Natural Resources Committee on Feb. 17th, 2015

[The Chair, Conservative, Leon Benoit]

Thank you very much.

We'll go now to the Parliamentary Secretary to the Minister of Natural Resources, Ms. Kelly Block.

Go ahead, please, for up to five minutes.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Thank you very much, Mr. Chair.

I want to join my colleagues in welcoming all of you here today. It's been a really good discussion, and I appreciate what you bring to the conversation, definitely.

Mr. Lindsay, you said that, since the report of 2008, there has been progress on the journey of transformation in the forestry industry, but you also said there is more to be done, that we can't rest on our laurels. I know from your 2010-12 Vision 2020 report card that the industry is expecting further renewal. Maybe this ties into a little bit of what my colleague was asking you, and you can tie back to it. Would you be able to expand on what that further renewal is, what you envision for the industry in the future, and perhaps what programs are in place or what programs you envision that are going to help you to get there?

[David Lindsay]

In the forest industry, we cut down the trees and try to use the whole of the tree. The history of innovation in the forest sector has been—again my colleagues on the video screen could give you much more detail than I—to move from 60%, 70%, 80% to now over 90%. We're now at over 95% usage of the tree. We use the whole of the tree, whether it is in making bioenergy or these new chemicals and new products. Using the resource as efficiently and effectively as we can is the mantra that we have in our industry.

A lot of our equipment is old. A lot of our technology has been dependent on old products or products that are no longer popular. It's no secret that newsprint is not as popular as it was, so we need to invest in upgrading the equipment we have and in new equipment.

There was one specific program with which the government did help the industry, when the United States brought in the black liquor subsidy, as some of you may recall. My counterpart in the United States said it didn't believe in subsidies, but the black liquor benefit seemed to be quite good for my American friends. The federal government brought forward something called PPGTP, pulp and paper green transformation program, and our companies were able to upgrade and invest in equipment to reduce the environmental particulate matter, reduce smells, and increase the use of energy. It was a good investment in some of our base equipment.

Then the IFIT program, investments in forest industry transformation, is for new first-of technologies.

We need to do more of both. The foundation of our industry is still the mills and the forest harvesting practices. We need to continue to invest in that. My colleagues at FPInnovations are continuing to look at new innovations to be globally competitive and keep costs down so that we can hire the workers to make those products. That is the beginning of a conversation that's happening in every board room of every one of our companies right now. They're making those business decisions, and sometimes first-of investments are scary. Sometimes they don't work, so any help to spread the risk or mitigate the risk is always appreciated.

[Kelly Block, Conservative, Saskatoon—Rosetown—Biggar, SK]

Really quickly, can you comment on the biomass and bioproducts industry? I note in the report from 2008 that a number of witnesses stressed the importance of rapidly developing this industry. Where are we at with the biomass industry?

[David Lindsay]

Catherine is the engineer.

[Catherine Cobden]

I will say that the vision remains powerful. We must continue the spirit of the recommendation in 2008. We must continue on that journey, and it's linked directly, Ms. Block, to the desire to extract maximum value from every tree we harvest.

We are still able to extract more value from current harvest levels, and of course, there is always the question of whether you do more with the land base. That's for our friends in the CBFA world and in our environmental community to help us with, but the essence is that we are....

Pierre has painted the journey of these innovations that are going on, and if there is anything that I would love to ask the committee to stay focused on, it is that transformation journey. We're painting the portrait that things have improved in the last 12 months, and certainly in the last few months, but the pressures are going to continue, so let's not lose sight of that long game and let's continue to seek it.

[The Chair, Conservative, Leon Benoit]

Thank you.

We go next to Mr. Caron, then to Mr. Leef, then to Ms. Duncan.

Go ahead, Mr. Caron. You have up to five minutes.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

I want to thank all the witnesses for their informative presentations.

I will begin with Mr. Lindsay.

When the committee conducted its study in 2008, the Canada-U.S. Softwood Lumber Agreement had been in effect for two years. Based on my knowledge of the industry, I remember that the content of that agreement was not really unanimously accepted. However, it was welcomed because even a bad agreement or an agreement that can be argued about is better than no agreement at all, as the case was at the time and prior to 2006.

The agreement is supposed to expire by the end of the year, and I would like to know whether the association has any recommendations regarding the agreement's renegotiation and renewal.

Do you think the status quo will be maintained by both countries or will they have to start fresh?

[David Lindsay]

Thank you very much, Mr. Caron.

My French is not very good, so I will respond in English if you don't mind.

It's an excellent and very timely question.

The softwood lumber agreement is scheduled to expire at the end of this year. There will be a year of standstill. We're all free-traders and we believe in open markets. It has worked relatively well and has brought stability to the sector. It was and remains the hope of our companies that we can, in our vernacular, roll over the agreement for a number of additional years. We're hearing less than optimistic messages from our friends in the United States. It's not clear what they're going to finally do, but I know trade officials that we've been speaking with have a mandate to talk to our friends in the United States about rolling over the agreement, and we're supportive of that stance. I can't predict what's going to happen in the United States and what the American industry is going to do.

The world is very different than it was in 2006, and the market has changed. Our companies' footprint on the continent has changed. There are more Canadian companies that own U.S. facilities, and there are more international markets—we talked about China and elsewhere. So we're in a different dynamic. It would be my hope that we don't go back to the bad old days before 2006. If we could convince our American friends to have a rollover of the agreement, that would be our preference.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

It still takes two to tango.

Based on your discussions with your U.S. partners, would you say that they don't want an agreement and would simply like this to remain a grey area, as was the case before 2006?

Will the U.S. put forward any specific demands that could influence Canadian industry?

[David Lindsay]

I think our friends in the United States are very competitive and will obviously be looking for what's in their best interests. I can't predict what they're going to do.

In our view the negotiated agreement of 2006 had compromises on both sides to get to where we did get to. If we were to enter into another round of negotiations, we believe we would end up very close to the same spot. We're still trying to convince them that we're in the forest products industry, not in the trade law business. Usually what happens is that the trade lawyers make the most money in these types of negotiations.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much. I have about a minute left.

Mr. Lapointe, in my research leading up to the committee meeting, I looked a bit into FPInnovations' partnership work. I noted that a lot of good and worthwhile work had been done, especially in terms of cellulose. However, I saw less work relating to biomass, and more specifically the wood pellet industry. Some work had perhaps been carried out in that area, but it was less apparent to me. Yet European industries are increasingly setting up in Canada to produce wood pellets and export their product directly.

Can you summarize what is being done in that area, tell us in what projects FPInnovations has participated and what the outlook for wood pellet production in Canada is?

[Pierre Lapointe]

Thank you.

One of the issues with wood pellets in Canada, especially in Quebec and Ontario, is their cost. That high cost makes competition difficult. However, as long as European countries are subsidizing wood pellet production, it will only be profitable for those with lower wood-related costs.

In Ontario and Quebec, very little work has been done because the business plan is unworkable. For all sorts of reasons, the situation is not the same in British Columbia. The research was basically carried out on production processes. Be that as it may, wood pellet production is not profitable in eastern Canada.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Caron.

We go now to Mr. Leef for up to five minutes, please.

[Ryan Leef, Conservative, Yukon, YT]

Thank you, Mr. Chair. Thank you to all our witnesses. It's great to have you here.

It's been a very interesting study so far. I think that to see where we want to go it is important to look back at where we've been. I know Mr. Rafferty on the NDP side wanted to paint a little bit of a picture for the record, and talk about some of the numbers, and then imply, clearly, that somehow when the Conservative Party formed the government the bottom just magically fell out of the barrel. He completely forgets the fact that between 2006 and 2011 there was a minority government in which everybody was working together, and the NDP would have to have some hand in any of that equally if they were going to play that kind of game.

It might be interesting to move away from the direct partisan games they're attempting to play here, and refresh us again on what's going on in the market. What was going on at the time? What have been the real challenges in 2005, 2006, up to the 2008 crisis that occurred? Then we can start to really look at how we avoid those similar things as we move into the future.

I think that is the ultimate objective of the committee study now, to identify clearly what went on, and if there was a hand that government played, then we need to expose that and know that so we can avoid it. If that's not the case, I think we need to skirt aside what's more than typical from the NDP side here, focusing on partisan attacks.

If you could comment on that, it would be great to hear.

[David Lindsay]

I was in the partisan business many years ago, so I won't continue your line of partisan comment.

I would point out that we had two economic forces happening: one structural, the decline of written materials and newsprint; and one cyclical, U.S. housing starts. Those were global, international, forces acting on Canada's forest products industry. The Canadian dollar was over par, and that caused our products to be more expensive. There were a number of external factors.

Our industry brought forward the Vision 2020 process and recognized we can't just blame others. We need to actually embrace the future and embrace the opportunity.

Something we haven't talked about at this committee yet today, which I think is very important to remember, is that we are competing with other producers that are also growing. Their governments are investing. The Brazilians and others are investing considerably in their forest products industry. We have people who want to undermine our brand as a Canadian industry, so we need to work collectively to continue to support the green credentials we have, the good work the Boreal Forest Agreement people are doing.

I went through the effluent reductions, and particulate matter reductions, and GHG reductions. We have a good environmental record as a forest products industry in Canada, and we need the provinces and the federal government to stand beside the industry, to help continue to defend that.

[Ryan Leef, Conservative, Yukon, YT]

Is that undermining occurring domestically, or internationally, or a little bit of both?

[David Lindsay]

I think it's a function of a number of things. There are some groups, which Aran alluded to that have left the CBFA, that have an agenda they want to pursue. There are others who make products that are in competition with Canadian forestry, so they will make comments in the marketplace. Defending our credentials—

[Ryan Leef, Conservative, Yukon, YT]

That's a good point. If the governments can support getting the education piece out, that would be helpful to industry, and highlighting, and celebrating, really, your environmental record.

That leads to a question I have, because invariably the criticism will come. How do we brace ourselves for what we know will be inevitable? When you talk about your carbon footprint and your green, renewable record, of course the protection of boreal forests are important in the country. There's the promotion of the preservation of that and the value of trees in terms of their carbon storage. What is the industry doing now to prepare for forest management education for the general public?

Highlighting forest management can be done in a manner that will retain the important carbon storage piece and boreal forest protection for wildlife habitat, etc., but still be a renewable contributor to the development of the forest sector industry. What role can we play, as a government, to help you do that?

[David Lindsay]

It's an excellent question, Mr. Leef.

I'm actually going to signal to my colleague, Aran O'Carroll, because some of the issues you raise are part of the Canadian Boreal Forest Agreement. I will throw it to him in a minute.

Only in Canada do we have a federal-provincial conversation every time we talk policy. The provinces own the trees. They have a role to play. The federal government, as the face of the Canada brand, has a role to play to tell our story. We have a good story to tell, and if we don't tell it, nobody else will. The governments are partnering with the industry. The industry pursues this agenda with its customers all the time. They are telling their story about our carbon footprint and about the renewable resource. It's a very positive story to tell.

Again, the forest management practices are among the best in the world. Yale University did a study a number of years ago about the calibre of Canada's forest management practices. Again, it's third party validation, among the best in the world. We have more third party certified forests than any other country in the world, by an order of magnitude. I didn't bring the chart with me but my colleagues can validate the numbers.

We have a strong environmental footprint. We need to tell our domestic audience and our international audience the good story. I know that the CBFA wants to help us do that.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Leef.

If someone would like to ask a question to allow the CBFA a chance to respond, that would be great, but I don't control that.

We now have Ms. Duncan, followed by Ms. Perkins, and then another New Democrat member of Parliament.

Go ahead, please, Ms. Duncan.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you.

I want to thank all the panellists too. It's too bad that we couldn't have these two handsome gentlemen on the screen here with us in person, but I appreciate your testimony too.

I have a question that I'd like to put to both Mr. O'Carroll and Mr. Lindsay. It relates to the earlier testimony by Mr. O'Carroll. He very kindly provided us with a map of the progress of your boreal initiative.

I notice that in northern Alberta you show an area of suspended timber harvest. I've seen the maps over a time span of, say, 40 years, maps of the disappearance of the forests in Alberta, the vast majority of it due to conventional oil and gas and now oil sands development. I'd be interested to hear what kind of progress is being made in an agreement for Alberta.

I'm also interested in hearing from the forest sector on any concerns you might have about losing the potential for the jobs and revenue due to the loss of forest cover in the fossil fuel sector.

[Aran O'Carroll]

Thank you for your question. I'll start and then throw it to my colleague.

One of the foundations of the Canadian Boreal Forest Agreement was a commitment from the forest industry to suspend the harvest in caribou range. In fact, they suspended harvests in some 29 million hectares representing 98% of boreal within the caribou range to allow us the space and the time to find solutions to the challenge of woodland caribou conservation. It was a critical commitment from the industry to the environmental community.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Right. In Alberta?

[Aran O'Carroll]

Yes, including in Alberta. However, as we know, in Alberta there's a cumulative effects challenge, and the forest industry in Alberta is but one footprint on the Alberta boreal forest. The leadership the forest industry has shown in Alberta is getting the attention of the oil and gas sector. As I mentioned, we have draft recommendations that we're in discussions with the oil and gas industry about for northeastern Alberta.

We're working elsewhere in the province to expand those solutions, but it's a very complicated challenge. Every square metre of Alberta has up to 18 interests on it, as I'm sure you know well.

With that, I'll pass it on to Mr. Lindsay.