Natural Resources Committee on Dec. 12th, 2011

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

In a situation like this, where the application could potentially shut down resource development in a huge area, are you ready to respond? Or is it a situation of this being a small enough part of the market that some places will need to make sacrifices and other places will step up and defend the industry?

[Avrim Lazar]

We're ready to respond. When I say “we”, I mean the industry and the environmental groups.

When we're dealing with this politically, the environmental groups in, say, Manitoba and Saskatchewan would say that huge amounts of intact forest have to be left for the caribou. Industry would say that no one is going to find another job if we shut the mills, and we have to leave the caribou aside and harvest what we need. What the boreal agreement says is that both sides have to sit down, not to fight it out but with maps. We have been doing this in Ontario. We've been doing it in Alberta. We're starting in Quebec. We have not started in Saskatchewan or Manitoba yet.

We sit down with maps and say, okay, here's the forest: this is the fibre supply and this is the caribou habitat. Is there a maximum solution that minimizes the impact on caribou and minimizes the impact on jobs? Can we find the sweet spot?

Sometimes you can protect the caribou with really no loss of jobs.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Is your process fast enough to be able to respond? You talk about these processes. I can see people sitting and talking while they need to be responding.

[Avrim Lazar]

We can speed it up. We have chosen areas where the risk to the caribou is highest or where the economics are most dire. We have focused on them.

One of the reasons—

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

It would seem that your focus on this issue should be in Saskatchewan.

[Avrim Lazar]

One of the reasons we can't do it all at once, frankly, is that we just don't have the funding. You'll notice in our request for the next budget that there is an extension of the LEAF program. A specific request is that the program be revised so that we can use it for problem solving in the boreal. That is exactly how we would use the money. We would use it to accelerate the planning process.

We need government funding for what we call a solution space. We cannot use industry money to pay for the environmental groups. They just get too uncomfortable. What we need is government money. We're getting some from—

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Should the taxpayers be paying for that if industry won't and if the groups themselves won't?

[Avrim Lazar]

The taxpayers are the ones who are going to pay for it anyway if you try to do it through regulation. We'll give you better solutions, faster, that will be more enduring. We're not talking about megabucks. We're talking about a couple of million dollars a year. And it will accelerate the process.

If the government invests in the solution space that brings us together, we'll spend all the money on doing our homework and on actually negotiating. That's a place where you could have a very practical impact right now. Some of my companies operating in those areas have asked us to accelerate that. We're trying to find ways of doing it.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Anderson. Your time is up.

Monsieur Lapointe, for up to five minutes. Go ahead, please.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chair.

I find this willingness to sit down and find a solution with industry representatives and environmentalists quite positive. It is wonderful.

At times, there has been not so much a contradiction as much as an imbalance in everything you have said so far. On the one hand, you said that what the government decided to do was very clever. But, on the other hand, you said that, in comparison with our biggest competitor, the United States, the government did not do enough.

How could we have been clever while, at the same time, doing enough to offset what was happening? How much would that be investment-wise? In your expert opinion, how can we do that without having a slew of complaints on our hands because of the lumber agreements? There has to be a way to find a balance.

[Avrim Lazar]

Those are excellent questions.

I must point out that it is not just a matter of balancing intelligence and money. It is also necessary to avoid

a deepening of the deficit. Where is that bliss point between investment, deficit control, and strategic...?

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

That's what I'm asking. How can we be clever but do enough, and not do more in a stupid way?

[Avrim Lazar]

Our answer is that there are two parts to the current government programming. There is A base, which is old programming, and B base, which is new transformative stuff. If the government has to cut, we're saying look at the legacy programming. But the new programming, which is the stuff for environmental reputation, market development, green transformation, and all of that stuff, should be continued, not cut, because it's all sunset, and some of that stuff could be enhanced.

I'll give you an example. The IFIT program is for bringing new technology to market readiness. I think it was $100 million. We had applications....

What was it?

[Catherine Cobden, Vice-President, Economics, Forest Products Association of Canada]

It was $2.5 billion.

[Avrim Lazar]

That's projects ready to go.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Without having tons of problems, without tons of whatever....

[Avrim Lazar]

Yes.

That could be refurnished. I'm not saying $2.5 billion, but it could certainly be $300 million or $400 million. It would be used in a way that transforms the industry—for R and D, in the labs, the forest products innovation institute. Again, the funding has been extended, but it could be extended for a longer time, because research programs take time, and it could be increased very usefully.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Very often, people—and not just people in your industry—say that research and development support is always yearly. But that does not seem to work. When a researcher starts working on something complicated, they need to know whether they will be funded for two, three, four or five years, the period of time necessary to produce something. That is a handicap for the lumber industry. You need to know the amount of research funding you are going to get for the entire period required to find applications for your research, without having to go and ask for the money every year.

[Avrim Lazar]

Yes, and I'll go one step further. Unlike many other research programs, this one translates into jobs quickly. We used to have the universities, the institutes, and the industry all apart. Now we've integrated all the research institutions under one, under the guidance of the industry, so the research is focused on things that have the most impact on jobs. It's very highly leveraged in terms of economics.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Do I have a minute left, Mr. Chair?

[The Chair, Conservative, Leon Benoit]

You have a minute and a half.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I want to discuss a second aspect. In my riding, there are some good players who have done a lot to diversify. Maibec, for instance, has worked hard. And despite everything, they are worried about being able to survive, given how long it is taking the Americans to get back on their feet.

We have heard some legal opinions, but do you think that we could put minimal levers in place if things go wrong? We don't want to lose that expertise. We need to help them hang on for another two years, because when things pick up again, we will need those players who are already on the cutting edge of wood product transformation.

According to some legal opinions, it would be possible to help them hang on through a loan guarantee, which would help them survive even though they are in rough financial shape.

Would you be in favour of taking a transparent approach and setting up a program to keep these people afloat if the situation in the U.S. lasts another two or three years? That would keep them from going under during that two-year transition period, which, unfortunately, seems quite likely.

[Avrim Lazar]

We've been debating loan guarantees for many years inside the industry. We have two problems with them. One is—and we don't say this outside that much, but it's the truth—if you have three companies and two of them can make it without a loan guarantee, they don't want the other company to be helped through, because there's overcapacity, and in the end we want to come out of this terrible time stronger and more competitive. All of my member companies have agreed not to ask for loan guarantees, not because they're not suffering—they'd love the loan guarantees—but because in the end the loan guarantees are inevitably subject to parts of the political process and they stop the normal transformation of some people going out of business and others having a better time.

The other is that we're absolutely certain that they are actionable under the softwood lumber agreement.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Lapointe.

Mr. Trost, you have up to five minutes.

[Avrim Lazar]

We can talk more later.