Natural Resources Committee on Feb. 12th, 2008

[Jim Farrell]

It is a cumulative number.

Maybe I could just add to that. We have a database tracking the job losses, and in any week there are mills that close and open. So those numbers are pretty close.

[Catherine Bell, NDP, Vancouver Island North, BC]

Okay, thank you. I just wanted to clarify that.

I come from Vancouver Island north, of course, where we just had an announcement last week that another mill is closing, putting 257 mill workers out of their jobs. Attached to that, or right next door, is a fibre mill. They make very high-quality paper for magazines, and we're concerned about the future of that mill once the contract to supply fibre runs out for the mill company. So there's huge concern all over the place.

We're seeing lots of logging happening, which is great, but the problem is the logs aren't being milled in our communities. And there's more and more concern that we're becoming a nation of exporters of raw resources, and the value-added is not there.

So I'm glad to hear you say there is hope for the forest industry—some in British Columbia have written it off, or are writing it off. I'm an optimist and I think we can turn this around.

I'm really curious to know about the value-added. First I want to know what percentage of the softwood lumber we export. We have the dollar value here, but does that include raw log exports, or are those separate? What incentives are there for value-added in the fibre portion of it and also in the wood products?

I think I'll just leave it there for now, because that will take a few minutes.

[Jim Farrell]

As I am sure you're aware, Mr. Chair and Ms. Bell, there are federal and provincial restrictions and tests that must be met in the export of raw logs from public as well as private lands. I'm the first to admit I'm not an expert in that area; it's managed by the Department of Foreign Affairs and International Trade through their import-export bureau. The committee may want to gather a bit more information on that, but there are certainly requirements to get permits and meet tests.

In the recent past, from what I recall on the statistics, the volume of raw log exports has increased. But it is a relatively small percentage of the volume of softwood lumber we export, not only to the U.S. but offshore as well.

On incentives for value-added, if I've understood the question right, you're wondering whether or not the department has programs and provides incentives for value-added manufacturing.

[Catherine Bell, NDP, Vancouver Island North, BC]

Are you aware of any?

[Jim Farrell]

Yes. We have the Value to Wood program, and it has two dimensions to it. It moves research that relates to secondary manufacturing to the shop floor more quickly, and it provides expert advise in the mill to mill owners and operators about how to improve their efficiency. It's a partnership between ourselves, most of the provinces, the regional agencies, FPInnovations, and four or five universities across Canada.

It has been in place since 2002, and we have over 35 industry advisors. They are people who have spent a lot of time in the forest products and wood products business. They go out to visit these small operations, which generally have between 10 to 50 employees, to give them advice on how to improve their productivity. It has proven to be quite an effective program, and we've had a lot of feedback in the evaluations we've done about its effectiveness.

More generally, I know that some provinces have put in place policies that offer opportunities to value-added manufacturers. There are also some timber allocation policies around making timber available to secondary manufacturers. For the details on that I'd have to defer to my provincial colleagues, but there is quite a preoccupation with increasing the value of production out of the forest products industry in the country.

[Catherine Bell, NDP, Vancouver Island North, BC]

I've heard from sources that once the Campbell River mill closes, 112 sawmills will have closed in this country. That creates a problem. They make lumber out of raw logs. That's not quite value-added, but it's manufacturing, and it's those jobs that we're losing.

If we're talking about value-added and we don't have any sawmills left, what do I tell these people? What hope is there for them if we continue to see more and more mills close? There's a mill down island that's in jeopardy as well, and this is something that's happening across the country. I want to know how we turn that around. What kinds of programs or anything are you looking at?

[Jim Farrell]

I have a lot of compassion for people in small communities and forest-dependent communities. I started my career in 1975 in a mill town of 800 people in northern Manitoba, and, remarkably, it is still operating. Since then I've lived in a number of places in northern Saskatchewan and northern Ontario where the mills have closed, so I certainly understand how important they are to rural communities.

As the deputy mentioned at the front end of the presentation, a number of global issues have conspired to fundamentally create economic shocks in the global industry. But we're hearing more locally about the housing market in the U.S. That market, unfortunately, is forecasted to remain soft through 2008 but to pick up again in 2009.

[Catherine Bell, NDP, Vancouver Island North, BC]

Why is there a market for raw log export and not lumber?

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Bell. Your time is more than up for questioning for now.

Just before we go to Mr. Harris, Mr. Farrell, you mentioned you're tracking job losses. We're just starting this study, and it would be interesting to get this information, if you have it, Ms. Doyle or Mr. Farrell. Are you also tracking how many people who've lost their jobs in the forestry industry obtain jobs either in the forestry industry or elsewhere? Can you track where they obtain those jobs when they are re-employed and how long these workers remain unemployed?

[Jim Farrell]

We have been tracking closures, and we have also been tracking the numbers of employees who have been affected as a result of those closures. We have not tracked any parallel study, in terms of tracking those individuals as to where they've ended up in terms of the economy. We can provide the committee with that data on the front.

You may well be inviting representatives from Human Resources and Social Development Canada. I know they tend to keep a very close eye on the labour market and labour market statistics. They might be able to give you a better view of what that looks like over time, over the last 24 months or so.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

We go now to Mr. Harris, for up to seven minutes.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you, Mr. Chairman.

Mr. Farrell and Ms. Doyle, I'll ask a pine beetle question, just to clear up a misconception that may be present, and it's a result of your brief, Ms. Doyle, where it says the government is providing $200 million.

I think you will recall or confirm that the Prime Minister made a $1 billion commitment over 10 years to combat the spread of the pine beetle as well as to mitigate the damage. In the 2006-07 budget, the government did make the first installment of $200 million on that $1 billion, which was over two years. One would expect another commitment in this upcoming budget.

The government has provided a commitment of $1 billion and has provided $200 million of that commitment. Do you agree with that?

[Cassie Doyle]

Mr. Chair, I do agree. And just to clarify, the $200 million figure is the amount provided in Budget 2006.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

That's what I said, yes.

As well, there was $200 million—

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

I didn't understand the witness's answer, Mr. Chairman. The interpretation did not come through.

[Cassie Doyle]

Yes. To clarify, the $200 million figure is the amount provided in Budget 2006.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

As part of the $1 billion commitment.

[Cassie Doyle]

The $200 million is provided in Budget 2006, and I am aware of a commitment that was undertaken of $1 billion.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you.

In the 2006-07 budget, another $200 million was provided for ways to better manage our forests, to combat forest disturbances, to look at innovative other ways. You know that $200 million?

[Cassie Doyle]

Yes.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

How much of that has been spent? Is any of it left?

[Jim Farrell]

Mr. Chair, the $200 million Mr. Harris refers to was designed to target three broad areas. One was innovation, a second area was markets, and the third area was an allocation made to HRSDC around an older worker pilot, a national pilot. I can say all those funds are committed. The funding continues into next fiscal year, 2008-09, and then wraps up at the end of 2008-09.

What is unspent, I would offer, are the allocations that have been dedicated to the next fiscal year, but they are committed funds on those three areas.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Right. Thank you.

In your presentation you've correctly identified the reasons why we're in this forestry crisis--certainly the rising Canadian dollar, the housing market, higher energy costs, etc.--but also in there, as I'm sure you know, is the fact that many sawmills and pulp mills in Canada kind of sat back on their technology over a number of years. When the cost-of-production crunch started to come, they were the ones that were most affected. So the mills that kept ahead of the technology can now process wood far more effectively and more cheaply than those that didn't.

Ms. Bell knows that on Vancouver Island—and I'm not being critical—those mills were not technologically upgraded for many years, unfortunately. Had they been, they may still be operating now. So that would be a really good thing to push on the island, to have those mills brought up to the technology standards of some of the interior mills.

I have one other thing. Did you say that this new program is a $127 million forest technology program?

[Cassie Doyle]

Mr. Chair, it's the long-term forest sector competitiveness strategy. One big component is innovation.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

So it would have some similarities with respect to the $200 million that Mr. Farrell just described to us--research and development, innovation, things like that?