Northern Interior lumber producers -- particularly secondary manufacturers -- are bracing for what will come next as negotiations to reach a finalized softwood deal appear to have stalled.

The companies are fearful a deal that is not commercial viable, and doesn't provide policy autonomy for B.C.'s Interior, will be pushed through to meet self-imposed deadlines.

That fear has become more pronounced as lumber companies were told Tuesday that critical issues such as B.C.'s desire to implement its market-based pricing system in the Interior have still not been resolved.

Another key issue -- setting export penalties for secondary manufacturers based on the value of the lumber where it was first produced -- has also not been resolved.

That's a critical issue for secondary lumber producers -- who remanufacture low-quality lumber and trim ends into higher-valued products -- because they typically have been charged tariffs on the increased value of their products.

They believed a framework agreement inked April 27 between Canada and the U.S. recognized that that secondary manufacturers would be charged penalties on the first-mill price.

The two sides have been hammering out the details of the deal which will return to Canadian lumber companies about $4 billion of the $5 billion in tariffs collected by the U.S.

The tariffs will be replaced with either of two export tax schemes that decrease as the price of lumber climbs. The first option sets export taxes between five and 15 per cent, while the second option, which includes quota limits, sets the tax rates at between 2.5 and 7.5 per cent.

"As a company, we're extremely concerned," Brink Forest Products president John Brink said Tuesday. "Obviously, the Americans have taken a position that this deal will go through, and they don't have to compromise on a number of issues."

Brink said the Americans have put forward language that virtually excludes all secondary lumber manufacturers from obtaining the first-mill price. Brink is a leading secondary lumber manufacture in the Northern Interior, with plants in Prince George and Houston.

Brink said he encourages B.C. Premier Gordon Campbell to remain firm that the province will not endorse a deal that's bad for B.C. lumber producers.

Speaking in Vancouver last week, Premier Gordon Campbell said the province is not prepared to support a softwood lumber deal that would not recognize market-based pricing policy reform in the province or would hinder B.C.'s ability to manage the pine beetle crisis.

On Monday, B.C. Forests Minister Rich Coleman told the Vancouver Sun the U.S. must compromise if there is going to be a softwood lumber agreement.

Coleman acknowledged the U.S. is still insisting that the province's market-based timber pricing system be subject to anti-circumvention language in the softwood agreement.

Coleman had been more optimistic that B.C.'s interests would be met before heading into last weekend, where Canada had set a deadline on reaching an agreement.

Canada's new Conservative government had set timelines so that legislation can be passed before Parliament retires for the summer, but also, so the deal is done before a planned meeting of Prime Minister Stephen Harper and President George W. Bush on July 6.

That has heightened Brink's concerns that there hasn't been resolution on some of B.C.'s key issues. "The danger now is we are moving into a very tight timeline, and will we start caving in, giving away some of these absolutely critical pieces that give us independence as a country and province, and where we're being bullied by the Americans," said Brink.

Vanderhoof Specialty Wood Products owner Paul Heit said if secondary manufacturers concerns on the first-mill price issue are not addressed, they're adamantly opposed to the deal. "It's really going to depend on how well our governments go to bat for us," said Heit, who is a director of B.C.'s Independent Lumber Remanufacturers Association.

For primary lumber producers in the Northern Interior, the key issue has been ensuring the deal doesn't interfere with the province introducing market-based pricing. However, there are other issues, including whether the deal will set conditions that come into force going forward, or, instead, they are retrospective.

Lakeland Mills president Keith Anderson is hopeful that the lack of progress means there will be more time to hammer out a deal. "Maybe, the artificial time lines have been forgotten about," he said.

©Copyright 2006 Prince George Citizen