Staying within the lines – AG report gets off track

As commented in the Telegraph Journal June 26, 2015 editorial, “Audits demand more than nods”, the editorial takes the position that the Auditor General of New Brunswick has become a substitute for government leadership on policy issues, in this case forestry policy. As representing the majority of forest industries in the province, Forest NB would argue that this is not so as we have a forestry strategy before government that is progressive and balanced with a strong focus on capitalizing on future returns from silviculture investments. What we do share with the author of the editorial, is our concern with the AG’s foray into forest policy matters. The office of the AG is tasked to look for shortcomings and provide a public accounting of the management of government functions, all very good and mission accomplished. Where it digresses is in the sense that the office of the AG is not suited or responsible to address policy direction as it applies to forestry.
The AG weaves in and out of her own audit objectives. Commenting on reporting and enforcement standards, monitoring of silviculture services for cost comparison to other jurisdictions, all fine and within scope, but to advise the Department of Natural Resources (DNR) on harvesting prescriptions, or defining department objectives as “biased” and ignoring the contextual impact economic conditions have had on royalty revenue opens the door to public misinterpretation.
There are several examples of this coloring outside the lines to be found in the AG’s report, the most serious being the claim of no direct benefit to the Province’s finances and the “unstated” funding objective of maintaining economic development and jobs, as if to suggest this is a negative thing. The benefit to the province is unquestionable, and any assertion otherwise is irresponsible considering that the Forest Industry is the largest GDP contributor in NB.
One needs only to connect the dots of silviculture investment, increased wood supply, ongoing and new industry investment, job retention and economic growth to realize the full benefit of the tax payers’ $500 million investment in silviculture since 1982. Can DNR improve on the reporting process to demonstrate this connection; yes and they have acknowledged this in their response to recommendations by the AG but the connection is difficult to dispute. What is inappropriately mentioned is the reference to a “DNR unstated objective of maintaining economic development and jobs”. Of course there is an affinity to contribute to the economic well-being of the province and the use of the term “bias” to describe this objective sullies the notion unnecessarily.
On a similar vein the report highlighted the deficit in the Forest Management branch of the DNR. Now, in the rigid confines of an auditor’s columnar table, the numbers are valid, but to not apply some context and background invites misinterpretation. What should be remembered and put into context regarding the reported $10 million average deficit over the five year period the audit covers, is that DNR shared in the economic pain suffered by the forest industry during the economic downturn. Royalty revenues were adversely affected, in particular in 2009, and this plays into that average deficit number. Contrary to the audit findings, silviculture activities can have direct returns as they permit a withdrawal of more wood fibre in anticipation of future renewal. A case in point is the recent increase in allocations and efficiencies in land management service costs which should contribute in fiscal 2015/16 a conservative estimate of $16 million in additional royalty annually, more than offsetting the Forest Management branch current deficit situation. In fact a good leading indicator of this improved performance is the 2013/14 and 2014/15 fiscal numbers that show respective surpluses of $4.2 million and $7.3 million and this in spite of industry paid revenues going against many non-timber related management expenses for other values and important provincial priorities such as fish & wild life, maple syrup, crown lease and parks management and enforcement costs to name a few. On top of this, $6 million annually of industry paid royalty revenue goes directly into the hands of the seven Wood Marketing Boards to benefit private woodlot owners to fund and manage the silviculture work on their woodlots; growth that yields increased revenue for the private woodlot owner with no guarantee of that fiber being returned to a New Brunswick mill for processing.
Unlike a crown corporation or private enterprise, the Department of Natural Resources does not have a profit motive, nor should it. It is responsible for the management of crown forest resources and assuring that the assets are used to the best advantage of the citizens of New Brunswick. The 22, 000 jobs, $250 million in annual tax revenue and nearly $2 billion in economic contributions a year are in no small part due to silviculture investments. Despite paying the highest royalty rates in the country, a point conspicuously overlooked in the AG’s report, the forest industry will add $750 million in capital and other investment over the next five years including $135 million from AV Group combined in both Atholville and Nackawick mills, $65 million at Twin Rivers sawmill in Plaster Rock and pulp facility in Edmundston, $7.5 million at Chaleur Sawmill in Belledune and the over $500 million investment reported by JD Irving Limited. I would suggest the payback is obvious.

Media Contact: Mike Legere, Executive Director – 506-452-6930 –