1. BC Timber Sales Category 2 Effectiveness Review (DRAFT) TSAC Feb 11, 2016

2. Interview feedback from 26 clients and 12 BAs CAT 2 is highly valued by Cat 2 registrants Cat 2 is functioning well Cat 2 is for the most part highly effective Opportunities to improve Items excluded from report

3. Objectives of Cat 2 No clear objective or goal for Cat 2 across staff and clients Varied management approaches across BA’s - “end the Cat 2 program” - “manage off the side of my desk” - “managed as a priority” No reference in Strategic Plan or Business Plan

4. Objectives of Cat 2 - Recommendations Include objectives for Cat 2 in Business Plan “To provide open access to Crown Timber for non-tenured processing facilities and to promote local employment and support the value added sector of BC” Would provide clear direction, goals and priority of Cat 2

5. Cat 2 Registration Criteria Many diverse opinions on sectors to be included in Cat 2 especially pulp mills and portable chippers/grinders Concern with non-eligible bidders (Alaskan chainsaw, mills burned down or non-functional, acquired a NRFL) Concern with Major Licensee using Cat 2 mill as surrogate bidder Some prefer NRFLs excluded from Major Licence Reviewed last 3 years of Cat 2 TSLs

6. Cat 2 Registration Criteria - Recommendations Retain current definition of TPF - let market decide - slippery slope to start down - BAs exert influence through operational plans Retain 10,000 m3 Major Licence restriction NRFLs remain a Major Licence Periodic review of Cat 2 registrants to ensure continued eligibility is critical Repeal chipper debarker requirement for sawmills

7. Volume in Cat 2 Cat 2 volume goal not clearly stated or understood 1.0 million m3 or 10% or ? Volume auctioned, sold or harvested? Currently planning to auction 1.4 million m3 Unused volume for Cat 2 from UVDP BA response to No Bid Cat 2 sale Effect on Cat 2 from TSR decision

8. Volume in Cat 2 - Recommendations Cat 2 volume goals clearly stated and accomplishments reported in Business Plan Cat 2 goal “Volume Sold” Cat 2 No Bid response options - re-advertise as Cat 2 with reduced stumpage - Re-configure or replace - if proof of lack of market demand, sell Cat Any Cat 2 volume goal reduced similar to BCTS apportionment at TSR

9. Strategic and Operational Planning Long term planning desirable but not major concern 1 Year TSL disposal plans meets client needs but communication needs improvement Concern with reliable delivery of dependable plans - relatively even flow - flood of TSLs end of quarter and end of year

10. Strategic and Operational Planning (Con’t) Clients generally satisfied with TSL term, range of volume, species, grade, location. Some comments regarding “guts and feathers” and complex road/bridge construction in TSL Sales plan needs to designed for local Cat 2 Concern with log exports of Cat 2

11. Strategic and Operational Planning - Recommendations Continue with priority on long term planning and share with clients Communication with Cat 2 clients is essential to develop sales plan and needs improvement Produce dependable and accurate TSL disposal plans Avoid end of quarter and end of year flood of TSLs Avoid substitution or changing category from posted sales plan

12. Strategic and Operational Planning – Recommendations (Con’t) Cat 2 profile should be a range to meet client needs and the aggregate “average to slightly better than average” of BCTS profile - excluded from MPS - relatively small volume - generally revenue neutral - increases leverage for trading with MLs - direct and indirect benefits to government TSL term, volume, species, grade, location should continue to be a range to meet local client need

13. TSL Administration Concern with TSLs advertised under snowpack Concern with large amount of TSL deposits held at significant cost to TSL holder Slow release of TSL deposits by a few BAs

14. TSL Administration (con’t) E-bidding is a significant efficiency Concern with transfer of Cat 2 TSL to avoid milling requirement Confusion on arms-length/non arms-length declaration in TSL application

15. TSL Administration - Recommendations Pre-advertise winter TSLs should be a standard best practice Some BAs need to expedite TSL deposit return - staff priority or consider professional reliance

16. TSL Administration – Recommendations (Con’t) E-bidding needs to be delivered as a priority Review TSL transfer rules to ensure integrity of auction process and milling requirement Review Section 9 of TSL Application and Tender form to eliminate or improve arms- length/non arms-length declaration

17. Milling Requirement Milling requirement is critical to Cat 2 Diversity of opinion from 50% to 75% to 100% Desire to keep decision at local BA to meet local conditions Deadline for milling requirement at expiry of TSL is fine. Some flexibility required. Monitoring and enforcement critical but not consistent across BAs Milling report – keep simple; conversion factors outdated

18. Milling Requirement - Recommendations Retain current milling requirement in all Cat 2 TSLs Use 50% as minimum and adjust higher as required at local level All BAs need to more effectively monitor and enforce milling requirement BCTS HQ to consider audit contractor coupled with increased collaboration between BAs Review conversion factors in milling report

19. Other Options and Opportunities Various input to return to Sect 16.1 and Sect 21 Value Added TSLs, BCTS log sort yard, Cat 2 NRFLs, restrict export on Cat 2 TSLs, “local” milling requirement and others Generally varied success in past Provide report to Value Added Sector Strategy with no specific recommendations

20. Next steps TSAC review and comment on draft report by Feb 26 Final report submitted to BCTS by March 31

21. Questions or comments?