Community Economic Development - Documents

First Report

Hazelton Natural Resource Strategy

Current Situation Assessment

. . . . . . . . . . . . . . . . . . . . . . .

Village of Hazelton

Prepared by:

Lions Gate Consulting Inc.

Vancouver

Table of Contents

1         Introduction.. 1

1.1      Background.. 1

1.2      Purpose and Methodology.. 1

2         Regional Economic Analysis.. 2

2.1      Demographics. 2

2.1.1   Population. 2

2.1.2   Age Distribution. 3

2.1.3   Education. 4

2.2      Economic Dependencies. 4

2.3      Labour Force. 5

2.4      Personal Income. 6

2.5      Community Account.. 8

2.5.1   Property Class Portion of Assessment Values. 8

2.5.2   Property Class Portion of  Municipal Tax Revenue. 8

2.5.3   Total Municipal Revenues. 9

3         Situation Assessment.. 11

3.1      Cluster-based Economic Development.. 11

3.2      Forestry.. 12

3.2.1   Current Situation. 12

3.2.2   Market Assessment 13

3.2.3   Competitive Assessment 14

3.3      Tourism... 15

3.3.1   Current Situation. 15

3.3.2   Market Assessment 16

3.3.3   Competitive Assessment 19

3.4      Agriculture. 20

3.4.1   Current Situation. 20

3.4.2   Market Assessment 20

3.4.3   Competitiveness Assessment 21

3.5      Minerals, Oil and Gas. 22

3.5.1   Current Situation. 22

3.5.2   Market Assessment 22

3.5.3   Competitiveness Assessment 23

3.6      Botanical Forest Products. 23

3.6.1   Current Situation. 23

3.6.2   Market Assessment 23

3.6.3   Competitive Assessment 24

3.7      Commercial Fisheries. 25

3.7.1   Current Situation. 25

3.7.2   Market Assessment 25

3.7.3   Competitive Assessment 25

4         Strengths, Weakness, Opportunities and Threats.. 27

4.1      Background.. 27

4.2      The Role of Previous Community Consultation.. 28

4.2.1   Strengths. 28

4.2.2   Weaknesses. 29

4.2.3   Threats. 30

4.2.4   Opportunities. 31

1.1 Background

The Kispiox area has been hard hit by the downturn in the forest industry. Closures or intermittent operations at both Carnaby and Kispiox mills have contributed to the Kispiox area having one of the highest unemployment rates in the Province. In response to the current situation, the Village of Hazelton has commissioned Lions Gate Consulting Inc. to develop a natural resource strategic opportunities analysis and action plan.

The project will:

• Update the Forest Sector Action Plan in the Kispiox TSA, and include a review of the other resource sectors including mining, tourism, oil and gas, and fisheries;
• Complete viability analysis/feasibility study for one or two key opportunities thereby benefiting the economy of the community; and,
• Prepare a prospectus and marketing program for the area.

The resulting information will be utilized to attract investment to the area.  As the lead proponent, the Village of Hazelton is cooperating with neighbouring local governments and First Nation communities. The intention of the project is to identify viable business opportunities and industry to attract investors that will benefit the entire community of the region.

1.2 Purpose and Methodology

This report, an economic and industry overview of the region, is the first of several deliverables for the Natural Resource Strategy. Several recent reports on the region were closely reviewed to avoid a repetitive research process. Key reference materials included the following:

• Action 2000, A journey into the human and economic potential of the Upper Skeena
• Beyond 2000: Creating our Future
• A Profile of the Value Added Industry in the Upper Skeena
• Potential Opportunities for the Value-Added Industry in the Upper Skeena
• The Corporation of the village of Hazelton Official Community Plan (March 1997)
• Kispiox Forest District & Gitxsan First Nation Tourism Opportunities Strategy

Statistical data from Statistics Canada and BC Stats were obtained and used to prepare the updated demographic and labour force analyses.

The following paragraphs provide an overview of key demographic, labour force and other economic statistics for the Kispiox region and Hazelton. For the purposes of this analysis we have used the boundaries of the Kispiox Forest District as a study area because BC Stats has aggregated many Census statistics to this geographic level.

2.1 Demographics

2.1.1 Population

The population in the Kispiox Forest District was 6,292 in 1996 and is estimated to have grown to approximately 6,545 in 2000. Figure 2‑1 outlines the change in population between 1981 and 2000 for BC and the Kispiox Forest District.  Over the period the Kispiox FD has managed growth of 29% compared to the provincial growth of 43%.  However, between 1981 and 1991 the FD population closely tracked the provincial growth rate and has fallen behind only in the most recent ten years.

Figure 2‑1: Change in Kispiox Forest District and BC Population  (1981=100%)

Source:  BC Stats.

Table 2‑1 shows the population of key communities within the FD and the changes between 1996 and 2000. While the municipal populations of Hazelton and New Hazelton have shown no growth between 1996 and 2000, the six First Nation communities have seen their population grow by approximately 5.5% over the same period.

Table 2‑1: Kispiox Population By Incorporated and First Nation Communities, 1996 and 2000

Source: BC Stats and Indian and Northern Affairs Canada.                                                                                           

2.1.2 Age Distribution

The change in the age distribution in the Kispiox FD and the province over the 1981 to 1996 period appears in Table 2‑2 . Compared to the BC average, the Kispiox FD has a significantly higher proportion of young people (under 19) than observed in the province. Conversely, the FD also has a significantly smaller percentage of people in the 55 and over age categories than the province.

Over time the age distribution in the Kispiox has shifted from almost half of the population being under 19 years of age in 1981 to just over a third being in this category in 1996.  Meanwhile, the percentage of the local population over 35 years of age has climbed from 27% in 1981 to 39% in 1996.  The province has undergone similar shift towards the older age categories over the same period.

Table 2‑2:  Change in Age Distribution for Kispiox Forest District and BC, 1981 to 1996

Source:  BC Stats and Statistics Canada, Census 1981, 1986, 1991, and 1996.

2.1.3        Education

Table 2‑3 shows the highest level of education obtained by residents in the Kispiox FD and BC in 1996.  As illustrated, the FD has a significantly higher percentage of the population that did not complete grade 12 and a smaller percentage of university graduates than observed in the province.  However, the FD has a comparable proportion of trade and diploma graduates and university attendees without degrees as the province.

Table 2‑3: Educational Attainment for Kispiox FD and BC, 1996

Source:  Statistics Canada, Census 1996.

2.2 Economic Dependencies

Local employment income dependencies by basic economic sectors in the Kispiox FD are shown in Table 2‑4 . [1]   In 1996, there was an estimated $65.2 million in disposable income earned in the FD.  As illustrated, a significant portion of this income was derived from the area’s forest sector activities making it the largest basic sector locally.

Table 2‑4: Income Dependencies for the Hazelton Area, 1996

Source:  Ministry of Finance and Corporate Relations.

The second largest contribution to the area’s economy came from the public service sector, which includes the local school, health, and government administration activities.  Collectively, the forest sector and public sector made up 72% of the income generated in the area.  This value has likely declined somewhat in recent years with the impacts to the region’s forest industry but still dominants the local economy.  Tourism and recreation was the third largest basic sector in the area and continues to make a noticeable contribution to incomes in the area.

With such a high concentration of activity in only two sectors, it not surprising to find that the Kispiox FD has one of the least diversified local economies in the province in 1996.  In fact only two other local areas in the province had diversity indices lower than the Hazelton area. [2]   The 2001 Census data to be released next year is likely to show little change in this diversity standing. A lack of diversity in the local economy is not necessarily a bad occurrence so long as the leading sector(s) remain healthy and vibrant – when that rule is tested, a disproportionate economic hardship usually results.

2.3 Labour Force

Table 2‑5 outlines the trends in the labour force for the Kispiox FD between 1981 and 1996.

Table 2‑5: Labour Force Characteristics for Kispiox FD, 1981 to 1996

Source:  Statistics Canada - 1996, 1991, and 1981 Census.

In 1981, the goods producing sector of the economy represented 900 jobs and 44 percent of the labour force, compared to the provinces 28 percent. By 1996 the goods producing sector had increased in overall size to 1,070 jobs but had declined to 35 percent of the local labour force. Meanwhile, the province saw the proportion of the goods producing sector slide to 23 percent of the labour force. 

Within the Kispiox FD several key changes have occurred in the labour force and include:

• All components of the goods producing sector have grown between 1981 and 1996 except for manufacturing, which declined by 5 percent over the period.  The area’s sawmills have dominated manufacturing in the FD and declines in the this sector have been significantly more dramatic since peaking around 1991. Between 1991 and 1996 the manufacturing labour force declined by 16 percent.  However, recent events in the primary wood manufacturing have seen further declines and the uncertainty around SCI’s Carnaby operation place additional uncertainty on the contribution of this key local manufacturing sector.
  
  
• In the goods producing sector, only agriculture has sustained labour force growth over the 15-year period from 1981 to 1996.  All of the other goods producing sectors have experienced declines between 1991 and 1996.
  
  
• Between 1981 and 1996 the service producing sector increased by 68 percent and all individual sectors showed strong increases except for the business, personal, and other service sectors.  However this latter group did turn in a strong performance from 1991 to 1996.
  
  
• Government services have grown in spectacular fashion locally between 1981 and 1996 with growth of over 300%.  By 1996 government services made up almost half of the service producing sector, up from 24 percent in 1981.
  
  
• Overall, the Kispiox FD labour force grew 50 percent between 1981 to 1996 and every census period has shown consistent upward movement in the local labour force. This expansion is double the rate of population growth over the same period. A significant portion of this difference can be attributed to the shift in the local age characteristics, which have seen a sizable number of local residents become old enough to actively participate in the labour force in recent years.

2.4 Personal Income

Figure 2‑2 tracks average personal income levels for Hazelton, New Hazelton, Subdivision B of the Kitimat-Stikine RD (most of the remainder of the Kispiox FD) and BC for the period between 1986 and 1998.

Although the income growth pattern for the KSRD Subd. B was similar to the province during this period, its income is still well below the provincial average. New Hazleton has enjoyed significantly higher personal income than the rest of the FD, primarily because of its forest job base. In 1988, the New Hazelton personal income level was very close to the provincial level; however, it has fallen progressively behind since that time.  Meanwhile, Hazelton and KSRD subdivision B have had substantially lower income levels. Between 1995 and 1998, KSRD Subdivison B has enjoyed strong growth in personal income and closed the gap between Hazelton and area and New Hazelton.  

Figure 2‑2: Personal Income for Hazelton, New Hazelton, Subd. B KSRD and BC, 1986 to 1998

Source:  Canada Customs and Revenue Agency.

Table 2‑6 highlights the dependence of specific personal income categories and the changes observed in Hazelton, New Hazelton, KSRD Subdivision B, KSRD and BC for 1988 and 1998.  Communities with the KSRD had very similar personal income profiles in 1998. Over the ten year period the region has seen pension income share of total income double, self-employment income drop in half, and employment income maintain a predominant 71 percent share of total income. 

The personal income trends in the KSRD differ importantly from the province. For example, the province’s proportion of pension income has not risen as quickly as it has in the KSRD; nevertheless, pension income still makes up a significantly larger percentage of total personal income for the province than it does for the Kispiox. Also, the proportion of self-employment income at the provincial level has remained constant at 5 percent over the ten year period, while the KSRD Subd. B and KSRD have seen self-employment income share of total income reduced substantially.

Table 2‑6: Change in Personal Income, 1988 to 1998

Source:  Canada Customs and Revenue Agency.

2.5 Community Account

The community account outlines the observed changes in the class portions of the local property assessments as well as the municipal revenue characteristics for the incorporated communities of District of New Hazelton and the Village of Hazelton. [4]

Diversity in the assessed land value and a balanced tax base are important to communities so they have the capacity to maintain sustainable municipal services and provide the resources to develop and upgrade critical local infrastructure. Services and infrastructure are key local elements in supporting the existing economy and future economic expansion and diversification.

2.5.1 Property Class Portion of Assessment Values

Changes in total assessed value for the District of New Hazelton and the Village of Hazelton between 1998 and 1986 appear in Table 2‑7 .

Table 2‑7: Change in Components of the Assessed Value for Hazelton and New Hazelton

Source: BC Municipal Affairs.

Both communities have seen their total assessed values rise between 1986 and 1998 with New Hazelton’s assessed values up 286% and Hazelton’s up 236%.

In New Hazelton the components of the assessed land value have fluctuated significantly over the period. This is primarily a result of the changes observed within the assessed land values for the major industrial class. In 1986, light and major industrial class made up a very small component of the overall assessed values. However, by 1992 this had shot up to over $11 million and represented 35.9% of the total assessed value, only to decline sharply to $8.25 million (22.9%) in 1998.  

Hazelton has experienced a more stable pattern of assessed values over the period.  However, the community has very little diversity within its property classes and is dominated by the residential component, which has typically represented two-thirds or more of the total assessed value.

2.5.2 Property Class Portion of  Municipal Tax Revenue

Table 2‑8 outlines the change in municipal taxes collected by property class in the communities for 1992 and 1998. Again, the increased tax burden borne by residents shows up in these figures. Without further economic development, contributions from industry, business and utility classes may continue to weaken and increase the burden on the residential class.

Table 2‑8: Change in the Property Class Portion of Municipal Tax Revenue, 1992 and 1998

Source: BC Municipal Affairs.

2.5.3 Total Municipal Revenues

The remaining municipal revenues come from a variety of sources and are highlighted in Table 2‑9 for Hazelton and New Hazelton in 1998.

New Hazelton had total municipal revenue of just over $1 million while Hazelton’s revenue was closer to $0.75 million in 1998. In New Hazelton, municipal taxation made up over half of the revenue with revenue from “Own Source” and “Unconditional Transfers” making most of the remaining revenues.  However, in Hazelton “Conditional Transfers” represented the largest revenue component in 1998 with municipal taxation and “Unconditional Transfers” making up the majority of the remaining revenues.

Table 2‑9: Source of Municipal Revenue for Hazelton and New Hazelton, 1998

Source: BC Municipal Affairs.

Economic activity in Kispiox region occurs across several industry groups but the vast majority of activity, and most community wealth, is accounted for by a few key industries. While potential for economic development is present in all sectors, the focus of this analysis is on those industries most contributing to the community’s economic base.

3.1 Cluster-based Economic Development

Harvard Business School’s Michael Porter is one of the world’s leading business theorists, and his ideas about strategic planning and competitiveness (as captured in his widely read books, Competitive Strategy, Competitive Advantage, Competitive Advantage of Nations) are now considered essential reading for business and economic development planners.  

Porter’s theories of competitiveness and cluster-based economic development are particularly relevant for regions and communities facing severe economic dislocation and change.  The gist of “cluster” theory is that while a physical grouping of companies and supporting organizations is necessary for development, it is in fact the processes, linkages and systems of communications between these physical units that determine a region's competitiveness.  It is not sufficient to have a group of businesses within a geographical area that fall under the same industry classification.  “Cluster” is not a statistical term.  The critical element in cluster development is the scope and intensity of relationships between the varied parties - the export-oriented firms, the suppliers and the educational institutions in the cluster.  Nor does having one or two export-oriented companies in a region constitute a cluster.  They could be located in an area and compete well simply because of resource advantages, such as a plentiful timber or mineral supply.  They may prosper in spite of missing competitiveness attributes, such as quality infrastructure or a highly-educated workforce.

The economy of Western Canada is based on three key resource-based clusters (Forest Products, Agri-food and Energy/Mining) all of which are mature industries and are currently facing intense pressures from  emerging global competition and changing markets.  The key to sustaining growth is to protect the region from economic cycles by continuously adding value to the goods and services produced in the region through new product and market development.  A successful cluster creates a dynamic pattern of innovation, investment and growth so value can be added and a competitive standing maintained; a failing cluster, on the other hand, will typically suffer from the debilitating forces of declining productivity, lost investment and ultimately lost opportunities in the marketplace.

Much of regional economic development theory is premised on the existence of competitive or comparative advantage.  In Western Canada, that advantage has historically come in the form of land, wood, water, minerals and fossil fuels, the abundance and availability of which have built the industries that dominate today's regional economies.  The problem is that as these industries mature and as the supply of many commodities increases, especially from developing economies, natural resource inputs no longer function as competitive advantages.  Under these circumstance, a cluster or industry has to innovate and add value if it is to remain viable.  Instead, fragmented industries and firms are waging battles to maintain their share of declining markets.  BC's forest sector and commercial fishery are examples of industries which are spending an enormous effort to stake out positions in markets for which they no longer have competitive advantages.  Meanwhile, opportunities in new and emerging markets are being exploited by more aggressive competitors.

As a forest-dependent community, the Hazelton area has to contend with many of the threats facing the forest industry in BC.  The economy of the region is too small to have a recognized cluster, but many of the implications and lessons of cluster-based development apply locally.  These include:

• Traditional business development strategies usually aimed at cost reduction for business will no longer be sufficient to attract industry. Cluster needs such as tax credits, educational policies and infrastructure investments are more likely to simulate investment. Firms and industries will require economic infrastructure in the form of adaptable human resources, available financing, advanced physical infrastructure, acceptable tax and regulatory structure, quality of life, and accessible S&T (Science and Technology).  It is these infrastructure factor inputs, and not the natural resource inputs, which will determine the future competitiveness and viability of the community’s economic base.
  
  
• The pace of innovation by local business is critical to future economic prosperity.
  
  
• Government-led initiatives will eventually have to give way to industry-led initiatives for improving competitiveness, but this will only occur if industry takes the lead in pursuing collaborative actions aimed at building comparative advantages. 
  
  
• Economic development practitioners will have to focus on building core competencies including:
  • Public/private sector collaboration;
  • New and competitive infrastructure;
  • Aggressive business attraction and development programs;
  • Targeted marketing; and,
  • Local vision and initiative.

3.2 Forestry

3.2.1 Current Situation

Approximately 20 logging companies and contractors operate in the timber supply area. The Kispiox Timber Supply Area produces a variety of different sized logs as well as a relatively large pulp log component. These factors lead to complicated wood flows between companies attempting to obtain the most appropriate size and quality of log for their operation. On average, 10 to 15 per cent of the timber supply area harvest is exported from the area. However, when all sources of wood (including wood from other timber supply areas and private lands) are included, mills located within the Kispiox Timber Supply Area are considered net importers of fibre.

Most of the Kispiox Timber Supply Area timber is processed by four sawmills and the whole log chipping plant. In recent years virtually all of the wood chips produced in these facilities were processed at the Skeena pulp mill at Prince Rupert. When it was last operating, the SCI mill at Carnaby employed approximately 144 people, while the chipper employed approximately 15 people. With SCI now in receivership proceedings, the mill facility is now idle.

The mill operated by Kispiox Forest Products Ltd. (formally known as Isolite-Stege) employs approximately 88 people at South Hazelton. C GED Forest Products Ltd. (formally operated by Westar) and Kitwanga Lumber Company Ltd. employ 50 and 42 people, respectively, at Kitwanga. Companies located within the Kispiox Timber Supply Area also process timber from other timber supply areas, private land, Reserve land, and the Small Business Forest Enterprise Program.

Harvesting, processing and silvicultural activities relating to the current allowable annual cut in the Kispiox Timber Supply Area generate an estimated 583 person years of direct forestry employment within the timber supply area. An additional 286 person years of spin-off employment are estimated to be created through forest company and employee spending. In total, the current allowable annual cut generates approximately 869 person years of employment in the Kispiox Timber Supply Area. As noted above, the closure of SCI operations means a significant part of this employment base has now disappeared.

3.2.2 Market Assessment

The mills in the Kispiox FD are primary lumber manufacturers (i.e. they break down timber into commodity-like lumber products). The future of the BC primary wood manufacturing sector is very clouded, particularly on the coast, where mill closures are cascading in the face of soft prices, soft markets, high costs and system-wide weaknesses following years of declining productivity and competitiveness. Peter Pearse’s just-released report on the BC coastal forest industry suggested that as many as one half of coastal mills will have to be shut down because of excess capacity and low productivity. Significant investments in new facilities will also have to be undertaken to stem the loss of market share and prevent the collapse of the industry.

Primary Production

Some discussion of the broader trends currently affecting softwood lumber markets are important for understanding the future of the industry locally:

• The total volume of softwood lumber consumption worldwide is more than 60 billion board feet, and growing at between 1% to 2% annually. In the near future, the growth in domestic (i.e. North America) consumption is expected to be offset by lower rates of growth in overseas markets. Therefore, the aggregate level of demand is likely to be modest at best.
  
  
• Shortages in the supply of softwood timber are not expected any time soon as existing production capacity is fully capable of supplying existing and anticipated future demand. The ample volumes of maturing timber, together with ongoing investments in conversion capacity, will exert downward pressure on prices and costs.
  
  
• For the last two decades, there has been a steady incursion of substitute products into traditional lumber and softwood product markets. Steel studding, alternative construction materials such as brick and stone, and new developments in composites and ceramics are continuously eating away at wood’s traditional market base. This has the effect of keeping softwood prices low.
  
  
• In the last 30 years there has been little increase in the real North American price of dimension lumber. Of more immediate interest is the fact that short-term prices have failed to reach peaks seen in past years. Prices used to regularly hit $400/mfbm but have not done so now for 30 months. If the combined effect of offshore competition from producers like Chile and Australia and substitution conspire to depress prices over the long-term, then the implications for high-cost producers are obvious. With very little room to squeeze further margins out of commodity production, and with the major productivity gains through the incorporation of technology already realized, the rationalization of uneconomic capacity now being witnessed in BC is likely to continue.
  
  
• BC’s market share of the commodity-grade market for softwood lumber is in long-term decline. Presently, it sits at about 16%. It used to be much higher.
  
  
• BC is not alone in having to deal with these global developments. Several of its competitors also are struggling to maintain market share in over-supplied commodity product export markets. One development that has offset the loss of competitiveness is the long-term decline of the Canadian dollar. However, structural weaknesses in the industry still have not been resolved. BC is now “trapped in the commodity box” in which 1) average rates of profitability are too low for firms to sustain re-investment, 2) firms are fully exposed to cyclical commodity demand and prices, and 3) as high-cost producers, BC firms are the first to close their doors and is now a marginal producer in many grades. [6]

Value-added or Secondary Production

In contrast to the primary sector, markets for value-added products in North America have grown rapidly in recent years. However, the slow adoption of value-added technologies by BC primary producers has meant lower-than-expected attainment of market share. A recent study estimated the potential North American market for value-added wood products at around US$200 billion annually, divided into the following four key segments:[7]

• New residential housing – less than US$110 billion annually.
• Home improvement – US$50 billion annually.
• Non-residential construction – US$20 billion annually.
• Industrial and furniture markets – US$20 billion annually.

In 1997, the sales of value-added wood products by BC manufacturers was close to C$2.7 billion. The majority of production is directed to the North American market and represents about a 1% share of the market, far below the 16% share of total North American consumption of softwood lumber. The growth in sales of BC value-added wood products has been significant during the 1990s, having almost doubled in value.

In 1999, the majority of markets for value-added production in BC were in North America. BC (19%), the Rest of Canada (ROC) (20%) and the US (46%) accounted for 85% of sales. Japan (10%) and Europe (4%) were minor markets. Most value-added production is in the reman category, along with some millwork, engineered wood products, cabinets and wood furniture.

3.2.3 Competitive Assessment

Historically, the forest industry in the Kispiox FD has been supported by two main input factors: an abundant supply of timber, and close proximity of that timber to primary breakdown facilities. Together, they helped create an economic base that derives a significant portion of its wealth from the industrial development of the forest. In recent years, as these factors have diminished in importance, weaknesses that have always been present, but which were masked as long as markets conspired to maintain the status quo structure, have become more apparent. A declining long-term timber supply, the heavy concentration of processing capacity in softwood dimension lumber, the lack of value-added production, expensive harvesting costs and a deteriorating timber profile paint a bleak picture for the forest industry locally. What is discouraging is that many of these problems are not confined to the Kispiox region but appear to be system-wide and indicative of a systemic failure of forest policy, planning and development in the province. The challenges posed by significant changes in production and distribution technologies, weakening demand in North America and Asia, low prices and profit margins, intensified competition and restrictive trade policies are daunting from a community economic development perspective because for the most part these factors reside outside local control. 

The permanent closure of Seaton Timber’s sawmill and long-term temporary closure of SCI’s Carnaby sawmill are two local victims of the provinces terminally ill forest industry. The prognosis is not good for either facility, and at best, the future viability of the important Carnaby operation will remain clouded until the current bankruptcy procedures are resolved.

Ironically, these closures, along with short-term closures of facilities in the Bulkley, Lakes and Morice TSAs, has led to an oversupply of sawlogs. Bark beetle activity in the Lakes and Morice TSAs is expected to create an abundance of sawlogs well into the future. This oversupply is expected to continue until either new manufacturing capacity is constructed, cold weather annihilates the beetles, or lumber restrictions into the USA are removed and lumber prices increase. 

The current forest industry slump may eventually end, but the industry might look significantly different when the dust settles. Based on the quality and availability of the existing timber supply and the state of primary facilities in the Kispiox FD, significant investment in new processing facilities will have to occur to keep timber in the region, or else logs will be exported to those buyers who can afford to purchase the wood. In light of the state of the primary sector locally, the prospects of value-added processing as an alternative development path are far from encouraging. The sort of value-added production currently undertaken in the Northwest requires access to low cost lumber and/or access to US quota, neither of which is a strength regionally. This means that value-added production will have to have high levels of “value-added” so as to minimize the impacts of wood costs. In turn, this implies greater and more sophisticated use of human resources, technology, marketing and management, none of which are considered strengths of the BC value-added wood processing sector.

3.3 Tourism

3.3.1 Current Situation

Tourism is an important contributor to the community's economic base, both in terms of jobs and employment income. In the Kispiox, the proportion of the labour force employed in tourism is approximately 14%. Because tourism has relatively low wage levels compared to other export sectors, its proportion of total community income is much less at 7%. Continued growth in tourism markets and jobs are expected to drive this sector well into the next century.

Since the 1973 opening of the Cassiar highway, the Hazeltons have become a popular stop-over for Americans and Canadians travelling to Alaska and the territories. Highway improvements and increased ferry traffic through Prince Rupert have contributed to the growing highway tourism market.  The Kispiox is also becoming increasingly recognized as a tourist destination in its own right.  Quality scenery and recreational opportunities, such as fishing, hiking and camping, are attracting growing numbers of wilderness and adventure tourists. While there are not a lot of built attractions in the region, one of the most popular and well-known facilities is ‘Ksan, a Gitxsan village replica constructed in 1970 which includes traditional longhouses, a museum, art exhibition centre, carving school, gift shop, totems, art studios and interpretive tours. According to the Village’s administration the yearly visitation is about 50 000 over the last five years, with a 50-50 split between domestic and overseas tourists. Germany, France and Italy are all important markets. Recent improvements in the villages include an audio system in the three touring houses and seven long houses and the addition of a new food service outlet. 

The BC Accommodations Guide lists six campgrounds/RV parks, two hotels/motels and two lodges in the Kispiox FD. Except for the lodges, most of these facilities are clustered along Highways 16 and 37. The Kispiox land base supports more than just local tourism outfits and facilities, however. In nearby Smithers, where there is a very significant tourism sector, many accommodation, food service, guiding and transportation services are directly supported by Kispiox-based activities. This is especially true for backcountry recreation — there are many guides and outfitters based in Smithers who use the Kispiox to serve their clients.

Outdoor recreation activities in the region include fishing, hunting, wildlife viewing, hiking, camping, kayaking, canoeing, rafting, cross-country and downhill skiing, snowmobiling, horseback trail riding, and mountaineering. Several areas in the TSA possess high quality wilderness recreation opportunities and attract visitors from the US and overseas.

The region’s mountains, and their well-established network of trails provide fine opportunities for rock climbing, ice climbing, hiking, horseback riding and hunting enthusiasts. The rivers, in addition to providing angling experiences, also offer excellent kayaking, canoeing and rafting opportunities.

Presently, there are three provincial parks in the TSA: Seeley Lake, Ross Lake and Swan Lake Kispiox River Provincial Park. These parks have a combined area of 19,531 hectares.  The Babine River Wilderness Corridor (8,900) has high recreational and tourism values. There are fourteen official Forest Service recreation sites and many hiking trails. Wildlife viewing, as well as hunting and fishing, have benefited in the short-term from timber harvesting because of the increase in access roads.  In the longer term, this increased access may also have an adverse impact on wildlife populations.

The Ministry of Forests manages recreation sites on the Suskwa, Upper Kispiox and Sweetin Rivers, on Tsugwinselan and Sedan Creeks and on Little Fish, Mitten, Keyton, Pentz, Watson, Elizabeth, Octopus, Bonus and Derrick Lakes. Established BC Forest Services recreation trails include Blue Lake, Cedarvale, and Rossvale Lake (ski trail), Boulder Creek, Whiskey Creek, Coyote Creek, Watson Lake and Oliver Creek. The last five trails are all in the Seven Sisters, where the amount of development and use is indicative of its popularity among recreationists.

3.3.2 Market Assessment

Global Trends

Tourism is now one of the world's largest industries, with increasing volumes of international arrivals and related economic activity, including rising levels of spending and investment.  Markets have not only been increasing, but also changing – fundamental transformations in the global market profile include the “greening” of attitudes and the desire for more but safer adventures. Visitors will be more demanding and discriminating, and seek an active learning experience. Future trends are likely to include the following:

• Increased discretionary income will lead to more travel.
• Rising affluence will result in increased leisure time. Longer weekends and increased paid holidays have helped to stimulate expansion in attraction visitation.
• More active learning versus passive fun activities.
• More special interest holidays versus conventional passive experiences.
• Increasing concern over impacts on physical and social environment.
• Growing awareness of risks to personal health and safety.
• Increase in mental development as well as physical exercise during leisure time.
• More older, affluent visitors, but also more active physically and mentally.
• One-stop-shopping for all-inclusive packages will rise in appeal.
• Rising preference for low impact tourism facilities, consistent with environmental values and the desire not to contribute to negative impacts.

National Trends

In North America, as the baby boomers begin to slide into their 50s — the demographic start for two prime decades of leisure travel — tourism is expected to boom, and along with it tourism-related employment will grow as a rate almost double that of the rest of the economy.

Forecast demand trends include the following:

• Research shows that there is a high degree of interest among Canadians to visit the coastal and northern areas of the country. Domestic tourism appears to be on an upward trend that will continue well into this century.
• The population continues to age. The segment of the population which will grow the most during the period 1996 through 2011 will be the 55-64 year olds. This group will expand 77%.
• The growth in the ethnic American markets will be exceptional. By the year 2050, ethnic groups are expected to represent almost half of the population in the United States. Tourism operators have increasingly focused on capturing ethnic markets.
• The “traditional family” market is shrinking. Family households whose head is less than 35 years of age will make up just 15% of family households in 2016. This represents a decline from nearly 26% in 1991.
• Until the year 2016, the baby boom generation will shift from “young families” to “empty nesters”. Already numbering 1.5 million today, empty nesters will grow by nearly 35% to the year 2016. These aging baby boomers will expect travel experiences that are romantic, cultural, educational, adventuresome and hassle-free.

Economic trends include the following:

• Tourism is reliant on the spending of discretionary income. A rising Canadian dollar could result in fewer international visitors and more Canadians travelling abroad. This country’s low savings rate and high personal debt levels may dampen spending on travel.
• On the other hand, the travel industry could gain significantly if the more than $1 trillion to be handed down to the baby boomers is spent on travel. Certainly, with more leisure time on their hands, the demand from baby boomers for leisure activities like travel will expand. Money inherited from their parents will enable boomers to travel even more than they would have hoped.

BC Statistics and Trends

In 1999, British Columbia hosted 22.3 million overnight visitors an increase of 2.1% from 1998. Nearly half (48%) of these visitors were British Columbia residents. Travellers from other parts of Canada accounted for 4.8 million visits (21.7%) a 1.7% increase over the previous year. A strong US economy, a growing awareness of British Columbia as a preferred travel destination and a very favourable exchange rate combined to lure Americans to British Columbia in record numbers in 1999. There was a 5.3% increase over 1998 and a 37% increase since 1994. South Korea and Taiwan were the Asia/Pacific countries to show the strongest positive growth in 1999, up 61.6% and -29.3% respectively. More Europeans visited British Columbia in 1999 (up 7.8%), driven mainly by the 12% growth from the UK market. The number of UK visits topped 267,000, nearly doubling the second largest market of Germany with 134,000.

Tourism accounts for about 5% of BC’s total Gross Domestic Product (GDP) and is one of the fastest growing components of the province’s service sector. Tourism revenues have been growing consistently, although the events of September 11, 2001 have dampened projections for the coming year. Declines in overseas visitation, especially from Asia, are also expected which may not be totally offset by an expected rise in American visitors because of the strong US dollar. Since overseas visitors tend to spend more than US or domestic travellers, there may be continued downward pressure on total expenditures. On the domestic front, a stronger economy in Alberta and continued interest in visiting BC by eastern Canada residents should help boost BC tourism.

Local Trends

Unfortunately, data sources do not exist which comprehensively accounts for visitors to Northwestern BC and the Kispiox area. Presently there are three main sources of visitor data: community-based Visitor InfoCentres; provincially-based visitor surveys which occur from time to time (the last BC visitor survey was completed for the 1995/96 visitor season); and a ten year old regional rubber-tire visitor survey undertaken by the North By Northwest Tourism Association of BC (1991).

The 1995/96 Provincial Visitor Study remains the single best source of regional visitor statistics for the region. It has been estimated that about 2.2 million visitors travelled to NWBC for a day or overnight trip, 73% of whom are residents of BC. The total NWBC share of provincial visitation is about 7%. Visitors to NWBC spend about $425 million per season with non-residents accounting for 33% of this spending and BC residents providing 67% of regional revenues. Both non-resident and resident visitors spend on average $54 per day during their stay. However, non-residents spend about $234 per stay in the region as compared to resident spending of about $178 per stay. The total NWBC share of provincial tourism revenues is about 5%. Non-resident visitors spend an average of 4.4 days in the region and resident visitors stay in the region about 3.4 days per visit. 

Product Developments

In the future, the kind of tourism products that will hold the most appeal are those which add value to an individual’s life experiences. There will be an expected growth in “learning” type vacations, that is, aboriginal tourism, culture and heritage tourism as well as adventure travel. Examples of growth tourism products would be ecological cruises with well known experts, hiking tours with experts in the local flora and fauna where all meals are prepared for the clients, etc. Some winter products (if packaged properly) will become increasingly popular according to many operators. In the end, Canada’s future product development will be tied mainly to outdoor experiences with particular emphasis in the soft adventure market.

The culture and heritage tourism market segment comprises an important and rapidly growing tourism sector. As tourists become older, more educated and more interested in learning about the places they visit, they make greater demands to see museums, historic sites and other cultural attractions.

Twenty years ago, there was a small, specialty market offering active vacations focused primarily on adventure product (e.g., mountain trekking, river rafting). Part of the appeal was to experience the natural and scenic resources of the destination, and while that motivation is still a fundamental factor, ecotourism is no longer a niche market, comprising more than 15 percent of the overall leisure travel market in North America.

3.3.3 Competitive Assessment

In the ultra-competitive industry of tourism, the Kispiox region offers a list of products based mostly on its physical features, along with some popular built attractions. The region is most clearly known for its high quality fishing and 'Ksan. The mix of exceptional river, mountain, forest, wildlife and First Nations interpretive attributes are unique and in demand by the travelling public. Activities such as wildlife viewing, heritage tourism, parks, river activities, lodges/huts, mountaineering/climbing and road and air touring all have excellent potential for further development.

Whereas the strengths of the Hazeltons and the Kispiox are physical in nature, its weaknesses relate mostly to its built facilities. These fall into two categories. First, and of primary importance, is the shortage of quality accommodation facilities, destination attractions and cultural/historical interpretation. While 'Ksan is an asset to the region, more interpretation and development could be occurring. Some progress is being made with the following initiatives, but further investment and development is required:

• Hazelton riverfront revitalization project.
• Misty Rivers Arts Council’s living history street theatre performances in the downtown core.
• Hazelton’s interpretive signage program.
• Several Gitxsan tourism initiatives, including upgrading to the totem pole site at Gitanyow Historic Village, Gitwangak Cultural Centre and Motel, Lax Skiik Ventures Ecolodge, upgrading of longhouses and museum building at ‘Ksan Historic Village and Skeena Ecoexpeditions (the Kispiox Band’s tourism information centre and upgraded cultural camp).
• The Gitanmaax Band’s plans for a heritage park site located on reserve at the Hagwilget Bridge and a boat launch and riverfront trail project along the Skeena River.
• A number of House groups (Wilp) have also begun tourism projects and are in various stages of creating infrastructure on their House territories.  A few of these include:
  • a series of cabins and trail infrastructure for use as a cultural camp by Wilp Gutginuxw on Pine Nut Creek at approximately km 18 on the Salmon River Road;
  • a concept plan by Wilp Dawamuxw (Geel) for a backcountry lodge in the Upper Kispiox;
  • an initiative by Wilp Mululaak for wilderness cabins northeast of Kisgegas accessible by the Shedin Forest Service road;
  • a venture by Wilp Haxsbagwootxw for a cabin-to-cabin hiking infrastructure in the Seven Sisters range; and
  • a feasibility study for a backcountry cultural camp by Wilp Gwininnitxw either on the Sicintine River or the Slamgeesh River (Wilp Gwininnitxw has also purchased a building in Hazelton and opened a retail cooperative for local artists).

3.4 Agriculture

3.4.1 Current Situation

The Kispiox and Skeena Valleys have a climate and soils conducive to ranching and market

gardening make agriculture a small but important component of the local economy. Most of the farming occurs along the Kispiox River between the Hazeltons and Kispiox. The land in use is divided fairly evenly between crop and livestock applications, with beef cattle and forage production prominent. Approximately 500 cattle are raised in the area.  Use of range resources on Crown land in the Kispiox planning area is low, however, as only one fifth of the available 5,000 animal unit months (AUMs) of grazing on Crown land are used each year. Heavy tree cover and distance to main cattle markets make it difficult to establish viable farms. In addition to cattle, there is some lamb and hog production. 

Table 3‑1: Kitimat-Stikine Census Subdivision B Selected Agriculture Statistics, 1996

Horticulture activity has picked up in recent years with vegetable crops and a growing greenhouse sector responding primarily to local demand. The leading crops other than forages, included potatoes, vegetables, and grain. There is also a significant regional production of bedding plants.

The Gitsegukla Band has spent more than $300,000 over the past three years in the development of an industrial hemp sustainable agriculture project. A component of the project involves tours of the hemp fields, processing facilities and retail sales of locally-produced hemp related projects to tourists. The Gitsegukla Hemp Corporation has grown industrial hemp in a test plot for each of the last three years in partnership with Health Canada, the University of Northern British Columbia and the National Research Council.

3.4.2 Market Assessment

British Columbia’s agriculture industry continues to show steady growth in farm cash receipts, net income, and total employment. Farm cash receipts in 2000 could surpass $2 billion for the first time. Despite higher expenses, net farm income is also expected to be higher than in 1999. The BC agriculture industry remains among the most diverse agriculture industries in Canada, producing more than 200 commodities under a wide range of conditions. There are three major challenges facing the industry:

• The trend toward market globalization and rationalization;
• Greater competition to meet changing consumer preferences; and,
• Mounting pressure along the urban/rural interface.

Industry partnerships and public awareness of the value of agricultural activities are essential ingredients in reaching full productivity, boosting profitability, and ensuring long-term sustainability. Closer working relationships between government industry, rural communities, First Nations, and other partners are needed to improve the industry

Major challenges include:

• Rising input costs – particularly energy;
• The need to change attitudes toward risk management in dealing with the unpredictability of growing conditions – such as hail, drought, flooding, disease and insect infestation – or market declines, new regulatory requirements facing many sectors;
• New rules under international trade agreements;
• Increasing public concerns about the safety and quality of water and food products and the way they are produced;
• Anticipating changing consumer preferences;
• Meeting public demand for environmental sustainability and accountability;
• Dealing with greater competition and freer trade within an increasingly global marketplace; and,
• Resolving with minimal conflict the increasing pressure, including urban encroachment, on land and water resources.

Opportunities include:

• Developing new products and specialty markets (e.g., organics, nutraceuticals and agroforestry) and the expansion of exports (e.g., greenhouse products and beef);
• Natural resource strengths, including more intensive use of the Agricultural Land Reserve;
• Making better use of small-lot enterprises;
• Increased market access through community or regionally based production and promotion;
• Capturing intense and widespread loyalty for BC products;
• Using natural competitive strengths (e.g., BC’s international reputation for quality products);
• Expansion and refinement of value-added processing; and,
• Direct farm marketing, on-farm processing, and agri-tourism.

3.4.3 Competitiveness Assessment

The local agricultural sector is small compared to the production capabilities of the southern parts of the province. Even neighbouring regions such as the Nechako Valley have far more capacity for traditional livestock, forage and crop production. Together with the small regional markets, distance to major markets, the short growing season and the lack of transportation services, the environment for expanding conventional agricultural production is challenging.

Expansion into new agri-food, agri-tourism and farm/food marketing programs may hold the biggest potential for the region. The development of market gardens, farmers’ markets, nurseries and value-added, craft food products in recent years has demonstrated the existence of a local demand for locally produced food and with further capital and market assistance some of these enterprises could make the transition to export activities. 

3.5 Minerals, Oil and Gas

3.5.1 Current Situation

The Kispiox region does not have any current mineral production but it does have an exploration and mining history that dates to the 1880s. Base and precious metals have been produced from several underground mines around the Hazeltons, in the Rocher Deboule Range and around Nine Mile Mountain. Some mining activity occurred in the 1970’s and 1980’s when gold and silver prices went up, but currently there are no mines operating.

The Kispiox region is within the Bowser sedimentary basin. Although the basin has not been extensively explored for oil and gas, the potential for hydrocarbons is believed to be moderate to good, according to the Geological Survey of Canada (GSC). There are considerable play potentials for the whole basin in both gas and oil. Renewed interest from the private sector and the provincial government could lead to more active exploration in the near future. The fact that Terrace, Prince Rupert and Kitimat have identified oil and gas and petrochemical production as economic development opportunities could stimulate more interest in developing local resources.

3.5.2 Market Assessment

Mineral exploration and mining has not enjoyed a stellar decade in the province as the number of mines, employment, production and mineral exploration have all been in a downward trend. Several major mines, including Quintette Coal and Sullivan lead/zinc have closed recently and more scheduled closures are coming. Exploration and development activity have been in a steady decline since 1994, partly in response to a poor provincial investment climate but also because of faltering metal and coal prices. Prices for zinc, copper, silver, gold, molybdenum and lead are all lower now than they were in 1996-97. The industry as a group has not registered a profitable year since 1997. Still, with nine metal, seven coal, thirteen industrial mineral mines and one tailings project in operation in 2001 the industry is still a major economic force in the province.

There has been renewed interest in base metal exploration lately and this is expected to continue. The new federal Exploration Investment Tax Credit for flow-through share investors, coupled with the BC Mining Exploration Tax Credit is expected to provide a much needed boost for exploration financing in 2002 and future years. The economic significance of the Eskay Creek mine continues to attract province-wide attention to the potential for precious metal-enriched deposits.

In contrast to minerals and mining, the oil and gas sector, centred almost exclusively in the Northeast of the province, has registered some banner years recently, with record levels of exploration, production, employment, land sales and provincial revenues. In 2000, the sales value of the province’s oil and gas production reached a record $4.6 billion, which was before the landmark Ladyfern gas discovery went into production. Huge reserves of natural gas, coalbed methane and oil have yet to be discovered and the Kispiox area is one area with development potential. Provincial attempts to reduce

red tape, expedite permitting and stimulate the growth of a diverse, thriving private sector economy may bode well for future development.

3.5.3 Competitiveness Assessment

At present, the Kispiox area has few opportunities in either the mining or oil and gas sectors. First, there is a lack of both exploration and development in the immediate area. Second, any future development that may take place is premised on a favourable set of economic conditions, including rising commodity prices and reduced regulatory red tape, neither of which may occur any time soon. Third, the lack of historical activity has left the region with little business capacity to service new activity. And fourth, the region lacks the infrastructure and labour pool to provide a support role for new primary development in the Northwest. In comparison, larger neighbouring communities like Terrace and Smithers have better transportation (especially airport) and business services than the Kispiox. Both mining and oil and gas are difficult sectors to influence at the local level because external factors tend to drive exploration and development. 

3.6 Botanical Forest Products

3.6.1 Current Situation

Commercial harvesting of pine mushrooms is a major use of botanical forest products in the Kispiox FD.  Pine mushrooms are collected in old western hemlock and subalpine fir forests in the Skeena, Bulkley, Cranberry and Kispiox River valleys in the Hazelton area.  Mushroom harvesting is currently unregulated and is permitted on unoccupied Crown land.  Pickers are often secretive about mushroom harvesting locations which increases the difficulty of measuring or managing harvesting.  Permission is required to pick mushrooms on Indian reserves, private land and leased Crown land and picking is prohibited in protected areas.

Pine mushrooms or matsutake are harvested in the fall by local and professional pickers who sell to commercial buyers.  Buying stations are often located in the Kitwanga Valley, in the Cranberry area and near the Hazeltons and Kispiox.  Disturbance of wildlife, damage to picking sites, garbage and lost pickers have been problems associated with mushroom harvesting in the area.

3.6.2 Market Assessment

Pine mushrooms are exported to Japan as a delicacy.  Approximately 450 000 Kg of pine mushrooms with a value of $26 million were exported from Canada to Japan in 1994.  The same year, which was a good year for mushrooms, almost 160 000 Kg of pine mushrooms were harvested and pickers were paid $3.9 million in the Nass River valley including the area around Cranberry Junction. It is estimated that $2.5 million was spent in value added activities related to the trade of mushrooms such as shipping and processing. 

Pine mushrooms receive nominal handling and packaging, and are directly exported to Japanese markets. Some shipments are transhipped through brokers in the United States.  Prices in Japan are set by the interaction of Japanese demand on the one hand, and volumes produced by major market suppliers- primarily in China and South Korea, and to a lesser extent, in Japan itself- on the other.  Prices offered for BC harvests are directly dependent on these Japanese market conditions.  In economic jargon, BC producers are “price takers”.  

Harvesters (pickers) perform the actual harvest of mushrooms. Harvesters then sell their mushrooms directly to buyers at mobile buying stations or established mushroom depots. Before purchase, mushrooms are weighed and graded, with the final price per pound based on these two criteria. Transactions between harvesters and buyers are based almost entirely on cash. No reliable data on income derived from mushroom harvesting exist, in part because the majority of harvesters do not declare their incomes. Some harvesters acknowledge that harvesting can bring significant income. On a good day of picking pine mushrooms, a harvester may earn several hundred dollars; however, many days with little or no success occur during the season.

Many commercial harvesters are nomadic in their patterns of following the natural supply of mushrooms. The natural supply may be determined by rainfall, forest fires or other factors, depending on the particular species.

Buyers typically work as employees of a mushroom company or as contractors to one or more companies. Some of these individuals may be from the local area, but many of them are nomadic.

Mushroom companies usually concentrate on acquiring one or more species. They perform cleaning, fresh packaging or processing operations (for example drying and/or canning) before distributing the mushrooms. Mushroom companies play a major role in establishing field prices, and supplying cash for their purchases. Exporters specialize in domestic and international marketing of mushrooms.

The price for any one species of mushroom may vary significantly across the province. Prices fluctuate during the harvest season, usually being higher when fewer mushrooms are available and tending to decline as availability increases. At the end of the season, when supply becomes limited, prices normally increase. In addition to the supply factor, mushroom size and quality are critical factors in the final price paid to harvesters. Firm, high-quality mushrooms receive higher prices than older, low-quality mushrooms. A six-tiered grading system is presently established for pine mushrooms.

Despite the increasing commercial interest in wild edible mushrooms, domestic markets are generally not well developed. Industry participants have, however, identified two growing culinary markets for wild edible mushrooms. Firstly, ethnic communities in the large urban centres of British Columbia, eastern Canada and the United States use many varieties of mushrooms in national cuisines. Secondly, chefs in specialty restaurants constantly experiment with new varieties of mushrooms to meet customer demand for culinary diversity.

The vast majority of commercially harvested wild edible mushrooms are exported to either Europe or Japan. The pine mushroom, also known as matsutake, is exported almost exclusively to Japan, where it is highly regarded. The markets for wild edible mushrooms are thus highly international in nature, with British Columbia being only one supplier. Japanese markets are especially sensitive to the harvest levels of related species in eastern Europe, Southeast Asia and other global regions.

3.6.3 Competitive Assessment

BC has been very slow to control the wild mushroom harvest or to further exploit it for economic development purposes. In the Kispiox, the industry continues to be essentially unregulated, making it very difficult to project future activity. In contrast, in Washington State, government, industry, landowners and public interest groups have collaborated on providing a better focus for wild mushrooms by: promoting mushroom farming as a cottage industry; planning research on the ecology; habitat and production of mushroom species; and investigating ways to regulate and sustain the resource. A similar approach in BC could give the Kispiox area an opportunity to benefit more from this valuable resource.

3.7 Commercial Fisheries

3.7.1 Current Situation

In the Kispiox FD, the Skeena system is the major watershed into which all major rivers, except the Cranberry, flow.  The Skeena and Kispiox systems provide habitat for five salmon species, sockeye, pink, chinook, coho and chum. In terms of total escapement the Kispiox is the most important, followed by the Skeena, Babine, Bulkley and the Cranberry. The Kispiox contains the largest population of salmon with the pink in greatest numbers followed by sockeye, chinook and chum. The Babine River is the largest producer of sockeye salmon and steelhead trout in the Skeena drainage and next to the Fraser River system, the sockeye salmon population in the Skeena system is the largest in the province.

The contribution to commercial fisheries values from the Kispiox area is unknown.  However, commercial catches have been estimated based on escapements and exploitation rates. The value of the commercial catch attributable to area was estimated at approximately $8 million in 1996. However, because the harvesting and processing of the commercial harvest is performed outside the area, the impacts are realized at the provincial level rather than the local level.

3.7.2 Market Assessment

The annual total value of the British Columbia seafood harvest is nearly $600 million, with finished processed products fetching an estimated total of just over $1 billion wholesale. Exports of British Columbia's seafood products, which in 1996 were valued at $851 million, account for more than half of all food and agricultural exports, and have increased 22 percent since 1991. This industry occupies a very important place in the province's economy.

Salmon is one of the most dominant and important commodities of the entire agri-food industry and usually accounts for about 50% of the total value of all British Columbia seafood products, followed by roe herring, groundfish species and shellfish species. Among exports of fish and seafood products, salmon exports account for over $350 million followed by herring exports at $200 million.

While the consumption of salmon and seafood continues to increase worldwide, BC is only a very small market for the wild product. And after six years of low wild harvests, the aquaculture sector now sells more fresh and frozen salmon than the commercial harvest does. In 2000, world salmon supply reached 1.8 million tonnes, 60 per cent of it farmed. And there is no indication that this trend will change anytime soon. BC’s 12,000 tonnes of wild salmon pales in comparison to the one million tonnes of Atlantics now farmed annually.

Even though low prices and sluggish markets are holding back the salmon industry, consumption is continuing to grow. Established markets like Europe and Japan are developing new consumers, new products and new market niches. In North America, consumption is growing by at least five per cent a year and shows no sign of reaching its limits.

3.7.3 Competitive Assessment

The main issue affecting commercial fisheries potential in the Kispiox is of course the fact that as an inland area, the opportunities are limited. Proximity to either the wild or farmed fisheries is essential and this therefore works against value-added activities being developed in the region. Rationalization in the industry has left only Prince Rupert and the Vancouver area standing as processing centres. In addition, the infrastructure for processing, such as cold storage, is not available locally. There has been periodic harvesting of jack salmon in the Upper Skeena system, but such limited fisheries have not led to any long-term commercially viable enterprises.

Continued conservation problems and concerns for the Pacific salmon fishery also do not favour further commercial development of this resource in the Upper Skeena. Skeena coho have been at risk for years and ongoing concerns for the steelhead sport fishery will continue to pressure DFO to control commercial exploitation. Compounding this situation is the ongoing legal and policy quagmire surrounding the access to the resource by aboriginal, commercial and sport fishery interests.

4.1 Background

In the previous two chapters, we reviewed the recent performance of the regional economy, using statistical and trend data. The purpose of this chapter is to determine the local factors that determine the form of the regional economy. These factors are categorized as strengths and weaknesses. The strengths serve to attract economic activity and the weaknesses to repel it.

There is wide scope for applying a local resource in support of economic activity.  The resources can include numbers and skills of the local work force, amount and accessibility of local capital, availability and cost of energy sources, capacity and kind of post‑secondary education facilities, transportation infrastructure, natural physical resources such as lakes, wildlife and timber supply, etc. Weaknesses include not only the lack of a physical resource but poor infrastructure or the absence of certain attitudes that create a good investment climate. Every community has a long list of weaknesses. The purpose of the SWOT (strengths, weaknesses, opportunities and threats) analysis is to focus on those which are correctable.

Strengths and weaknesses are relative terms because economic development is a competitive process in the sense that persons or businesses can choose where to set up shop. The local factors are classified as strengths and weaknesses relative to the needs of a particular industry and secondarily, to the factors of competitive regions.

Once the local strengths and weaknesses are identified, consideration is given to identifying opportunities and threats. Given the many potential opportunities, the strengths and weaknesses information provides limits on where the viable opportunities exist. The idea is to focus on those opportunities where the region can offer comparative advantages in local strengths.

A SWOT analysis is not an infallible tool. It is very often the case that local residents will set up a business in a community simply because they want to reside there. Their business may or may not be based on the local strengths. Similarly, the choice of business may revolve around personal interests. A SWOT analysis can only take this kind of decision making into account in a general way through data on the skills and education of the local population.

An entrepreneur may ignore business investment criteria and emphasize the value placed on living in the community of choice and/or on fulfilling personal interests. Many proposed business ventures, when analysed from a disinterested perspective, will not appear viable. Nevertheless, they will be implemented and, while not particularly successful in a profit sense, may provide considerable satisfaction to the owner.

A SWOT analysis is a step in moving from the general to the specific. The identified opportunities are simple sketches based on matching strengths and weaknesses with product area or industry requirements. 

4.2 The Role of Previous Community Consultation

The following SWOT analysis is a compilation derived from a review of several sources. The extensive community input obtained through the Action 2000 and Beyond 2000 reports was a key reference. Surveys, interviews and workshops were held involving dozens of stakeholders representing a broad cross section of the community, including industry small business, social services, education, agriculture, forestry, tourism and government. In light of the extensive community consultation over the last four years, it was deemed appropriate for the purposes of this project to digest and interpret this feedback rather than conducting another round of SWOT questioning. Stakeholders have already demonstrated a high degree of commitment to the community economic development process and will be asked about more concrete strategic initiatives, rather than SWOT, when interviewing commences for this project.

Economic development studies and specific sector reports and feasibility studies were a second important resource.

The focus of this project is on marketing and business development initiatives rather than broad community economic development. At the same time, it is a natural resource study. For these reasons, we have confined our SWOT research to issues pertinent to business development in the natural resource sectors.

4.2.1 Strengths

Natural resources - Historically, the economy of the Kispiox area has been based on its wealth of natural resources. First Nations were sustained by the fish and wildlife resource. European settlers were attracted by mineral and timber potential, while in recent times, agriculture, scenic and recreation resources have led to the development of the forest, tourism and fishery sectors, respectively. 

Wildlife resource – In terms of tourism development, it is not sufficient to have the capability for hosting a particular activity such as hiking, canoeing or climbing – there has to be some outstanding natural feature around which these activities can be built. In the Kispiox, salmon and bears are two such critical assets, and because they can be predictably viewed can serve as the foundation for a variety of sustainable tourism projects.

Quality of life - “Quality of Life” (QoL) is a major factor in the lives of residents, influencing not only living and working patterns but also community attitudes and values.  Although QoL can mean different things to different people, it generally implies the presence of a diversity of values and interests covering economic, financial, environmental, social and cultural well-being. 

Transportation services – The Hazeltons and other communities on Highway 16 are well served by relatively modern transportation systems, although the rural areas are less advantaged. Highway, bus, truck and rail freight services are available. 

Proximity to tidewater – Reasonable proximity to coastal ports in Prince Rupert and Kitimat together with a modern transportation system, gives the region quick and convenient access to Pacific Rim markets.

Affordable land and housing - House prices are a key determinant of a community’s QoL and an advantage in attracting certain industries.  Although housing stocks fluctuate, real estate prices in the region are still very reasonable by BC standards.

4.2.2 Weaknesses

Short growing season – The relatively short growing season limits the opportunities available for agricultural production.

Small local market – One way to develop sustainable export businesses is to have them first cut their teeth on the local market. Since the local population base is so small, new business development that provides new jobs and income to the community will have to be based on export activity.

Limited telecommunications – Telecommunications services lag those in larger centres, and some services like cellular and high-speed internet are lacking altogether.

Lack of economic diversity - The Kispiox area is relatively un-diversified economically, which is not unusual for small resource-based communities in BC.  A high dependency on forestry and the public sector is a weakness that is exposed if there is a downturn in either of these sectors. A long-term loss of Carnaby or closure of a government office will create a major economic shock in the community.

Limited business services – New businesses and entrepreneurial activity depends upon accessing support services, be they banking, professional services or key material suppliers. What is often taken for granted in larger centres can be a significant barrier to business attraction and development in smaller areas like the Kispiox where these services do not exist or are minimally available.

High unemployment - Unemployment in the Kispiox area over the last few years has tended to be higher than the BC average, but unemployment levels among young age groups is even higher and perhaps of more concern over the long-term if the community desires to maintain its youth population, and resolve social problems.

Pool of entrepreneurs - The region does not have a large number of entrepreneurs who could take advantage of emerging development opportunities.

Area incomes - Household incomes are low in the region, particularly outside of the two municipalities. This has implications for the local retail and service sector which relies heavily on spending by residents. Additionally, local sources of non-institutional capital are liable to be limited.

Supply of capital - The region lacks local, organized venture capital pools and has relatively lower amounts of funds available for speculative investments. Bank lending has also been reduced to a minimum.

Lack of trained workers - Even though there is a pool of available workers in the region, many happen to be unskilled or semi-skilled and not well suited to new opportunities in knowledge-intensive economic and business development.

Lack of political influence - The location of the Kispiox area, together with its small population base, contribute to a lack of political influence in the region, not only at the federal and provincial levels, but also at the regional level.  

4.2.3 Threats

Demographic change – The aging population will have implications for most communities in the province, including those who will attract retirees and those who lose them.

Loss of manufacturing capacity – If SCI Carnaby turns into a permanent closure, then this will represent a tremendous loss for the community, in terms of jobs and community income, as well as opportunities for value-added manufacturing. This is because one of the best ways to encourage value-added is through close linkages with primary producers. If there is less primary production in the Kispiox, then this potential linkage will be weakened. Present trends suggest that manufacturing capacity and Crown tenure in the Northwest will gravitate to fewer, larger, more capital-intensive facilities. Once the woods flows are “rationalized”, communities which do not have the facilities will be hard-pressed to repatriate the economic benefits of out-flowing timber resources.

Provincial tenure reform – The provincial government is reviewing Crown timber tenure legislation and policy because of pressure from the US as well as a general malaise in the forest industry. Tenure reform could threaten community access and control of Crown timber, or it could present opportunities.

Provincial government down-sizing – The provincial government plans to slash its workforce by up to 11,000 jobs over the next three years and this could result in a significant loss of regional government offices and staff. This has negative economic consequences because of the lost employment and income, but it also affects local access to Crown resources if decision-making is centralized in Prince George or Victoria.

Fisheries management  - Legal and policy changes surrounding the salmon fishery are a major concern for the region. The balance between conservation and commercial development is a delicate one. At stake locally is the sport fishing sector, other tourism activity that depends indirectly on the fishery and on wildlife populations that have a salmon diet, the native food fishery and any potential expansion of the inland commercial fishery.

Unresolved land claims - Overall investment performance in BC is neither robust nor widespread. This primarily reflects the state of demand for goods and services in the economy, but provincial surveys repeatedly show the lack of progress on land claims to be a problem. Investors, business people, and entrepreneurs are attaching additional levels of risk to investments in natural and land-based resources and this simply raises the costs of doing business.

Consistent land access - Many houses (Wilp’s) do not want various land and resource-based opportunities identified (inventoried); this can be problematic due to overlapping territories and overlapping of activities in each area. Again, attracting investment for new business development will be difficult without a consistent set of land access policies.

Out-migration of youth - High youth unemployment and the low level of job creation in the regional economy means that there are fewer job opportunities for new labour force entrants.  Should this situation persist, then the community risks either losing parts of this population segment to larger centres or to increasing social problems.

Inter-community relations – There is a pre-occupation with human relations in the region, whether they be between natives and non-natives, different communities or competing interest groups. This threatens the community’s ability to look beyond itself to the outside world where it must compete for its future economic prosperity.  

4.2.4 Opportunities

The following list of opportunities was gleaned from existing documents and our own understanding of economic potential of the area. It is by no means exhaustive and will be added to and refined before the short-listing process begins.

• Trade shows and fairs
• Migration program for HBB to come downtown
• Carnaby mill and tenure purchase
• Forestry cooperative
• Value-added wood manufacturing - has to be tied to some source of local advantage, either a low-cost supply of lumber or other asset.
• Eco and FN certified forest products
• Community Forest Tenure
• Silviculture company
• Native plant nursery
• Herbal production
• Greenhouse nursery/garden
• Business/value-added incubator
• Retirement village or complex
• Destination resort or lodge (e.g. sweat lodge or spa)
• Expansion of 'Ksan
• Agri-tourism (e.g. berry/mushroom tours)
• RV park in Hazelton
• Develop Hagwilget - craft building, totems, food services and tram to lower bench
• Outdoor adventure product development
• Skeena riverboat tours from Hazelton to Prince Rupert