Natural Resources Committee on Feb. 24th, 2015

[The Chair, Conservative, Leon Benoit]

Good afternoon—

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. Chair, before we start with witnesses, could I have the floor?

I wish to table a notice of motion, to the effect:

That the National Energy Board be convened before the Standing Committee on Natural Resources for two hours prior to March 31st, 2015 to explain: 1) why the deadlines to apply for the Financial Aid Program (February 23rd , 2015) and for the status of Intervener or Commentator (March 3rd 2015) in the NEB Hearing Process for TransCanada's Energy-East Project were established despite the fact the TransCanada Energy-East Project route does not appear to be final; 2) what measures will be implemented by the National Energy Board regarding who can participate in the event TransCanada modifies its project; and 3) how will the National Energy Board act to ensure that Canadians have access in both languages to all the information provided by TransCanada as it relates to the Energy-East project.

I have a copy in both English and French to pass to the clerk.

[The Chair, Conservative, Leon Benoit]

Ms. Duncan, you're giving us a notice of motion.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

I'm simply providing you with notice of motion.

[The Chair, Conservative, Leon Benoit]

Okay. Thank you.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

I have a second motion. I may as well get it on the record.

[The Chair, Conservative, Leon Benoit]

This is a notice of motion.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

This is a notice of motion:

That the Committee invite the Honourable Greg Rickford, Minister of Natural Resources, to appear before the Committee regarding the Supplementary Estimates (C) 2014–2015, before March 13th, 2015 and that this meeting be televised.

I also have a copy in both languages for the clerk.

Thank you.

[The Chair, Conservative, Leon Benoit]

We'll now get to the business of the meeting today. We are continuing our study on the renewal of Canada's forest industry. I believe this is our fifth meeting on the study.

We have with us today four witnesses. As an individual, we have Ying Hei Chui, professor and director, Wood Science and Technology Centre, University of New Brunswick. From the Canadian Association of Forest Owners, we have Christopher Lee, managing director. We also have, by video conference from Vancouver, British Columbia, from Forestry Innovation Investment, Ken Baker, chief executive officer; and from Vancouver again, from the B.C. First Nations Forestry Council, Keith Atkinson, chief executive officer.

Welcome, everyone.

We'll have the presentations in the order they are on the agenda, with the exception of Mr. Baker's. He'll be arriving a little late, so we'll have his presentation last. If we could, we'll go ahead with presentations for up to seven minutes, starting with Mr. Chui from the Wood Science and Technology Centre, University of New Brunswick.

Again, thank you so much, all of you, for being here today to give us input, which I'm sure will be very beneficial to this study.

Go ahead with your presentation, please, sir.

[Dr. Ying Hei Chui, Professor and Director, Wood Science and Technology Centre, University of New Brunswick, As an Individual]

Thank you, Mr. Chairman.

Good afternoon, everyone. It's a privilege to appear before this committee as a witness to provide remarks and answer any questions you might have related to forestry.

My name is Ying Hei Chui. I'm a professor of wood technology and engineering at the University of New Brunswick. I'm part of the faculty of forestry and environmental management. I'm currently director of the Wood Science and Technology Centre at UNB. In 2009, I was chosen by the Natural Sciences and Engineering Research Council of Canada to lead a national research network on innovative wood products and building systems, now known as NEWBuildS.

I have over 30 years of experience in conducting and managing research on wood products and wood building construction, and 27 of these 30-plus years have actually been in Canada. Therefore, my opening remarks here will be on how innovation helps transform the wood products industry and create market opportunities for the industry. I will start with the Atlantic Canadian situation and then move on to the national situation

The Wood Science and Technology Centre at UNB is the only wood products research facility in Atlantic Canada, and it performs a critical innovation support role to the wood industry in the region. The centre assists, on average, about 30 to 40 companies per year with their innovation needs. Most of these companies are from Atlantic Canada, and some are from other provinces or the U.S.

The types of technical services we provide include development of new products, solving process problems, and seeking product approval for companies in Canada and overseas markets. Our ability to continue to support the wood products industry in Atlantic Canada is under threat to some extent. Because of the retirement of faculty members, we have lost our critical mass.

We were delighted to see that the Standing Senate Committee on Agriculture and Forestry, in a 2011 report, recommended that:

...the Canada Research Chairs, the Natural Sciences and Engineering Research Council of Canada and Natural Resources Canada, work with Canadian universities and the forest industry to establish four...research chairs in the design and construction of wood buildings, to be located in the Maritimes, Quebec, Ontario and Western Canada.

Today, we've seen research chairs established in three of these four regions, but not yet in the Maritimes. I believe a research chair in wood building, design, and construction in the Maritimes is critical to help the Atlantic Canadian wood product industry capture the opportunities created by the recent changes in building codes to allow mid-rise wood construction.

At the national level, the NEWBuildS research network, led by me, consists of 23 professors from 13 Canadian universities. The NEWBuildS network was established with funding support from the forest sector R and D initiative announced by the federal government in 2008.

The goal of the network is to develop technical information that supports the use of wood products beyond single-family and low-rise residential building construction, which has traditionally been the major end-use market for Canadian wood products. This is largely because of the restrictions imposed by building codes requiring buildings to be lower than five storeys.

It has long been recognized by the industry that overdependence on the narrow scope low-rise residential construction market has made the industry vulnerable to external factors outside of its control, such as housing styles, commodity pricing, and exchange rates. Diversification into other applications such as mid-rise building construction has been a major goal of the Canadian wood products industry for a number of years. Through research conducted by organizations such as FPInnovations, the National Research Council, and universities, the wood products industry has managed to convince the building code authorities in Canada to increase the height limit for wood buildings from four to six storeys.

The Government of Canada should be commended for providing the research funding to allow this research to be conducted in order to make this building code change possible. More importantly, the funding provided by the federal government actually helped bring the Canadian universities, FPInnovations, and the National Research Council together to form a large Canadian innovation network that is now the envy of the world.

In the field of innovative wood products and building systems prior to 2008 and 2009, Canada was essentially a follower and adopter of technologies and knowledge developed elsewhere. Now we are considered a world leader in this particular discipline. Although we have made significant inroads from low-rise to mid-rise building construction, I believe the potential is there for wood to be used in taller buildings and this view is shared by a lot of experts as well. At the global level, we have now seen the completion of a 14-storey wood building in Norway. Currently there are at least three tall wood building projects that are currently at the design stage in Canada. The significance of this breakthrough project is that we can demonstrate to end users that, along with concrete and steel, wood is a viable structural material for tall buildings and massive structures.

I believe the foundation has been laid for Canada to be a leader in developing competitive solutions for tall wood buildings that can be used both domestically and in export markets. The potential economic benefit for Canada can be enormous. However, there are still major technical challenges ahead of us and we will need to continue to innovate and keep the innovation network functioning in order to sustain the momentum to move ahead of our competitors. This will require governments, universities, industries and research organizations working together to achieve this goal and we have demonstrated through the mid-rise wood building initiative that by working together we can achieve great results collectively, such as making the changes in building codes possible.

So, Mr. Chairman, I look forward to discussing opportunities and approaches with the committee today on how we can sustain Canada's position as a world leader in innovative wood products and buildings solutions.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Dr. Chui, for your presentation

We go now to Christopher Lee, managing director of the Canadian Association of Forest Owners. Welcome to our committee, sir, and go ahead with your presentation.

[Christopher Lee, Managing Director, Canadian Association of Forest Owners]

Thank you very much for the opportunity to appear before the committee.

As you said, I represent the Canadian Association of Forest Owners. About 92% of the forest land in Canada is publicly owned; the other 8% is privately owned and totals about 25 million hectares. A hectare is roughly 100 metres by 100 metres, or two football fields side by side, just to give you a scale. Of this 25 million hectares, 20 million is owned by 450,000 woodlot owners, whose average property size is about 40 hectares. The other five million is owned by companies like J.D. Irving, Wagner forest products, Acadian Timber, Island Timberlands, TimberWest, and other large industrial forest landowners. These are mainly the companies that make up the Canadian Association of Forest Owners, or CAFO.

CAFO members also manage 15 million hectares of public land. CAFO works closely with woodlot owners and farmers, and we share many of the same issues and challenges with these other rural landowners. All CAFO members are certified to one or several forest certification systems, and all are subject to the same regulations you see on public land: protection of water supply, fish and wildlife habitat, soil conservation, and other requirements. There's a legal requirement to reforest, and landowners are subject to penalties, audits, and public reporting.

Private forest lands make up 13% of the managed forests of Canada. They're located in some of the most productive sites in the country and are very well managed. As a result, this 13% of managed forests produces 18% of the forest products of Canada, contributes $7 billion to our GDP, and supports 80,000 jobs in rural Canada.

Private forests are also very productive in terms of wildlife and fish habitat. As a result they tend to attract the attention of wildlife and fisheries managers looking to protect habitat, and set aside portions of the forest to maintain critical habitat and ensure the recovery of species at risk. Forest owners fully support and spend millions on habitat management and protection, and are willing to work with governments to enhance protection.

The challenge arises when officials come onto private lands, sometimes without notice or approval, and begin to identify habitat. Once habitat is identified, it places a de facto restriction on what the owner can do with or near that habitat, reducing flexibility and options on their own land.

CAFO members seek to work with government to identify habitat and develop ways to protect it. They're willing to share the information they have about their lands. They want to avoid situations where they must set aside large areas to protect habitat regardless of the health of populations either on their land or elsewhere, despite the fact that it's private land where owners are trying to operate businesses and maintain the value of their asset.

CAFO members want government to adopt a two-step policy when identifying critical habitat. Step one would be to first identify habitat on public land and then, if necessary and with the knowledge and consent of the owner, identify habitat on private land. This approach ensures the involvement and support of landowners. It builds a relationship whereby the landowner is willing to share the extensive knowledge and information they have about their land without the fear that sharing that information will result in even more restrictions being placed on them.

CAFO has begun discussions with Environment Canada to develop conservation agreements under the Species at Risk Act. The idea is to recognize the efforts landowners already make to protect habitat, and avoid penalizing owners by adding further restrictions or imposing fines if mistakes happen and habitat is inadvertently damaged or species are harmed. Such agreements would be subject to annual, external, third-party audits under forest certification schemes. For forest owners, this would add a great deal of certainty to their business. For government, it would give them the assurance that habitat is being protected, while the audit function ensures that the work is being done and that any necessary corrective actions are identified and carried out in a timely manner.

The challenge we face with these agreements is that landowners manage habitat across the land base, not habitat for species A or species B. For government, the Species at Risk Act requires that if a species is identified as being at risk, a recovery strategy is required and very specific measures and actions are developed. This results in several actions for several species all on the same land base. This quickly becomes complicated, very expensive, and very difficult to measure in terms of success or failure. Our preferred approach would be to manage the land base, protect habitat, and verify that protection through annual audits.

I want to raise log exports on behalf of CAFO members with the B.C. Private Forest Landowners Association. This is a B.C.-only issue, but it seriously restricts their ability to conduct business. Log exports are subject to a surplus test in B.C.; in other words, logs can only be exported if they are surplus to domestic needs. This requirement makes logs available at a lower domestic price and affects the ability of the owners to assure foreign buyers of the volume, species, quality, and timing of the logs that they wish to purchase. There’s a large surplus of logs available to the domestic market, but this requirement remains in place. We would not consider a restriction on the export of raw wheat and a lower price for wheat producers in order to subsidize the domestic bread industry.

The softwood lumber agreement is coming up for renewal very shortly. The price of lumber affects the price of logs, and CAFO members are interested in providing their perspective in the softwood lumber agreement negotiations. CAFO is seeking recognition for private property rights and a distinction between public land and private land. We are looking to work with government, develop arrangements that are in the best interests of wildlife, and provide assurances that landowners will not be penalized for providing information about their land. Owners in B.C. are seeking to have restrictions on log exports removed and to participate in softwood lumber discussions.

All of these arrangements that I’ve described will provide certainty for business and allow forest owners to invest in their land, grow higher-value products, and generate further economic activity across the country.

Thank you.

[The Chair, Conservative, Leon Benoit]

Mr. Lee, thank you very much for your presentation.

I'm going to keep the presentations in the order that I indicated at the first of the meeting. We'll go now to Mr. Atkinson, chief executive officer of the B.C. First Nations Forestry Council.

Go ahead, please, with your presentation, for up to seven minutes.

[Keith Atkinson, Chief Executive Officer, B.C. First Nations Forestry Council]

Good afternoon and thank you. It's my pleasure to be here to speak to you on behalf of the First Nations Forestry Council. Although we've been asked to speak on the regional economic development theme, you'll hear aspects of all three themes in this presentation.

We believe that the relevance of first nations in your current study has never been more paramount. With this in mind, I would like to bring the committee's attention to the recent Supreme Court of Canada decision on Tsilhqot’in. This most recent decision has been discussed as a game changer in that it has brought a clearer definition of title as it relates to first nations lands, which is clearly important to a renewed forest sector.

Our understanding of the work of this committee today begins with reflecting on work done and recommendations made in your 2008 report, “Canada's Forest Industry: Recognizing the Challenges and Opportunities”. We wish to remind the committee that the First Nations Forestry Council did participate as a witness providing input into that report and we supported the recommendations that were put forward. Some of the 23 recommendation were very specific to the first nations and aboriginal peoples of Canada.

Specifically, we agreed with planning for first nations to become more active partners in the sustainable development of Canada's forests. We agreed to and expected renewed participation in land use planning efforts. We had already begun and were pleased to support increased attention to the value-added sector. Of particular note, we supported a recommendation on direct funding for the protection measures needed in our communities—aboriginal communities—regarding the forest fire risk associated with the mountain pine beetle epidemic.

I'd like to point out that these recommendations were not singular, but rather very strongly echoed in multiple action plans and commitment agreements at the time. It is now the 10th anniversary of the B.C. “New Relationship”, which had expressed a new vision of coexistence and reconciliation of title and rights in this province. The First Nations-Federal Crown Political Accord was also penned in 2005, committing the parties to promote a meaningful process for reconciliation towards improved quality of life, including policy transformation. The Transformative Change Accord, also in 2005, committed B.C., Canada, and first nations leadership to close the socio-economic gap between first nations and others in B.C. Then more recently, in 2008, a B.C. round table recommendations report was completed, and first nations becoming partners in forestry was one of the six priorities of that work. Within our own communities and within our organization, the First Nations Forestry Council, we completed the “B.C. First Nations Forestry and Land Stewardship Action Plan” in 2008. This was a plan for transforming the forest sector with our involvement and participation.

So after 10 years of commitments to this high-level engagement and participation and clearly good intentions being described on paper, we are suffering a shortfall in the realization of these goals. The primary involvement of the sector has been through provincial forest consultation and revenue-sharing agreements—that's in British Columbia. These agreements offer revenue sharing and forest tenure opportunities in exchange for a consultation process that enables the industry to operate within first nations territories.

Currently over 160 of our 203 nations in the province are engaged in these agreements and they hold over 10 million cubic metres of annual harvesting rights. Although this volume allocation sounds significant, and it is over 12% of B.C.'s annual cut, it does not deliver the benefits our communities are striving for. Regardless of this, it is important to note that our communities are eagerly making the effort to participate in this sector at some of the worst times the sector has seen, I might add, including the 2009 economic crash, the U.S. housing crash, and the impacts of the mountain pine beetle epidemic making it hard on the industry overall.

It's also important to note that revenue sharing under these agreements over the past 12 years represents approximately 3% of the revenue collected by the crown. As forest products cross into the U.S., additional resource rent is charged: the softwood lumber agreement tariff. We're aware of this and we're aware this revenue is not shared in the revenue-sharing agreements we currently hold.

Although this revenue sharing and tenure opportunity has been a good start and we're eagerly participating in it, a continued effort and incremental change is needed to properly recognize aboriginal title and rights. Better solutions are required for capacity building and forest management, and governance roles in particular, over forest lands.

When it comes to the fuel management issue regarding our communities and forest fire risk, direct funding has been made available for community fuel management assessments. However, the costs associated with the implementation of these treatments has not been available. The significant changes in budgets reduced meaningful money for the implementation of these prescriptions. This leaves our communities at continued risk of forest fire, which is an unacceptable health risk to our citizens. We have a First Nations' Emergency Services Society in B.C. that's taken the lead on this work, and we encourage your committee to reach out to that group to hear more specifically about the forest fire hazard.

I should note that the primary involvement of first nations as tenure holders is not involvement as partners in sustainable management of Canada's forest lands. It does not represent meaningful participation in land use planning. It is a simple economic opportunity to participate in the logging sector.

I'm switching gears a bit to the HR concerns. The Forest Products Sector Council did its reporting in 2011. Although we continue to struggle with meaningful programs that support the scale of workforce replacement that is upon our sector, aboriginal youth can be the replacement workforce that is clearly needed in the next five to 10 years. However, without real planning and investment, this opportunity could be missed.

Investments in restoration of the land or fuel management treatment, as discussed, are tremendous opportunities for building capacity in forestry-related business and could serve as a transition to the skilled aboriginal workforce that the forest sector requires. Similarly, major resource projects like natural gas lines can be tremendous catalysts for new and emerging workforce participants. This type of short-term project workforce demand needs to be planned and coordinated with the sustainable forest sector needs.

First nations have shown tremendous interest in being participants in the forest sector. However, there is an obvious lack of wealth for investment purposes. A renewed manufacturing sector or stimulated value-added sector are almost out of reach, considering the lack of access to capital for our communities.

We view innovation efforts of late as being focused on finding new global markets to replace the previous U.S. demand. Although it may not be abundantly clear, we feel that the lack of meaningful relationships with first nations represents a tremendous barrier to investment in the forest sector. It represents a risk of uncertainty to investors. Strong relationships with first nations can lead to globally certified wood products or other value-added products. For those of us who wish to see a renewed forest sector for Canada—and we certainly are part of this group—a forest sector that is inclusive and respectful of aboriginal peoples in Canada is imperative.

First nations are eager to be part of this new sector. It requires investment in these communities for stewardship and planning; operational and management support; targeted workforce programs; access to capital for local investment into new manufacturing and value-added facilities, including bioenergy; and of course, a policy framework that will accommodate this support.

Let's move past denying the title and rights that aboriginal peoples hold, and past the shallow commitments that look nice in reports but have inadequate scale with the financial resources that are called for. Inadequate and inappropriate levels of investment in aboriginal communities is costing Canada in the slow recovery and renewal of the sector.

We feel a strong and healthy relationship with our communities will bring prosperity for all in a renewed forest sector in Canada.

Thank you very much for allowing me to share this perspective.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Atkinson, chief executive officer, B.C. First Nations Forestry Council.

Finally, we go by video conference, again from Vancouver, to Mr. Ken Baker, chief executive officer of Forestry Innovation Investment Limited. Go ahead, please, sir, with your presentation for up to seven minutes.

[Ken Baker, Chief Executive Officer, Forestry Innovation Investment]

Thank you very much, and thank you to the committee for inviting me to offer some input today.

I'd like to explain the context for my involvement in this particular arena and then offer you some rather personal editorial comments on the scope of the committee's work.

The terms of reference of the committee, as I understand it, say that it is seeking expert opinion on how industry and different levels of government can continue to support the forestry sector. That is the essence of the functionality of the organization I work for, which most people refer to as FII, so I'll be referring to it as FII.

FII is a provincial crown corporation. It was created in 2003. For years we reported to the Minister of Forests, but for the last year and a half or so, to the new B.C. Minister of International Trade. The Minister of International Trade specifies our mandate, which is refreshed and updated once each year.

As a crown corporation, we are funded mostly by the province. We have a budget this year of $17 million from the province, and we have attracted about $2 million a year in revenue from other sources, primarily in the forest industry. Our programming, our funding, is completely discretionary from year to year.

Our prime focus is on stimulating the demand for B.C.'s solid wood products wherever we think opportunities are apparent, anywhere in the world. Our main focus is in North America and in northeast Asia. We have a subsidiary company in China, with about 14 employees. Two years ago we established a subsidiary company in India, with half a dozen employees, and we have one here in Vancouver, with 21. That gives you a sense of scale. We're not huge, but we like to think that we punch above our weight.

Our function is partly to be a funding agency, in the same way as Natural Resources Canada is on behalf of the federal government. But also we direct-deliver a lot of programming to fill in what we think are apparent gaps in the market development world or to do things that we are best placed to do on behalf of this sector as a whole.

Our organization, as a crown corporation, has nothing to sell. We don't sell forest products. In pursuing the government's priorities, we have to make sure we are closely aligned with those of the industry, because only the industry has product to sell, obviously.

As some of you may know, 70% to 80% of the harvested timber in B.C. goes first to a sawmill. Our focus happens to be very largely on solid wood products, including value-added products. We support the pulp and paper industry with communications material about sustainable forest management that they use in the marketplace, but otherwise our engagement with pulp and paper manufacturers is very limited. We're a very solid wood centre.

Half of our budget goes to trade associations and a few other not-for-profit organizations through some competitive calls for proposals. We invite people to propose to us what they would like to do with our money on a cost-share basis. We have an annual call for market initiatives that has a global reach. We have a secondary, much smaller competitive call for what we call “wood first” activities in the province of B.C., which are aimed at making the province a global leader in innovative manufacturing and use of wood products.

Our funding to trade associations, which as I mentioned, constitutes about half of our cashflow, is intimately melded with coincident funding from Natural Resources Canada to the same trade associations. But we have a very harmonized federal-provincial system of managing that entire program, from the competition for funding each year, through administration, and right through common audits. We have daily conversations with trade associations and numerous firms, as well as with NRCan staff in Ottawa.

Our focus in North America is primarily on trying to encourage greater use of wood products in non-residential construction and multi-family construction, including a wide range of value-added products and including the promotion of new building technology, such as a 14-storey wood structure that you heard about earlier from the first presenter.

Our biggest collective success so far—and I emphasize “collective” because this is a unique tripartite arrangement among the private sector here in B.C., the provincial government, and the federal government through NRCan—has been in China, where initially, in 2003, we were selling 69 million dollars' worth of lumber, and we're now selling 1.4 billion dollars' worth of lumber a year. That's 30% of British Columbia's lumber production now. This has not only made a home for that volume, but also, through added consumption around the world, has increased the price of lumber worldwide very dramatically, including in North America.

In Japan we're mostly in a holding action in the face of a declining and aging population and declining demand for what British Columbia firms have to offer. We have a small play in Korea as part of a diversified portfolio, and currently we are updating some research in Vietnam, Thailand, Indonesia, and the Philippines. We don't yet know where that might lead us.

We have a little effort under way in Europe, but not much, and none whatsoever in the Middle East, South America, Africa, or places like that.

Finally, our newest frontier, as I mentioned at the outset, is India, where we've established a subsidiary company because we think there will be opportunities there in the coming five-year period or so. We do virtually no business there now, but we think it will grow dramatically in the years to come.

Our business model puts a strong emphasis on collaboration with industry and NRCan. Because we're spending public money we have to be very disciplined as a public agency in pursuing a diversified portfolio of activities. We do take a longer-term view than the industry does. Typically we take greater risk in spending public money, but we think it's still quite disciplined.

We base our priorities and our strategies on considerable research that we invest in at the outset. We always focus on customer needs around the world and the logical fit with Canadian suppliers. We always assess the competition, and sometimes we decide not to go somewhere because we don't think we will be able to compete in the long run.

We prefer to share the cost of programming with others so as to test the validity of people's ideas and priorities. We are very open to changing course when we think that's appropriate, and we keep a close eye on all the metrics of what's going on in the marketplace.

That's the business model that I am somewhat responsible for in the organization I work for.

From a personal perspective, I would assert that the forest industry can and should make a tremendous contribution to our society because it is fundamentally sustainable and increasingly friendly to the environment. By definition it is very important to our rural societies across the country.

I believe that when most people talk about the forest industry they are thinking of the logging, sawmill, and pulp and paper industries, which is accurate as far as it goes, but I'm happy to see that the committee is thinking in terms of the broader forest sector, which includes not only logging and manufacturing but also firms that supply the equipment that loggers and manufacturers need, firms that supply the daily input materials to those parts of the industry, firms that create the software that they use, firms that transport their products, firms that develop forest management tools such as satellite remote sensing, firms that provide firefighting services, and so on.

In Canada we do fairly well in some of those areas, but not in all. For example, my perception is that we in Canada have become very dependent on foreign suppliers of logging and manufacturing equipment, and that is something I would like to see rectified.

I wish my definition of the forest sector could include entities that actually manage forest land, but to be honest, I don't think such firms truly exist on most forest land in British Columbia. That's because it is public land on which companies have harvesting rights, but they're essentially hunter-gatherers on public land. There's not much incentive to actually manage public timber resources or other forest resources well. I think that's because none of it is monetized. Trees are not on anyone's balance sheet when they're on public land. They're not even on the provinces' balance sheets. Harvesting rights are monetized but not the standing timber itself. The same goes for wildlife, non-timber forest resources, water, scenery, etc.

None of it is monetized until it is liquidated and thus I think that husbanding those resources inevitably is dependent on regulation rather than incentive. What I'm talking about of course goes to the never-ending conundrum of how to design and implement a better forest tenure system on public land. That's a huge question that I think is beyond the purview of this committee. I think it's going to be profoundly influenced by basic changes in the first nations arena, at least here in B.C.

As with any sector of our economy, government's role is to set the table in ways that encourage the private sector to step up. That's what the organization I work for tries to do in the marketplace. I hope the committee can come up with measures that do the same in our public forests and in our forest-product manufacturing industries. Doing a good job of setting the table requires sound policy based on robust knowledge, fiscal discipline, and taking the long-term view.

Finally, I would like to say that the solid wood sector is in reasonably good shape in the west after weathering the worst ever downturn in markets. What worries me the most is the precarious future of our pulp sector if it doesn't reinvent itself by becoming the forest-based equivalent of the oil refining industry.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Baker, chief executive officer of Forest Innovation Investment Limited.

Thank you all again for your presentations.

We go now to members. In the seven-minute round, we have the Parliamentary Secretary to the Minister of Natural Resources, Ms. Block, followed by Mr. Rafferty, and then Mr. Regan.

Go ahead, please, Ms. Block. You have up to seven minutes.

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

Thank you very much, Mr. Chair.

I join the chair in welcoming you here today.

This is a very interesting study. We are just getting into it but we did start by taking the opportunity to review the study that was done back in 2007. We certainly came to understand the imperative for the industry to begin a transformation and also to recognize that innovation and commercialization were going to be the key to that transformation.

I look back at the introduction from the report in 2007. What the committee undertook to do was to seek to contribute to the implementation of a market-driven action plan that would make it possible to lay the groundwork for the industry's renewal, prosperity, and sustainability. That's really why we're here now taking a look back at that study. Seven or eight years have passed and we're trying to get a really good grasp on what has taken place since 2007. I have a sense that things have changed and that there's been a lot of progress in the industry but recognize that there's still much to be done.

I want to ask my first question to Mr. Chui.

I understand that the University of New Brunswick is the only university in Atlantic Canada that has that concentration of strength to provide support to the wood industry. I understand that you have received funding from NRCan through the value to wood program. You did state that the university performs a critical support role to the wood industry. I want to give you an opportunity to speak a little bit more to that support role that you play.

[Dr. Ying Hei Chui]

Thank you very much for the question.

The centre was actually established about 23 years ago with some government funding. The intent at that time was to provide a service to support the wood product industry in Atlantic Canada. Over time the idea was that the centre would become self-sustaining. This is how we've been operating for the last 22 or 23 years, which is to provide services and bring in revenue to support the technical side of that and in turn serve the needs of the industry.

Over time, as I mentioned in my remarks, on average we supported about 30 to 40 companies per year with their innovation needs. This would include helping them develop new products, finding opportunities for products in domestic and overseas markets, testing a product that would eventually allow a company to get approval by the building code to be used in building construction, and so on. This is the role we have played over the last 22 or 23 years. At the same time, being part of the university we also have a function to produce what we call highly qualified personnel like graduate students who in turn go out and work for the wood industry, design companies, and so on. Essentially, we perform and function as a technical support agency as well as producing human resources that would support the wood industry as well.

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

Thank you.

I want to follow up on a comment Mr. Baker made towards the end of his presentation, but my question is actually for Mr. Lee. Mr. Baker made the observation, which I thought was rather interesting, regarding land management on public lands. I'm thinking the observation may be different when it comes to private lot owners. I know you represent the private lot owners here today, so I'm wondering if you have any observations to make with regard to what Mr. Baker said about incentivizing versus regulatory management.

[Christopher Lee]

Thanks for the question.

First of all, I agree with Mr. Baker completely that the resources from the forest, including trees, including wildlife, including water and soil, aren't monetized. Because they are public assets, the access to any of those things can change depending on how the province decides it wants to allocate that. There's very little incentive to intensively manage most forest land on public land. It's a difficult challenge, and I think it's a problem right across the country.

The other side of that argument, of course, is that it is public land and you need to have the province—the landowner—maintain control and make sure things are being managed in a sustainable way, and that other parts of the forest ecosystem are being treated with equal emphasis.

I guess I would say I agree with him, and I would also make the point that you make, that private forest land is managed in a much different way, which is why, as I mentioned, only 13% of Canada's managed forest is privately owned, yet that 13% produces 18% of the forest products in Canada because it is much more intensively managed. Owners can make that investment without fear of someone saying that's good work but that wood is now going to be allocated somewhere else or that they no longer have access to that portion of the land base, which happens from time to time on provincial crown land.

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

I'll just follow up. I think you said that 8% is privately owned, and that's 25 million hectares, but that the private lot owners also manage 15 million hectares of public land.

[Christopher Lee]

The members that I represent do. They also manage 15 million hectares of public land, so a lot of those people have the same kinds of issues. They're dealing with managing the property they own, and they manage it in conjunction with provincial crown land as well. So there are challenges on both sides of that equation for the people I represent.

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

And that's right across the country?

[Christopher Lee]

Yes, it is.