New Tenure System in Quebec
In April 2013, regulatory tenure changes were implemented in Quebec which resulted in about 30% of Resolute Forest Products' timber supply being removed from current company allocations and sold through public auction. As part of these changes, responsibility for forest management planning and silviculture was taken over by the provincial government. Industry retains a role in the operational planning of harvesting activities and continues to hold forest management certificates.
The new system increased the cost of harvesting timber and has also impacted supply. Resolute will continue to closely monitor and assess the effects of forest-related regulatory developments in Quebec. We will continue to position the company competitively in the timber auction market and will explore opportunities that could result from these regulatory shifts.
Most Significant Changes for the Industry
- Timber Supply and Forest Management Agreements have been replaced by Timber Supply Guarantees.
- Competitive bidding for roundwood takes place in open market auctions where stumpage is charged for wood harvested on Crown land.
- The current target is to sell approximately 25% of the total annual allowable cut through this new auction system.
Changes in Ontario Forestry
In Ontario, the province is gradually moving towards a shareholder co-op model over the next few years, which will see responsibility for forest management and certification transferred to a new managing entity. Resolute’s timber supply allocations will be fully maintained under the new system, and the company will become a shareholder in the co-op group. Forest management certification will be maintained by the managing entity and based on shareholder interests. Customers should not notice any change, as the certified fiber will continue to be transferable through the chain of custody systems at our facilities.
Regulatory compliance is non-negotiable for Resolute as we pride ourselves on setting – even surpassing – industry-leading environmental standards and developing sustainable forest management plans for the woodlands in our care that consider species at risk, public input and a variety of other important components. Employees throughout the company have an ongoing interest in understanding company-wide environmental performance. As well, customers and stakeholders often request information on sanctions and fines levied against the company.
In the Quebec and Ontario woodlands where we operate, each provincial government has its own system for monitoring compliance with forestry and environmental laws and regulations. Compliance inspectors visit our sites to observe everything from riparian buffer distances to drainage facilities, noting any regulatory non-compliance. In Ontario, a combination of government and forest industry compliance inspectors identify instances of non-compliance and, where possible, companies are given an opportunity to rectify the situation.
Administrative penalties and fines are imposed by the government when an issue cannot be addressed, generally within a three-year period. In Quebec, government agents carry out the compliance inspections without involving the company in the process. Non-compliance charges can be filed several years after an incident occurs, and legal proceedings can take an additional two years.1 In many cases, non-compliance situations that have been corrected will still incur a fine.
Although we have a long history of keeping our annual non-compliance rates below the industry average, Resolute nevertheless ensures that regulatory non-compliance incidents, and the associated fines, are closely monitored. That is why in 2009 Resolute implemented a zero-tolerance policy for forestry non-compliance and has been working steadily to achieve that goal by actively identifying risks.
This combination of actively identifying risks and ensuring accountability, up to and including the chief executive officer, has successfully reduced Resolute’s non-compliance rates and instilled a new corporate culture of zero-tolerance for regulatory non-compliances. Our average annual non-compliance rate has dropped from 66 per year prior to the implementation of our zero-tolerance policy in 2009 to an average of just over 1 per year in 2012.
2014 was the first year Resolute publicly reported our progress, as part of our public commitments in the company’s 2014 annual report. We disclosed fines of C$4,625 for two non-compliance incidents: one in Quebec, which dated back to 2012, and the other in Ontario, identified in 2013.
For 2015, we had set a maximum of three or fewer regulatory infractions2 in each province, with a long-term goal of zero incidents. We received a fine of C$1,000 for a 2013 infraction at our now-closed Iroquois Falls operation, for a total of one incident reported in Ontario in 2015. No incidents were reported in Quebec in 2015. For 2016, the target remains the same: three or fewer infractions in each province where we operate.
Information on regulatory compliance related to mill environmental performance is available on the Environmental Management page.
1 In the Province of Quebec, proceedings with respect to offences committed under the “Regulation respecting standards of forest management for forests in the domain of the State” are instituted by the Director of Criminal and Penal Prosecutions under the Code of Penal Procedure. 2 Disclosed regulatory infractions as they would be published on the provincial ministry website only include woodlands operations directly managed by Resolute.