Natural Resources Committee on Feb. 24th, 2015

[Dr. Ying Hei Chui]

As I mentioned in my remarks, right now the building code has generated an opportunity for the wood products industry, because now we can build taller buildings. If we don't have a chair with the technical expertise to help local designers and builders capture that opportunity, I think we will lag behind the rest of the country in terms of benefiting from that change to the building code.

[Geoff Regan, Liberal, Halifax West, NS]

Mr. Baker, let me turn to you.

In this sector is there a way of assessing the degree of value added to wood products? Is there an accepted scale, or is it simply dollar value per weight? What can you tell me about that?

[Ken Baker]

The value-added arena is very complex. I guess I can illustrate that by pointing to the major trade association that represents the broad spectrum of value-added manufacturers in British Columbia. It's an organization called BC Wood Specialties Group. It's very well-established. It divides its lines of business into, I think, seven different categories, everything from log homes to engineered wood products to cabinetry, and so on. It's a very diverse array of manufacturers and product lines. The only common denominator is sales revenue. You can't aggregate the volumes of output of most of those product lines, so the common denominator is sales.

We focus heavily on exports. I think exports of value-added products, according to the harmonized code, are on the order of $2 billion a year from B.C. That sector has had a real shakeout, unfortunately, since the big collapse in demand in the United States after 2007, and many firms have gone out of business. It seems to have stabilized and is in a rebuilding mode now.

Our perspective out here in British Columbia is rather narrow, because we don't have the hardwood resource underpinning the value-added sector, as you do in eastern Canada. We have virtually only softwoods to deal with, and that situation lends itself to a different array of products and so on. Nevertheless, as I say, the sector is rebuilding and is optimistic.

Its markets from western Canada are overwhelmingly in the United States; secondarily, I would suggest, in Japan; somewhat in Europe; of course, in Canada as well. But promoting the interests of that sector requires quite a different approach from that for promoting the interests of primary producers.

[Geoff Regan, Liberal, Halifax West, NS]

While I look for a definition of different stages of value added, it sounds as though we're talking about logs—I won't call them “raw logs” and will try not to do that anymore—or else something that has some value added.

Is there no more definition than that? Is it just logs versus everything else; is that fair to say?

[Ken Baker]

It's a very subjective matter, I would say. I hearken back to an experience I had maybe 15 years ago trying to define a population of value-added firms in the province—and you're right, it proved to be very difficult—to see who is adding value through a complicated distribution chain. But in your gut you know that it's all about the final revenue generating as much as possible per cubic metre of the timber harvested at the front end.

[Geoff Regan, Liberal, Halifax West, NS]

Sure; I think that appeals to members of the committee. We all share, I think, the desire to see the maximum value received for Canada and Canadians—and for our workers, especially—from every bit of fibre that we harvest.

But let me turn to Mr. Atkinson, if I may, and ask you about whether or how you have seen first nations benefit from new innovations in this sector. Are you satisfied in that regard?

[Keith Atkinson]

Thank you for the question.

I would have to say that innovation in the sector doesn't directly satisfy what our leadership is looking for. I made the comment in my report that of recent days and years, we've seen innovation mostly to be finding new markets internationally. That success obviously supports our success as well because of our eagerness to participate in the sector. We need a healthy, robust market for the success of any of our new and expanding first nations forestry companies.

The innovation that I focus on, that I'm looking for, is how to reinvent the manufacturing sector. I differentiate value added as the primary breakdown, such as manufacturing for sawlogs, and then the other value added, where we're doing more than just that primary. There's a tremendous opportunity for first nations to contribute to that and be part of that economy as partners, as true partners and business co-owners. We're trying to find ways to get into that.

If we can, I think the other innovation is that we actually complement the global marketing access by having the indigenous peoples as partners. As true partners in the sector, we can globally market that value added or access to new markets, that kind of thing.

So there's definitely the innovation need, the new technology; we have to do more. I'd go all the way back to our leadership goals and values around stewardship. They suggest that we'd want to see less timber harvesting on the land base and more non-timber values protected, because we have those as community values, and they're of much higher value to these other resources, although not financial. Therefore, we absolutely want to see added value with reduced timber utilized.

We have been involved and have tried to engage in value-added opportunities, in building that into rural B.C. and our communities, and in finding a way, but it's very challenging to do that.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Regan.

We start the five-minute round now with Ms. Perkins, followed by Mr. Leef, and finally Ms. Duncan.

Go ahead, please, Ms. Perkins.

[Pat Perkins, Conservative, Whitby—Oshawa, ON]

Thank you, Mr. Chairman.

I thank all of you for presenting today. I've been finding this whole communication piece very interesting over the last few weeks. Today there's been a little bit more of an expansion on a dialogue we had last week, which was about the success that seems to be there in the Orient.

I think you made a statement, Mr. Baker, that the biggest collective gain has been in the Chinese market. You further went on to explain that about 30%, I believe you said, of the B.C. lumber product is going in that direction. You also started talking about other places in that general area, India and other places.

How do you see this growing? Do you have a sense for where this is going and how big it might become?

[Ken Baker]

Thank you for that question.

It's important to always remember that a wide array of forest products lend themselves to different applications in different competitive circumstances around the world. The China effort was focused on primary lumber, primarily from our interior industry, to a lesser extent from our coastal industry, which is a very different kettle of fish, with different product lines and so on. But that's in parallel to numerous other activities in what I refer to as a diversified portfolio. The kinds of things you do to promote the interests of the industry as a whole are very different when it comes to lumber going into China or cabinetry going into the United States. They're completely different audiences, with different communications tools, priorities, strategies, and so on.

So it begs quite a diversified approach.

[Pat Perkins, Conservative, Whitby—Oshawa, ON]

I suspected that this would be very true. I was just trying to get a sense of whether or not this has been a very large expansion of the market, such that you think you've gotten to the point where that's where you are and you're not going too much further, or whether this is the tip of the iceberg, so to speak. Are we looking at there being much more expansion?

[Ken Baker]

The big success in China has been our lumber, and I think we've peaked out on the volume from the B.C. industry, or at least from western Canada, because a certain amount goes into China from Alberta as well. I think we've peaked out in volume, and now we are shifting our focus to trying to increase the value proposition in China to get a higher unit price for different applications.

[Pat Perkins, Conservative, Whitby—Oshawa, ON]

Is there anything technology-wise we can work on with them that would increase the value added?

[Ken Baker]

Yes, technology in the sense of building systems in China.... The big spend in China has been introducing North American technology for building with wood, as opposed to using it for upholstered furniture or crates or industrial packaging or something. That's sophisticated technology.

[Pat Perkins, Conservative, Whitby—Oshawa, ON]

Mr. Chairman, I'll ask the professor to expand a little bit on some of the comments he made.

You were talking about the growth of the building industry, with some expansion of the building codes, and so on. We've been having several pieces of dialogue about that with various people. One thing that seems to be the main barrier that people are seeing is the fact that we don't have engineers and architects who are being taught in our universities how to design with wood or what the merits of wood are. It doesn't seem to be the mainstay for anything over four storeys.

Do you see the academic world changing soon enough to embrace this?

[Dr. Ying Hei Chui]

That is a chicken-and-egg situation to some extent. I have personally seen an increased interest in students taking wood design courses at university.

When I first came to Canada about 25 years ago, there were a lot of civil engineering departments that had wood design courses, and they all gradually fell away. They were initially core courses, then became elective, and then no one took an interest. I am now seeing students taking an interest in wood design. One of my post-docs is actually teaching a course at UNB on wood design, and that's an elective course. A few years ago he probably would have had 10 students; now he has 50.

I think the word is out there that wood building is coming on stream to become equivalent as wood is considered, as I mentioned in my remarks, a viable building material along with concrete and steel.

On the teaching side of departments, because of the interest in wood building, I think I have seen more civil engineering departments across the country renewing their retiring faculty with professors with expertise in wood. I think the network I'm leading, which created that interest for university professors to get involved in wood building research, actually helped that.

I think we are moving in the right direction, and I think we are getting more professors interested in wood design and more student interest in wood design. I think that has to be part of the puzzle if you want to increase the.... You're perfectly correct that we are not just providing a product, but we need to have the designers who are actually capable of doing the design.

[The Chair, Conservative, Leon Benoit]

Thank you.

We're going now to Mr. Leef, for up to five minutes.

[Ryan Leef, Conservative, Yukon, YT]

Thank you, Mr. Chair.

Mr. Atkinson, I would be interested to talk to some of the businesses and organizations in the Yukon when we have a chance. I'm the member of Parliament for that territory.

I know some of the things they're working on. You touched a bit on the forest fire work that was there, and I'm not sure if you were touching on specific programs. I know that in the Yukon the territorial government has a FireSmart program. I think some of that funding comes from the federal government. I'm wondering if that is one of the programs or if there are others you are referencing with respect to forest fires.

We've touched a bit, more broadly across the country, on the impact of fires in terms of our ability to develop programs around that and utilize before consumption, or what to do with the dead standing forests that exist in our timber inventory. I wonder if you could expand a bit more on that specific piece of your introductory remarks.

[Keith Atkinson]

Yes, thank you for that question.

I raised that point because back in 2008 we were very actively involved in federal transfer funds to the province, and the mitigation effort that was going to happen, the previous commitment for 10 years of mitigating the mountain pine beetle epidemic—and most of it was about mountain pine beetle, from my perspective.

We went to our communities to identify the priority activities they wanted to see, and overwhelmingly it was safety of their community from the forest fire hazard that was created by the standing deadwood from the mountain pine beetle. We embarked on fuel management reduction assessments for the communities, community wildfire safety plans, and then we ran out of money. The money got recalled and we weren't able to do the treatment work. Some work does continue, primarily at the provincial government's expense, and it's doing that for rural communities and first nations. But it's at a much reduced level and there's a significant risk for decades to come standing in front of our communities. That's what I was referring to.

[Ryan Leef, Conservative, Yukon, YT]

I think, probably similar to most rural or remote parts of Canada, a lot of the communities are small to medium size. Do you know if there's any work being done through the groups you work with, or your group especially, to identify a timber inventory and perhaps the value of biomass in those areas? I know some of the small communities in the Yukon have looked toward biomass potential for community heating. These are markets where you could actually, for lack of a better word, get away with trying that sort of smaller scale modelling of alternative heat sources. Are you aware of any of that going on in your communities now?

[Keith Atkinson]

Yes, absolutely. In fact, as an organization, we did partner a number of years ago with the BC Bioenergy Network, which generously offered some resources for us to participate in looking at small-scale combined heat and power bioenergy facilities for first nations. We have more than 50 remote communities in B.C. that are on diesel generators, surrounded by the woodlands, in which we could be installing these units and transferring to green energy.

We started a pilot project with Kwadacha Nation in the north, and that's taken many years. It's been very challenging to navigate mostly the policy environment of BC Hydro in the province and Aboriginal Affairs Canada's on-reserve polices, and trying to coordinate that so we could switch from diesel generators to a bioenergy source. It's a very real, very good opportunity for small rural communities, and we're eager to try to find a way to get back into that realm of research and investment. It's a really good one.

[Ryan Leef, Conservative, Yukon, YT]

Referring broadly to everybody here, anybody who is inclined to answer or is interested, given Mr. Atkinson's comments on that piece—and I know I'm focusing largely on a domestic market here—we've talked about innovation and finding those markets or utilizing the product we have, but utilizing the product that exists in our country also depends on identifying and sometimes developing that consumer. In this case, Mr. Atkinson is talking about communities that may be potential domestic consumers for us. What do we need to do to innovate to get to that? Is it a market that's large enough for us to warrant the innovation? I don't mean from a social perspective, but I mean economically. From a business point of view, is this something we can achieve?

[The Chair, Conservative, Leon Benoit]

We'll have to keep that thought in mind. If you can fit a response in later, that would be fine, but Mr. Leef is out of time.

We go now to Ms. Duncan, followed by Mr. Trost and Monsieur Aubin.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thanks, Mr. Chair.

I'd like to thank all the witnesses as well. It's been very informative.

Mr. Baker, I have a quick question to you. I really appreciated that you've raised this subject, and I've noticed that it wasn't mentioned in any of the recommendations from the last committee review. It is the fact that you are saying we need to be paying attention to support for manufacturing in Canada and the purchasing in Canada of wood or forest-related equipment. In my office we actually did a search on this and we were stunned to discover how many forest-related manufacturers there are in every small community of Canada, from woodsplitters to mill equipment to production of wood pellets.

I don't want to put you on the spot right here, but I'm sure the committee would welcome any recommendations you might like to send to us, within the confines of trade disputes, of what we might be able to recommend to support the manufacturing sector in Canada in this sector.

[Ken Baker]

Thank you very much. I'll make a note of that.