TSA does not have a heavy reliance on any one industry (i.e. its labour force is relatively well-distributed) and, because it experienced solid labour force growth between 1986 and 2006, was able to experience modest increases in job concentration. In other words, it was able to avoid the effects of job loss in forestry and mining that the other TSAs did not. In order to understand the nature of employment growth or decline in the region, it is useful to compare that change to the broader economy. Shift/share analysis is a technique for disaggregating employment change into three components, again using the province as a reference area: The region s share of provincial growth (provincial effect); The change in industry mix (industry effect); and, The shift of activities to, or away from, the region (local effect). As noted in Table 3-3, the provincial effects are positive for all industries because overall provincial employment increased between 1986 and Except for accommodation, oil and gas, construction and furniture manufacture, the industry effects are negative because in BC those industries lost jobs during this period. The local effects for each industry are meant to account for the residual change in regional employment. The negative effect in agriculture and printing is an indication that employment change in these industries cannot be attributed to overall provincial employment change or industry employment change. The local effect for all other industries was positive because the change in labour force exceeded change attributable to provincial and industry factors. Construction, transportation and other manufacturing had the largest local effects, but wood products manufacturing and furniture manufacturing also performed well. The growth in wood products manufacturing is notable because it came during a prolonged period of decline in total industry employment (indicated by the large negative industry effect). 9

13 Table 3-3 Employment Shift-Share in the Okanagan TSA, 1986 to 2006 Labour Force Provincial Effect Industry Effect Local Effect Total Change Labour Force Agriculture Logging and Forestry Mining Oil and Gas Utilities Construction Wood products Pulp and Paper Printing Furniture Other Manufacturing Transportation Accommodation Source: Statistics Canada A graphic representation of job concentration (i.e. location quotients presented in Table 3-2) plotted against the locally induced change in jobs (i.e. the local effect in Table 3-3) between 1986 and 2006 can be seen in Figure 3-2. Employment concentration and change for the study period are characterized by their placement within the four quadrants of the chart. The size of each bubble represents the total change in the labour force, with empty bubbles representing job loss and shaded bubbles job gain. The Okanagan TSA does not exhibit a high job concentration (i.e. a high location quotient) for industries outside of agriculture, or low concentration apart from printing. Most industries are therefore clustered around the central access. However, almost all industries, again except agriculture, exhibited positive local growth components and therefore were situated in the top two quadrants of the chart no other TSA in the SIBAC area had as many foundation and emerging industries than the Okanagan, or so few descending industries. The chart also demonstrates that jobs are being added in most industries and not just a select few. This is increasing the diversification of the labour force and bringing the TSA more in line with the province. 10

14 Figure 3-2 Okanagan TSA Labour Force Concentration and Change, EMERGING Low job concentration Positive Local Growth Conditions 5,500 Construction FOUNDATION High job concentration Positive Local Growth Conditions 4,000 Transportation 2,500 Other Manfuacturing Wood Manufacturing Pulp & Paper Printing Mining Utilities 1,000 Logging Furniture Oil and Gas Accommodation Agriculture Job concentration (location quotient) 2,000 3,500 5,000 MARGINAL Low job concentration Negative Local Growth Conditions 6,500 Change in jobs due to local conditions, DESCENDING High job concentration Negative Local Growth Conditions Source: Statistics Canada Note: Size of bubble represents total change in jobs shaded bubbles represent job gain, empty bubbles job loss. 11

15 4 TSA Level Dependency and Income 4.1 Forest Dependency The Okanagan TSA encompasses a large and diversified economic region; therefore, data for the three Forest Districts that comprised the Okanagan TSA prior to 2003 are highlighted in Table 4-1. Table 4-1 Salmon Arm, Penticton, Vernon Forest District Economic Dependencies, 1991 and 2006 FOR MIN AGR TOU PUB CONST Other Trans ONEI Salmon Arm Forest District Vernon Forest District Penticton Forest District Source: BC Stats and BC Ministry of Forest. Note: In 1991 data for construction was not separated from other basic sectors and Transfer Payments and Other nonemployment income (ONEI) was defined differently. Note 2: Transfer Payments (Trans) includes income from senior governments while Other Non Employment Income (ONEI) includes investment income, such as dividends and interest, retirement pensions, superannuation, annuities, alimony, etc. As illustrated, the economies in the Okanagan TSA have a high dependency on transfer and nonemployment income payments and the public sector. Moving south in the Okanagan TSA, the dependency in the forest sector generally declines, with the Salmon Arm Forest District having a dependency of 12% and the Penticton Forest District having a dependency of 4% in Local Disposable Income Over the period, disposable income (defined as after tax income) in the Okanagan TSA has risen from $3,199.4 million in 1991 to $7,568.8 million in 2006, an increase of 137%. Over the same period, the BC consumer price index has risen by 31% (BC Stats. 2009). For the forest sector the total disposable income has increased from $186.7 million in 1991 to million in 2006 an increase of 112%, only slightly behind the 137% growth rate experienced for the overall TSA. 12

16 As illustrated in Figure 4-1, shares within the economic categories have remained fairly stable in the TSA, with the public administration sector (+192%) growing faster than the remaining categories and gaining in share of the overall disposable income in the Okanagan TSA. Within the other basic sector category, the tourism sub-sector has led growth with an increase in disposable income from $85.5 million in 1991 to $353.1 million in 2006, an increase of 313%. Figure 4-1 Okanagan TSA After Tax Income Estimates 1991 to 2006, $ Millions $3,650.0 $3,150.0 $2,650.0 $2,150.0 $1,650.0 $1,150.0 $650.0 $150.0 $$3,860.5 M $1,331.6 M $1,302.2 M $396.5 M Forestry Remaining Basic Employ. Tran & ONEI/ Non Basic Public Sector Total TSA $3,199.4 M $4,351.6 M $5,774.1 M $7,568.8 M Source: BC Stats. 1996, Nd Note: Remaining Basic Sectors includes: mining, agriculture, tourism and construction and other basic sectors (including film, high technology and others). 4.3 Forest Sector Employment Income Table 4-2 highlights the number of full-time, full-year workers in the Okanagan TSA and in BC for the forest sector and total labour force in In addition, it highlights the percentage of workers that worked full-time, full-year in each forestry category and the total labour force in Table 4-2 Average Employment Income for Okanagan TSA and BC, Full-Year Full-Time in 2005 Full Time, Full Year Okanagan TSA $/year % Full Time Workers Full Time, Full Year BC $/year % Full Time Workers 113 Forestry & Logging 745 $56, % 8,560 $65, % 1153 Support Act. for forestry 290 $47, % 2,655 $51, % 321 Wood Products Man. 2,950 $55, % 28,815 $56, % 322 Pulp & Paper Manufacturing 185 $52, % 10,675 $75, % Total All Industries 90,875 $44, % 1,151,520 $50, % Source: Statistics Canada. Census

17 Overall, employment incomes for full-year, full-time employment in the Okanagan TSA for all forestry categories was lower than generally observed at the provincial level. However, wood manufacturing and forestry support services are only marginally below the provincial averages for those categories. Overall, the percentage of workers working full-time, full-year in the forestry categories in the TSA is comparable to the provincial levels except for the pulp and paper category where only 46% of workers found themselves working full-time, full-year in 2005 compared to 70% at the provincial level. 4.4 Forest Vulnerabilities Many areas in the SIBAC region are particularly dependent on the forest sector as a driver of the local economy. The magnitude of the Forest Vulnerability Index (FVI) indicates the vulnerability of a particular area to a potential downturn in the forest sector a community is vulnerable if its forest sector dependency is high and its diversity is low. FVI rankings have been considered at both the larger TSA level and the smaller local area level. Given the size and economic diversity in the two most populated TSAs, the Kamloops and Okanagan TSAs have been further subdivided into their pre-2003 Forest District boundaries. This subdivision creates 14 TSA level entries in the table below. In addition, the local areas are primarily based on the local areas as defined by BC Stats; however, in several areas the local areas have divided further to explore SIBAC committee concerns that some smaller communities may be at higher risk than indicated by the BC Stats reported numbers, but may be masked by larger communities in which they were grouped. Separating specific local areas has resulted in a unique set of 55 local areas being developed to represent the communities in the SIBAC region. Table 4-3 highlights the TSA level FVI for all TSAs and the local area that fall within the Okanagan TSA. The Okanagan TSA has a wide range of FVI within the various local areas ranging from a high FVI of 27 in the Lumby area to a low of 4 in the Kelowna area. 14

18 Table 4-3 Okanagan TSA and SIBAC Forest Vulnerability Comparison, 2006 TSA Local Areas within TSA FVI Ranking Okanagan TSA (Salmon Arm FD) 14 9 of 14 Sicamous of 55 Salmon Arm of 55 Okanagan TSA (Vernon FD) of 14 Lumby of 55 Enderby of 55 Spallumcheen Armstrong of 55 Vernon Coldstream of 55 Okanagan TSA (Penticton FD) 5 14 of 14 Keremeos of 55 Okanagan Falls of 55 Penticton 6 43 of 55 Peachland 5 45 of 55 Oliver Oliver 5 45 of 55 Kelowna 4 55 of 55 Boundary TSA 38 1 of 14 Golden TSA 35 2 of 14 Lillooet TSA 32 3 of 14 Kamloops TSA (Clearwater FD) 32 3 of 14 Merritt TSA 30 5 of 14 Revelstoke TSA 21 6 of 14 Arrow TSA 16 7 of 14 Invermere TSA 14 8 of 14 Cranbrook TSA of 14 Kamloops TSA (Kamloops FD) of 14 Kootenay Lake TSA of 14 Source: Statistics Canada Census. See Appendix B for local area definition 15

19 5 Community Level Dependency 5.1 Community Level Dependencies The community level dependencies in the Okanagan TSA vary considerably across the TSA. In general, the communities in the Okanagan TSA have relatively diversified economies with basic employment income receiving noticeable contributions from public administration, forestry, and construction. Non employment income sources also play an important role in the TSA communities which is characteristic of the large retirement population. Table 5-1 highlights the local dependencies by local area and for local communities. Table 5-1 Okanagan TSA Communities Economic Dependencies, 2006 FOR MIN AGR TOU PUB CONST Other Trans ONEI Sicamous Salmon Arm Lumby Enderby Spallumcheen Armstrong Vernon Coldstream Keremeos Okanagan Falls Penticton Summerland Peachland Oliver Oliver Kelowna Source: BC Stats and BC Ministry of Forest. Note: See Appendix B for local area definitions. 5.2 Community Forest Dependency Comparison Figure 5-1 graphically compares the local forest dependencies for each community in the SIBAC region and compares them to the other incorporated communities. As illustrated, forest dependencies in the Okanagan TSA communities generally show a low degree of dependency on the forest sector and are among some of the least forest dependent communities in the southern interior of BC. The exception to this would be Lumby and Sicamous which still have noticeable forest dependencies. 16

20 Figure 5-1 Forest Dependency by Community (After Tax Income), 2006 Trail Montrose/Warfield Rossland/Fruitvale Kelowna/Lake Country Osoyoos/Oliver Nelson Peachland Penticton/Summerland Fernie Elkford/Sparwood Creston Vernon/Coldstream Slocan Kamloops/Logan Lk Ashcroft/Cache Ck Lytton Keremeos Armstrong Spallumcheen Cranbrook Enderby Canal Flats Invermere Kimberley Sicamous Silverton/New Denver Kaslo Revelstoke Chase Lillooet Grand Forks Lumby Salmo Merritt Castlegar Nakusp Golden Princeton Radium Hot Springs Barriere Greenwood Midway Clearwater 0% 5% 10% 15% 20% 25% 30% 35% Source: BC Stats

21 6 Historical and Future Forest Implications 6.1 Description of Historic AAC and Harvest Volumes The total Crown forested land base in the Okanagan TSA is estimated at 1,439,711 hectares, or 65% of the total TSA land base. The forest land that is both commercially viable and available for timber harvesting, termed the timber harvesting land base (THLB), is estimated at 1,022,342 hectares (46% of the total land base) 2 The common tree species in the Okanagan TSA include lodgepole pine, Douglas-fir, spruce, ponderosa pine, western redcedar, western hemlock, and subalpine fir. Mature pine stands accounted for 55 million m 3, or 28% of the volume on the THLB in The Allowable Annual Cut (AAC) is presently 3,375,000 m 3 per year. It was set in 2005 following an expedited review to address the rapid spread of MPB in the TSA. The AAC contains an uplift of 720,000 m 3 per year to address the spread of the MPB. The most recent base case timber supply forecast indicated an initial harvest of 3,000,000 m 3 that could be maintained for 4 decades, before declining by approximately 8% for two decades to a long term harvest rate of 2,555,000 m 3. After 11 decades the sustainable long term harvest level would increase to 2,930,000 m 3. This base case timber supply forecast did not incorporate the effects of MPB on timber supply, but was addressed in subsequent sensitivity analyses. The AAC and the actual harvest volume over the past decade are summarized in Figure 6-1. The uplift in the AAC in 2006 is evident in the figure, and the industry has responded by harvesting the full volume in most years. 2 Descriptions of the land base and forest cover from MoFR (2005). 18

22 Figure 6-1 Okanagan TSA AAC and Harvest Volume, 1995 to ,000 3,500 '000 cubic metres 3,000 2,500 2,000 1,500 1, AAC Harvest year Source: MoFR Harvest Billing System. The documentation of timber flows associated with the 2006 harvest found that about 92% was processed in the TSA with the balance distributed in relatively small volumes to a number of SIBAC TSAs. A substantial volume of logs were imported to the Okanagan TSA from the Kamloops, Boundary and Merritt TSAs. The major forest license holders in the TSA are shown in Table 6-1. Table 6-1 Okanagan TSA Apportionment of AAC, 2008 License/Company Volume (m 3 /yr) Forest Licences Replaceable 1,993,315 Tolko Industries Ltd.(3 licenses) 1,010,826 Selkirk Timber Company 13,762 Stella-Jones Canada Inc. 54,718 Weyerhaeuser Company Limited 209,431 Louisiana-Pacific Canada Ltd 129,715 Federated Co-Operatives Limited 328,805 Gorman Bros. Lumber Ltd. 246,058 BCTS Timber Sale 580,047 Other 1 801,638 Total volume (AAC) 3,375,000 Source: Ministry of Forests and Range Apportionment System (status at 29/06/08). Note 1: Other includes forest licenses non replaceable, woodlots and Forest Service Reserve. Annual timber requirements for mills in the Okanagan TSA increased on trend from about 4.8 million m 3 in 1991 to 5.8 million m 3 in 2007 (Forest Ecosystems, 2009). During this time period there has been mill closures, such as the Kelowna plywood line and Weyerhaeuser's OK Falls saw mill. More than offsetting the capacity reductions were mill upgrades, increased shifts in existing 19

23 mills and company rationalization, such as Tolko's re-ordering of its veneer production capacity among plants. 6.2 Forest Sector Employment Impact An estimate of total employment and stumpage revenue associated with the 2006 harvest volume is summarized in Table 6-2. The methods and assumptions for estimating these values follow the MoFR guidelines (MoFR 2003). The location of the employment is based on the 2006 log flow information. In 2006, the TSA s harvest supported some 7,350 full-time equivalent positions in the TSA and more than 11,000 total full-time positions in BC. The TSA harvest supported some 320 full-time positions in other SIBAC TSAs. It is noted that many of the jobs do not directly involve forest industry work, but are associated with either supporting forest industry activities or meeting consumer demands of the industry s work force. Table 6-2 Total Employment Associated with the Okanagan TSA s 2006 Timber Harvest (3,694,963m 3 ) Harvesting & Silviculture Total Processing Indirect/ Induced Total TSA 1,775 2,610 2,940 7,325 Rest of SIBAC Rest of BC - - 3,720 3,720 Total Employment 1,775 2,810 6,780 11,365 Total Stumpage $ 59,756,574 Note: Employment estimate by model, stumpage revenue reported by MoFR Harvest billing system. The 2006 stumpage revenue from the TSA s harvest was nearly $60 million. The value changes from year to year and is based on market and other factors. The TSA s average stumpage rates from recent years are shown in Table 6-3 as well as the corresponding rates for the Southern Forest Region. In general, the TSA s stumpage rate is above the regional average. Table 6-3 Average TSA stumpage rates ($/m 3 ) Average Okanagan TSA $ $ $ $ $ Southern Forest Region $ $ $ $ 7.25 $ Source: MoFR Harvest Billing System. 6.3 Potential MPB Economic Implications The mountain pine beetle epidemic in the TSA will reduce timber supply available, thereby reducing employment and income to industry and households, and stumpage revenue to government. This effect can be mitigated to a degree by adopting a harvest strategy that maximizes pine harvest in the near term and transitioning to non-pine leading stands in the medium term. Table 6-4 shows the AAC in effect in 2006, the mid-term harvest volume forecast for the TSA if the forest was not subject to the MPB epidemic, and the anticipated mid-term harvest level given 20

24 assumptions about the timing and magnitude MPB impacts. A range is provided because there is uncertainty about the extent of the MPB attack. Total employment in the TSA (i.e. forest industry employment plus dependant employment) for the corresponding harvest levels are shown in the table. The future employment values assume the full allowable volume would be harvested and a continuation of labour/harvest coefficients that prevailed in the early 2000 s, which typically change over time. Thus, rather than a forecast of employment loss, the values should be considered indicative of the relative impact in moving to the mid-term as well as the impact of the MPB. Note that employment impacts outside the TSA, to mills processing the TSA wood and dependant employment, is not reported. The change in stumpage revenue is also shown in the table. Table 6-4 Timber Supply and Local Employment Impact Scenarios in the Okanagan TSA AAC Mid-Term Timber Supply W/O MPB MPB Scenario Timing low high yrs Timber Volume (m3/yr) 3,375,000 2,550,000 2,320,500 2,040, Total TSA Employ. (person years) 8,575 6,235 5,505 4,835 Stumpage Revenue ($ 000/yr) $ 56,708 $ 42,846 $ 38,990 $ 34,277 Source: Scenarios from Forest Ecosystems (2009) and MoFR (2007b) Note 1: Employment and stumpage revenue differs from Table 6 2 which reports at 2006 harvest level rather than AAC. Figure 6-2 shows the recent trend in the TSA s direct forest industry employment, and the expected profile of employment given the two timber supply scenarios. The TSA s direct employment in the forest industry has been trending down over the past decade or so. This trend would be continued in the mid-term as the timber available for harvesting without MPB would decline by 25% from the AAC volume in The effect of the MPB will be to reduce TSA employment over the next years to roughly 55%- 65% of the 2006 level. 21

25 Figure 6-2 Local Employment Implications of Okanagan TSA Scenarios yrs 120% 2006 employment = 100% Index of Recorded Forest Industry Employment 110% 100% 90% 80% 70% Mid-Term W/O MPB 60% Mid-Term with MPB 50% 22

26 7 Summary and Conclusion 7.1 Summary The Okanagan TSA has by far the largest population among the southern interior TSAs. The TSA is also characterized by a diversified economy and is in general among the least dependent forestry areas in the southern interior. However, in localized areas such as the communities of Lumby and Sicamous, the forest sector remains a sizeable component of the local disposable income. The Okanagan TSA is unlike other TSAs in the SIBAC because it is economically diverse, has experienced high population and labour force growth between 1986 and 2006, and is not highly exposed to any one sector. The Okanagan TSA also differs from other SIBAC TSAs because it has several major urban areas that have developed a high number of service occupations, including retail, commercial, high technology and the public sector. It is not dependent on forestry and is in fact one of the few TSAs that has actually increased its wood products manufacturing labour force over the last 20 years. Nevertheless, employment in the TSA s forest industry trended downward from 1996 to Over the mid-term, the Okanagan TSA s harvest volume would decline even without the impact of MPB. The effects of the MPB will be to increase the decline in timber supply, hence employment and economic activity related to the harvesting and processing of TSA timber. 7.2 Conclusions Larger communities and the southern portion of the Okanagan TSA are not strongly dependent on the forest sector and are characterized by the resiliency and diversification that would increase the likelihood of the community to emerge from a downturn in the forest sector with minimal impairment to their local economy. However, the communities of Lumby and Sicamous would experience noticeable impacts from further negative challenges to their forest economies. In addition, communities in the northern portion of the Okanagan TSA have moderate exposure to the forest sector and would experience challenges to their overall economic health if a further forest sector downturn where to take place locally. Despite the forest sectors moderate to low contribution to the local economies, it is important to remember that the overall forest sector in the Okanagan TSA is large (a labour force of 2,655 in forestry and logging and 4,130 in wood manufacturing) when compared to other TSAs and given the inflows from other TSAs the impacts, particularly in the manufacturing sector, may be significant if there are noticeable declines in forest harvest. 23

27 Appendix A - Bibliography BC Stats. March The Revised Forest District Tables Local Area Dependencies BC Stats. April The Revised Forest District Tables Local Area Dependencies BC Stats. Nd Forest District Tables (Pre District Boundaries). Excel Spreadsheet. Accessed July 8, 2009 at website: BC Stats. March British Columbia Local Area Economic Dependencies: BC Stats Consumer Price Index (2002=100) Annual. Prepared from CANSIM Table BC Stats. April The 1996 Forest District Tables. BC Stats. March The Revised Forest District Tables. Forest Ecosystem Solutions. March Forest Sector Trends Analysis (Draft). Prepared for Southern Interior Beetle Action Coalition. Ministry of Forest and Range Interim Guidelines for the Preparation of Socio-Economic Assessment for Timber Supply Reviews. Economic and Trade. May be accessed at July Urgent Timber Supply Review for the Okanagan Timber Supply Area. Accessed on July 22, 2009 at website: Okanagan Timber Supply Area Rationale for Annual Allowable Cut Determination. Effective January 1, Access on August 16, 2009 at website: Timber Supply and the Mountain Pine Beetle Infestation in British Columbia Update May be accessed at Harvest Billing System. May be accessed at 24

28 Appendix B Local Area Definitions Sicamous Columbia Shuswap RD Electoral Area E and Sicamous Salmon Arm Columbia Shuswap RD EA C, D, and F, and Salmon Arm Lumby Lumby, North Okanagan RD EA D and E Enderby Enderby, North Okanagan RD EA F Spallumcheen Armstrong Spallumcheen and Armstrong Vernon Coldstream Vernon, Coldstream, North Okanagan B and C Keremeos Keremeos, Okanagan Similkameen B and G Okanagan Falls Okanagan Similkameen D Penticton Summerland Summerland, Penticton, Okanagan Similkameen D, E, and F. Peachland Peachland, Central Okanagan RD J Oliver Oliver Oliver, Osoyoos, Okanagan Similkameen C and G Kelowna Kelowna, Lake Country, Central Okanagan RD 25