Wood Supply Competition
Allocation and Licensing (Forest Tenure)
More Information
Forest Tenure is the term commonly used to describe the allocation and licensing of timber from Crown forests. Tenure is governed by legal arrangements that define the rights and responsibilities assigned to forestry companies and other resource users.
The allocation and licensing process is governed by the Crown Forest Sustainability Act, 1994 (CFSA) and its regulations. In Ontario, access to forest resources from Crown lands is provided by mechanisms available under Part 3 of the CFSA which include Supply Agreements, Sustainable Forest Licences and other Forest Resource Licences.
Supply Agreements
Supply agreements (commitments) are granted under Section 25 of the CFSA, and are the current mechanism providing rights to purchase forest resources. In a supply agreement the Crown will make a specific supply of Crown forest resources available to a licenced forest resource processing facility (mill) for a specified period of time. They normally make wood supply available from one or more specified management units.
A supply agreement obligates the holder of a forest resource licence (a harvester) to make forest resources available to the holder of a supply agreement (mill operator). These commitments usually require that the harvester and mill operator establish a mutually beneficial business arrangement that will facilitate the flow of forest resources from the forest to the mill.
The process to acquire an allocation through a supply agreement follows a rigorous framework that generally requires Cabinet approval before execution. A supply agreement can be granted:
- In accordance with a competitive process described in CFSA, Section 24. This is the most common manner in which supply agreements are granted; or
- The Minister can make forest resources available without a competitive process under certain limited circumstances in accordance with Order in Council 993/95. Generally, the exceptions to a competitive process can be made for the following reasons:
a. to meet an existing legal commitment
b. to meet the approved utilization levels of existing forest industry
c. to satisfy economic opportunities for Aboriginal people
Forest Resource Licences
The CFSA provides for the granting of licences for harvesting forest resources on managed Crown forest lands. The majority of Ontario's forests are harvested by companies or individual operators that hold one of two types of forest resource licences.
1. Sustainable Forest Licences (SFLs)
SFLs, granted under Section 26 of the CFSA, are long-term licences issued for a period of 20 years for a defined management area (management unit). SFLs give the holder of the licence the right to harvest and use the forest resources available on a management unit and the SFL holder is required to carry out certain forest management activities to provide for the sustainability of Crown forests in the area covered by the licence. Forest management activities undertaken by the SFL holder include strategic forest planning, planning and implementation of operational activities (e.g. access, harvesting, renewal and maintenance), and compliance monitoring of the operational activities.
Some SFLs are held by corporations that operate a large forest processing facility such as a pulp mill and/or sawmill. These are commonly referred to as “single entity SFLs”. Ontario also has several cooperative or shareholder style SFLs where several companies interested in Crown timber from a defined geographic area formed a new company to hold the licence. SFLs are granted by the Minister of Natural Resources.
2. Forest Resource Licences (FRLs)
FRLs, granted under Section 27 of the CFSA, are licences to harvest timber that cover a smaller geographic area. FRLs are issued for periods of up to five years. These licences may be granted to harvest timber on the same land area as a SFL; however, unlike an SFL holder, the FRL holder is only responsible to undertake the implementation of operational activities such as harvesting and the associated road construction. The SFL holder retains responsibilities for the forest management and other components.
FRLs issued on the same area as an SFL normally require an agreement between the holder of the SFL and the holder of the FRL (commonly referred to as overlapping agreements).
FRL licence holders may enter into agreements with the Minister of Natural Resources for renewal and maintenance activities.
Forest Resource Processing Facility Licences
Persons intending to operate a mill that will use forest resources from any source must obtain a Forest Resource Processing Facility Licence (Mill Licence). Under the CFSA, all mills consuming more than 1,000 cubic metres of forest resources must have a Forest Resource Processing Facility Licence. These licences provide the right to construct and/or operate a mill but do not provide for an allocation (supply) of forest resources to a mill. Facilities are licenced subject to the requirement to submit a business plan acceptable to the Ministry of Natural Resources.
Forest Resource Processing Facility Licence holders are required to complete an Annual Return which allows the Ministry to monitor the capacity of forest industry facilities and forest resource utilization. This information is a vital tool to assist in the support and promotion of a healthy forest industry in Ontario, especially when available forest resource supplies change. Provision of accurate information is vital for analysis of forest industry utilization trends, wood flow patterns and the products manufactured from the supply of forest resources.
Forest Tenure and Pricing Review
Ontario is seeking to modernize its tenure and pricing system in a way that fosters and supports this new emerging forest sector while continuing to balance changing economic, environmental and social objectives. Learn more about the tenure and pricing system review.
