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B.C. forestry revenues have been helped by the low Canadian dollar, but energy costs post an increasing threat to the industry.

Ben Nelms/for The Globe & Mail

B.C. Finance Minister Mike de Jong offered tax breaks and other support for the province's natural gas and mining sectors on Tuesday, but little for the forest industry, the single largest contributor to the province's natural-resource revenues.

The B.C. budget forecasts that natural-resource revenues will slide by nearly 7 per cent this year, thanks to lower revenue from energy sectors. But revenue from forestry is expected to deliver $835-million to provincial coffers – more than double the amount that will come from natural gas royalties – and is forecast to rise at a rate of 6.2 per cent over each of the next three years.

The forest industry has been on the rebound due to the low Canadian dollar and a rise in housing starts in the United States. Over the past five years, forest-product exports have climbed by more than 60 per cent.

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However, that turnaround could be short-lived. The Council of Forest Industries (COFI), which represents the dominant Interior sector, is warning that the industry will be in trouble if the government continues with the status quo.

The forest industry consumes about 60 per cent of BC Hydro's industrial power supply – it is a significant and growing cost item. And the amount of available timber in the Interior is beginning a precipitous decline as the harvest of timber infected by the mountain pine beetle is almost complete.

COFI's chief executive, James Gorman, said Tuesday the industry faces challenges but he was pleased to see a commitment from the provincial government to develop a "competitiveness strategy."

The budget, however, is vague about what changes that strategy might bring. "Our government is committed to making B.C.'s forest industry a sunrise industry again," the documents state. "We will continue every effort to keep the sector growing, including annual forest-industry trade missions to Asia to find new markets and create jobs at home."

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