Cowichan Lake Community Forest Co-operative

Date of Incorporation: August 2, 1995
Membership: 9 member organisations1
Area Served: Cowichan Lake area
Activity: Maintaining and creating employment in Cowichan Lake through logging; value- added wood processing; managing government contracts; establishing of a trust fund for scholarships

MISSION STATEMENT:

The Cowichan Lake Community Forest Co-operative is a locally owned and managed business cooperative which creates and maintains jobs through its commitment to the principles of forest sustainability and community economic development.

The Cowichan Lake Community Forest Co-operative (CLCFC) was spawned out of the Community Forest Steering Committee—an organized group of local citizens who were concerned about the loss of forestry jobs they were witnessing in their community. The Community Forest Steering Committee was formed in early 1990. In late 1992, it was reorganised and renamed as the Cowichan Lake Community Resource Board (CLCRB). The CLCRB’s main focus was lobbying for control of forestland so that community members and forest workers could capture some of the benefits that accrued from forest resources. Community members were feeling the effects of changes in the forest industry and land-use plans, and were fed up with not being included in the decision-making process.

Industry Changes

Historically, the Cowichan Lake economy was heavily dependent on the forest industry. Beginning in the late 1980s, citizens of Cowichan Lake and the neighbouring communities saw a rapid decline in forest related jobs. Fletcher Challenge Canada merged two logging divisions and upgraded the Cowichan Sawmill, which resulted in the loss of 300 jobs (CLCFC Report, 1995). A report by the Sierra Club of BC (Zakreski and Waters, 1997) found that despite an increase of 8.3% in harvesting on Vancouver Island between 1991 and 1995—up 1 000 000 metres3 from 13 100 000 metres3 in 1995—forestry jobs were still lost. In the period between 1991-1995, 4000 forestry jobs (one in five) were lost. At the same time, fibre consumption by Vancouver Island mills increased by 17.6%, indicating that the mills imported fibre from off the island (Zakreski and Waters, 1997). This statistic also indicated that the decline in forestry jobs was not due to the mill closures, nor was it due to a decrease in total number of logs harvested; rather, it indicated that the loss in forestry jobs may have been a result of a shift from labour-intensive logging techniques to more capital-intensive methods.

Vancouver Island Land Use Plan

In 1990, thanks to the tireless work of conservationist Randy Stoltmann and other activists, the provincial government created the Carmanah Pacific Provincial Park, which protected 3592 hectares. In late 1992, the Vancouver Island Land Use Plan was issued. It recommended the protection of 23 new areas, including the nearby Walbran Valley.

The Walbran and upper Carmanah Valleys were added in 1995 to lower Carmanah Valley, creating a 16,450 hectare park called Carmanah Walbran Provincial Park. Carmanah Walbran is home to some of the world’s largest spruce trees, which account for two per cent of BC’s remaining old-growth forest. These giants may reach heights in excess of 95 metres and live for 800 years or more. The park also boasts gnarled cedars, which are estimated to be well over 1 000 years old.2

Decline in Forest Jobs

Different people give different reasons for the steep decline in the forest industry: the closure of mills means there are fewer jobs associated with each log cut; park land was created, reducing the amount of land available for cutting; industrial changes in logging resulted in a shift away from labour intensive techniques to capital-intensive techniques. While there is disagreement about the reasons for the decline, people do agree that the decline in forestry jobs is real.

Community Members Lobby for Access to Forest Land

“People in our area are really tired of seeing all the logs leave on the trucks, because we have over 200 logging truck-loads go through our community every day, taking the logs away and not creating very much employment,” (CLCFC member).

The impending threat of further job loss due to the Vancouver Island Land Use Plan, on top of the jobs already lost from the past decade, provoked a group of concerned community members to form the Community Forest Steering Committee in early 1990 to address the deteriorating economic and employment situations.

Community Forest Pioneers

The first challenge was to lobby the BC government to change the Forest Act to enable communities to hold long term tenure to crown land, with harvesting rights for Timber and non-Timber forest products. This was a long, drawn-out process, but the members’ perseverance paid off. Legislation was introduced as part of the Forests Statutes Amendment Act, 1998 (Bill 34)3. The Act allows a community to enter into an agreement with the Provincial government, which gives the community certain ownership rights to a specific tract of land.

In January 1998, the BC government invited communities to submit formal expressions of interest to participate
in a pilot project. More than 80 responses were received.4 At the time of writing (February 2002), the government has entered into pilot agreements with 10 communities, which means ten BC Communities have a pilot Community Forest tenure in BC.5 At the end of the pilot term (usually 5 years), the government may decide to enter into long-term agreements with the communities for 25-99 years. The CLCFC has not entered into community forest agreement with the province; however; the CLCFC was awarded a timber-cutting License in 1994.

Cowichan Lake Gets a Timber Cutting License

On June 24th, 1994, after much effort on the part of community members, the IWA, and local MLA Jan Pullinger, Premier Mike Harcourt announced a timber-cutting license for Cowichan Lake. A timber-cutting license (TCL) is volume-based and time-limited. The CLCFC TCL allows the co-op to cut up to 15 000 cubic metres per year for 19 years.

When the province invited communities to their community forest pilot program in 1998, the CLCFC did not submit an application because the application process was too onerous. A Community Forest agreement would enable the co-op to harvest timber and non-timber products using a variety of harvesting techniques. The TCL, being volume-based as opposed to land-based, means that the type of activities the co-op can pursue are restricted to traditional logging.

Why Co-op?

The local MLA, the Mayor and Councillors of the Village of Lake Cowichan, the two local Directors of the Cowichan Valley Regional District, and representatives from the Cowichan Lake First Nations, Cowichan Lake and District Chamber of Commerce, the Economic Development Committee, IWA Local 1-80, and the Ministry of Forests came together as the Cowichan Lake Community Ad Hoc Committee to prepare to manage the TCL.

In considering an organisational form, the committee examined various models, including a society, a non-profit corporation, and a co-operative. The co-operative model was chosen because it allows for a broad range of community membership and it has a reputation for being stable. Pat Foster, the chairperson and a founding member, explains that the founders reasoned a co-op could draw on its large membership base for support. 

“The Chamber of Commerce has about 80 members…and the IWA has many members...and of course their memberships are working for us.”

 “When I envision a co-operative I think of, and everybody around the table thought of, the credit union, which is there all the time, and the grocery co-op, which is there forever,” (Pat Foster, interview 2001). A further push towards the co-operative model was the potential access to funding through the Co-operative Branch of the Ministry of Housing, Recreation and Consumer Services (MHRCS).

Is the Co-op Model a Good Fit?

Members have differing opinions of how successful the co-operative model has been for the organisation. Some feel that the model is working well. Others feel that it was great in the beginning, but that a change might be needed now, possibly to a corporate model. One difficulty with the co-op model that was frequently mentioned was that “it brings along its glitches because everybody comes along with their own agenda sometimes and they forget to take off the hat that they come with and put on the co-op hat,” (Pat Foster, interview, 2001). For example, when the co-op is dealing with personnel issues, the union representative on the board must act as the employer. It can be challenging for union representatives to shift from the role of employee to the role of employer.

On the other hand, the non-union board members—while they are community members themselves, and are concerned about the overall health and well-being of the community—do not have their employment at risk. They are advocates for other workers, while the union members are self-advocates. At times, the diverse perspectives inherent in this co-op result in completely compatible goals and, at other times, create tension within the co-op.

Getting Started

Cowichan Lake Community Forest Co-operative incorporated on August 2nd, 1995. Members of the cooperative are local organisations with a vested interest in the creation of employment in the Cowichan Lake region. Each member organisation holds at least one and no more than twenty-five shares in the co-op, at $10 per share. The original members were the Cowichan & Chemainus Valleys Ecomuseum; Industrial, Wood and Allied Workers of Canada (IWA) – local 1-80; Cowichan Lake & District Chamber of Commerce; the Town of Lake Cowichan; and the Community Futures Development Corporation – Cowichan Region. Since incorporation, four more organisations have come on board.

CLCFC received a $54,000 start-up grant from Forest Renewal BC and $7,500 from the Co-operative Branch, MHRCS. One member remarked that without this funding the co-op would never have started. Founders participated in a one-day workshop about co-operatives, and government consultants were available for guidance throughout the organisational process. However, the bulk of the development of the co-operative was left up to the members, most of whom had very little familiarity with the co-operative model; fortunately, they were able to draw on previous experiences from working in other organisations.

Co-op Structure

The co-operative board consists of a board member and an alternate board member for each of the seven member organisations. All board members are volunteers. Each member organisation selects (through appointment or election) a person from their organisation to sit on the board. The current board then elects those representatives to various positions on the board. Specific board positions include Chairman, Vice Chair, Secretary, and Treasurer. One seat on the board remains vacant for the Cowichan Lake First Nations. Each member organisation has one vote; alternate board members only vote if their organisation’s board member is not present. The board attempts to reach consensus in decision making; if consensus cannot be reached, a simple majority (50% plus 1) vote decides the outcome. The responsibility of the board is to
manage the business of the co-operative, to appoint staff and prescribe their duties, and to delegate power to committees.

CLCFC employs a full-time Business Manager, who is responsible for the operations of the co-op, and a part-time Administrator, who is in charge of records and bookkeeping.

Sometimes the division of duties between the board and the management overlap. For example, the co-op has a rule regarding discretionary funds, which means the board must approve purchases above a certain amount. The board meets once per month and the manager must present the board with the proposal for their approval. However, in order for the business to be viable, the management must be able to act quickly and decisively. In practice, the board is more flexible than the rule, and may at times backdate approval of purchases.

Challenges—Cash Flow

One of the co-op’s ongoing challenges is maintaining its cash flow. Fluctuating lumber prices have resulted in dramatic differences in income from year to year and the co-op recognizes that logging alone will not sustain the co-operative. Some of the financially driven decisions that the co-op members have faced include:

• Should the co-op cut down 2nd growth forest to generate much needed revenue when it would be much more valuable in 5-10 years? 
• Should the co-op act conservatively and invest the money they make from the timber-cutting license (TCL) or should they actively pursue every opportunity to increase assets? 
• Should the co-operative operate in the red for the sake of employment creation?

Agreeing on a plan of action has not been easy, but the members of the co-op are committed to diversifying the activities of the co-op in order to stabilise its income and jobs. The co-op entered into a joint venture agreement with TimberWest, and has also generated revenue from managing government contracts, salvaging, milling and brokering lumber.

Joint Venture with TimberWest

CLCFC is involved in a variety of activities, all of which aim to create local employment opportunities. The coop’s primary activity is participating in a joint venture agreement with TimberWest. TimberWest manages the co-op’s TCL. This involves pre-planning, logging, planting and reporting to the Ministry of Forests. The coop is allowed to cut approximately 15 000 cubic metres per year. That is roughly equivalent to 400 logging truckloads. For each 1000 metres3 harvested there is almost 1 fulltime job created for 6 months or 0.5 person years created.6 In other words the TCL of CLCFC maintains 15 fulltime jobs for 6 months each year or 7.5 full-time year-round jobs.

After the logs are sold, TimberWest and the co-op share the profits evenly. How much money the co-op makes depends entirely on market prices for logs. The co-op owns the resource, and TimberWest harvests it.

TimberWest pays 50% of the profits it earns from sales of the TCL’s harvest to the co-op. One year, the coop received a cheque for its TCL for $64; another year, the co-op earned about $245 000; and yet another year, it earned $43 000.

The intent of the original joint venture agreement was to use the harvested timber to supply the Youbou mill, thus sustaining additional local employment. However, the Youbou mill closed on January 26th, 2001, resulting in the termination of over 200 employees. The Union conducted a feasability study regarding purchasing the mill, but TimberWest was selling it and the TFL 46 as a package, at a price of $33,000,000. The Union was not able to raise this money. The Forest Co-op then hired Peter Woodbridge and Associates to investigate possibilities for starting a speciality mill at Youbou. A business plan was completed, a community prospectus was printed, and at the time this case study was written, the co-op was seeking investors for the project.

CLCFC is currently in the process of renegotiating their joint venture agreement with TimberWest. When they negotiated the first contract they were inexperienced and did not know what to ask for. This time they are hoping to negotiate a more profitable arrangement between with TimberWest. For example, they want to reduce some of their costs, and they also want to ensure that they have the right to salvage wood from the blocks after it has been logged.

Government Contracts

In the past, CLCFC has generated most of its revenue from the management of various contracts. The cooperative has successfully secured government contracts in the past, including numerous Environmental Youth Team projects, Campgrounds BC crews, and trail-building and upkeep projects. In recent years, the cooperative has seen a reduction in the number of government contracts they receive. However, since June 2001, the new provincial government has terminated all of the programs the co-op managed. This may force the co-operative to reduce its operations or to operate solely on a volunteer basis. The following numbers illustrate the decline in revenue from government contracts: in 1997, government contracts for CLCFC totalled $2 700 000; in 1998, $1 000 000; in 1999, $900 000; and in 2000, they totalled a mere $700 000.

Salvage and Scale Yard Operations

After a site is harvested, many logs are left that can sometimes be salvaged. Under certain circumstances, the Ministry of Forests allows logs to be removed from the site. There are different types of salvage, such as old logs that are already rotting, or secondary growth. Each type requires a special permit.

In May 2000, CLCFC began operating a scale yard. In the fall of 2000 the scale yard had approximately $200 000 worth (wholesale value) of inventory sitting in it. The co-op hopes that after milling, it can increase the value significantly and generate revenue for the co-op. The co-op’s main goal is to create jobs, so it can sell the milled wood at a competitive price. It is not concerned solely with making a profit. If the co-op covers its costs—including wages—they are meeting their overall objective. In the fall of 2000, the scale yard contracted work to 6 full-time temporary workers.

The co-operative hopes to expand its value-added operations to provide timber for local artisans and businesses.  Ideally, the co-operative would like to market fibre to one industrial site that has common administration and marketing for numerous different operators. They are currently involved in a study to determine the type and amount of fibres these businesses would require, potential markets for them, and how to attract them to the Cowichan Lake region. This project is still in the conceptual stage.

The co-operative is also involved in timber brokering. This activity does not create local employment opportunities, but the co-op board hopes that it will generate much-needed revenue that can be put towards job creation programs.

Commitment to Sustainability

On April 1, 1997 the CLCFC Board adopted the following profit allocation policy. Profit from the business of the co-operative will be allocated as follows:

• Eighty percent (80%) will be used to generate and sustain employment in the community.  This may include:
  • Investing in Capital Expenditures (i.e. a dry kiln)
  • Researching what is needed to enhance and encourage value-added manufacturing 
  • Training and education for workers 
  • Establishing expertise to assist small businesses to be successful 
  • Loans and Grants 
  • Other ideas that may come up from time to time from the Board of Directors, Members Organisations, or the community

• Ten percent (10%) will be set aside in a reserve fund to meet contingencies that may arise from time to time.
• Ten percent (10%) will be used to establish a Community Legacy Fund. This fund would be established and added to on an annual basis or as profits are realised. The primary fund would stay in place in perpetuity and the interest realised would be used for Community Economic Development.

In 1999-2000 the co-operative offered two scholarships of $500 each, from the interest of the Legacy Fund, to local graduating students who intended to pursue post secondary education in a forestry and/or environmental field. In 2000 the co-operative doubled the amount of money in the Legacy fund by depositing almost $50 000 in the trust fund. The co-op’s policy required that it put $22 000 into the Legacy. It has since had to use these funds for the short term, but will endeavour to put back %10 of the profits in the future.

Some members are concerned that regulations associated with holding a TCL presents additional obstacles for the co-op. Having a TCL, as opposed to a long-term tenure such as a community forest agreement, automatically categorises the co-op with larger forestry corporations like TimberWest. This designation renders the cooperative ineligible to bid on small logging contracts.

Another challenge for the co-operative is the high stumpage7 fee charged for its preferred method of logging: long-lining. Long-line logging employs more workers than heli-logging, and the co-operative argues it as environmentally sound. However, the government charges lower stumpage fees for heli-logging because, it asserts, it is more environmentally sound. The co-operative is asking the government to establish stumpage fees for long-lining that are equivalent to those for heli-logging.

Looking into the future, the co-operative would like to maintain and expand the co-op’s current operations, which would mean:

• Renegotiating the joint venture agreement with TimberWest;
• Operating the log scaling yard more efficiently;
• Increasing salvage for value-added products; and
• Influencing changes to the regulations surrounding TCLs and long-lining stumpage fees

In the long term, the co-operative is hoping to secure a continuing timber license or, preferably, a long-term community forest agreement, rather than a 19-year non-renewable term. They are also pursuing new business opportunities for their co-op, such as the use of composted wood fines for the production of topsoil and other value-added products.

Conclusion

After 7 years of operation, the Cowichan Lake Community Forest Co-operative continues to struggle to make a profit. Despite this constant challenge the co-op has managed to meet its overall goal. The goal of the coop is to maintain or create employment—not to make a profit. In order to do this the co-op has had to make some difficult choices. For example, the co-op recently withdrew from the Legacy Fund to cover operational costs. Also, the co-operative has continued operations, at times incurring a loss, so that jobs are maintained.

As Cowichan Lake residents know too well, a corporation would have pulled its resources out of the town and invested somewhere more profitable.

The TCL limits the co-op to harvesting timber. With a tenure base for operations, the co-op would be able to adhere to principles of forest sustainability through the new harvesting techniques and harvesting of non-timber products. Despite this limitation, the co-op has sought out and implemented value-added activities in order to diversify their income source, thus creating more stable employment. The members of the Cowichan Lake Community Forest Co-operative have demonstrated that determination and tenacity are necessary to adapt to the rapid changes affecting forest-dependent communities.

Endnotes

1. The member organisations are Cowichan Lake and District Chamber of Commerce; IWA local 1-80; Town of Lake Cowichan; FutureCorp – Cowichan Region; Cowichan Valley Regional District Electoral Areas of Cowichan Lake – South – Skutz Falls and Youbou – Meade Creek; Cowichan Lake Information Access Society; Royal Canadian Legion Branch 210; Elks Association; and Youbou TimberLess Society. 
2. http://wlapwww.gov.bc.ca/bcparks/explore/parkpgs/carmanah.htm#location 
3. Community Forest Pilot Project http://www.for.gov.bc.ca/pab/jobs/community/legislation.htm
4. http://www.for.gov.bc.ca/pab/jobs/community/history.htm 
5. While there are just 10 Community Forest agreements in place, the Denman Community Forest Co-op (DCFC), which has not entered into a Community Forest Agreement, uses a more inclusive definition of community forest to include 44 community forests in BC. The DCFC is still trying to acquire a land base for their operations (http://www.denmanis.bc.ca/directory/index.html) 
6. Logging employment co-efficients for Vancouver Island range from .42 - .48. In other words for every 1000m3 harvested there are an equivalent of .42-.48 Person Year jobs created. One person-year job is fulltime work for 1 year.
7. Stumpage is the value of standing timber. A harvesting company typically pays a stumpage fee (a percentage of the estimated value) to be able to cut timber on the land of another.

References

Zakreski, Sheldon & Waters, Cory. 1997. Forestry Jobs and Timber: Vancouver Island forestry trends, 1991-1995 and their implications for forestry policy. The Sierra Club of BC, Victoria, BC

Directory of Community Forest Organisations of British Columbia, compiled by The Silva Forest Foundation, Victoria International Development Education Association, and The Eco-Research Chair of Environmental Law and Policy, University of Victoria. Published by Denman Community Forest Cooperative, Denman Island, BC. http://www.denmanis.bc.ca/directory/index.html

CLCFC, Cowichan Lake Community Forest: Background Information, August 2, 1995

Case Study Information

This case study was developed for a report entitled Situating Co-operatives in British Columbia – 2000 -2001, which was prepared for the Province of B.C. (Ministry of Community Development, Co-operatives and Volunteers) by the British Columbia Institute for Co-operative Studies, University of Victoria. To obtain the information for the case study BCICS and the co-op entered into a partnership agreement. BCICS is grateful to the co-op members for their contributions and time. The case study is published with the approval of the co-operative. Further information regarding this study includes the following:

Researchers: Victoria Bowman, Nicole Chaland, Kyla Zachary
Date of Research: 2000/2001
Author: Kyla Zachary and Nicole Chaland
Date of writing: 2001
Editing: BCICS editorial group
Supervision: Kathleen Gabelmann, BCICS Research Co-ordinator

Location