Evidence of meeting #59 for Natural Resources in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was fibre.
A recording is available from Parliament.
4:45 p.m.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
Now that I have that from an academic, I'll go to industry. I suspect that the engineer from industry might have a slightly different perspective—or maybe not.
4:45 p.m.
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
You're right, I might surprise you, because I was actually trained by one of the greatest fundamental scientists in the space of wood chemistry.
I happen personally to be of the opinion that the role of universities is to produce people; that the work, the creation of knowledge, is there to produce the people; and that the technology itself is almost secondary. As I mentioned earlier, what we really need, and where Canada has an advantage, in my personal opinion, over, say, its U.S. neighbours, is highly skilled technical people.
Having said that, in terms of fundamental research, I actually don't have a good feeling for what the balance or the mix is in Canada. I know the programs I'm involved with. I like the fact that I can engage directly with universities on a fundamental level and have federal government and provincial agencies support it.
I might be cutting off my nose to spite my face here, but one of the things we've seen in the last five to ten years with this added interest in biorefineries is that many times we're trying to put the cart in front of the horse. These technologies simply are not ready for implementation. There are too many unknowns. These create risks and the margins are too tight.
I would never advocate backing off on fundamental research. I happen to believe that when you produce the people, that's the most important product you have. Fundamental knowledge will always find a way to create value.
4:50 p.m.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
So what I'm hearing you say is that it's a very, very difficult thing to balance, and if we get the people right, we will ultimately get the product right?
4:50 p.m.
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
That's my personal opinion, yes.
4:50 p.m.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
Mr. Chair, if I have only 10 seconds left, I'll yield.
4:50 p.m.
Conservative
May 14th, 2015 / 4:50 p.m.
Conservative
Pat Perkins Conservative Whitby—Oshawa, ON
Thank you very much.
I think I'll continue on with Mr. Marcoccia for the balance of the questions here.
With regard to the three fundamental areas, you talked about the specialty pulps, the proprietary specialty fibre, the new things that are coming on stream. You spoke about the R and D innovation. I think you said that less than 5% of the production is here but more than 50% of the innovation is here.
4:50 p.m.
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
Actually, 25% of our manufacturing—
4:50 p.m.
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
—and between 50% and 75% of all our innovation activity occurs in Canada.
4:50 p.m.
Conservative
Pat Perkins Conservative Whitby—Oshawa, ON
Okay, thank you. I was trying to keep up with you, and I obviously didn't do quite so well.
4:50 p.m.
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
Sorry.
4:50 p.m.
Conservative
Pat Perkins Conservative Whitby—Oshawa, ON
At any rate, we have that kind of a disparity, which is quite significant and in a way is good for us.
Then you talked about PPGTP. I really want to know what that is because you seem to be very excited about it, thinking that it is one of the best things we've ever had the opportunity to present.
Can you touch on those three things?
4:50 p.m.
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
I can, definitely, if I can remember them.
The first item was why a disproportionate amount of our research and effort is going into Canada. I would say that, looking from the top down at the government agencies on a federal and provincial level and also at the universities, it is easier to deal with all of the agencies and institutions and individual researchers. I personally believe that socially—and this is represented in the government—more value is attached to the forest-based industry in Canada than to the one in the United States.
As an example, I remember a debate in which we were saying that the U.S. spends $1 billion a year on nanoparticle research. The forest products industry in the U.S. still represents 7% of GDP, so it should be able to get $50 million to $100 million a year in research support for nanocrystalline cellulose and nanoparticles from the forest, where we have an enormous advantage, and yet it can't, because they'd rather put the money in other places.
I believe that Canada is a better environment to work in because of the values that are placed on forest-based industry by government, society, and university professors.
PPGTP stands for pulp and paper green transformation program. It was a short-term program, I believe two-year. In response to certain policy aberrations in the United States, Canada had to step up to the plate to level the playing field. Essentially this is an example of very targeted support of improvements that were not necessarily transformational in terms of generating a whole new class of products or bringing us into a new century. It was blocking and tackling basic kinds of things, and it was focused on energy improvements and improvements in environmental performance. The dollars were extremely focused.
It caused a significant amount of capital investment, and there was excellent follow-up on the program as well, in which they looked at the benefits accrued by this supported investment. It caused companies to do good projects that they otherwise wouldn't have done but that should have been done.
The moral of the story there is that while we're all very interested in developing entirely new applications and products and moving up the value chain, it's absolutely essential to have an element of this work that looks at the most fundamental things we deal with, which are thermodynamics, energy efficiency, and things like reliability—very fundamental things.
We come back to this discussion about fundamental things versus project funding.
4:55 p.m.
Conservative
4:55 p.m.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Thank you, Mr. Chair.
I'd like to thank the witnesses because this has been one of the most informative and interesting sessions in our study on the forestry industry.
I'd like to start with the exchange between Mr. Mangin and Mr. Arsenault following the question asked by my colleague, Mr. Aubin. It was about exporting wood pellet versus finding domestic markets for them.
Mr. Arsenault, I was surprised that you did not mention the $45 per tonne U.S. subsidy. The Americans are starting to compete with us on our own soil. That subsidy was introduced in 2009 and renewed in 2010. To date, there's been $235 million in subsidies.
Is that preventing us from reaching the American market and being competitive in our own markets given that the Americans are starting to export to eastern Canada in particular?
4:55 p.m.
Director, Market Access, Wood Pellet Association of Canada
The program you're talking about is the Biomass Crop Assistance Program. That program was created to support the lignocellulose sector for making ethanol. There was very little impact on pellets. Some projects benefited. I would say that, of the $235 million, about $5 million was invested in the American pellet industry. That has virtually no impact on trade for either of us.
However, if we're talking about the discussion with Mr. Mangin, I'd like to follow up on his comment about exports. We have a study—life cycle analyses—that showed that the transportation of pellets, even overseas, does not have a major impact in terms of loss of life cycle. I myself have done exporting. To give you a sense of scale, a ship carrying 35,000 tonnes of pellets will use 350 tonnes of fuel to cross the Atlantic, which is 1%. Crossing the Atlantic involves carbon loss, but it's not like half the cargo is being used up in the crossing. It's just 1%.
4:55 p.m.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Mr. Mangin's question is relevant, nevertheless. Why don't we use more here in Canada?
4:55 p.m.
Director, Market Access, Wood Pellet Association of Canada
That's because of the current cost of other energy sources, such as natural gas. Electricity is cheap in Quebec, but we are replacing heating oil and propane to a significant degree. There are more problems economically with other forms of energy. There are also conversion costs. Pellets cost half as much as energy, but require investments worth thousands of dollars in heating systems.
4:55 p.m.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
I'm thinking of major projects. In my riding, which is in Témiscouata, there are maple syrup producers. People are starting to use biomass to run their evaporators. I'm thinking of all kinds of infrastructure, such as churches and schools. In my riding, in my region, communities are doing those conversions, but it doesn't see to be going far enough fast enough.
I see another problem with domestic use versus export. Many European players are now coming here for raw materials. They process it and then they ship it out. A Belgian company is going to set up shop in Saint-Jean-de-Dieu and Causapscal in the lower St. Lawrence region, which is good news. That will create jobs. The company is going to take the resource, make the torrefied pellets and then ship them to Belgium. The pellets are for use over there only. Why wouldn't Quebec companies do the same thing and benefit from those European markets just like a company that comes here?
4:55 p.m.
Director, Market Access, Wood Pellet Association of Canada
Many projects have been announced. There is plenty of potential for export to Europe, but none of those projects have materialized yet. However, the next time there is an announcement about the closure of a paper mill, some company—an independent one, probably—will probably choose to use its wood chips to manufacture pellets for export.
I think it's impossible for someone from another country to come here for the fibre and succeed economically without being integrated in any way whatsoever.
4:55 p.m.
NDP
4:55 p.m.
Director, Market Access, Wood Pellet Association of Canada
As Mr. Mangin said, collecting biomass form the forest and transporting it to a mill for processing costs more than what the market is paying right now. However, there is some progress.
Mr. Regan mentioned that he paid $2 for his bag of pellets 10 years ago and that he's now paying $6 or $7. The per-tonne price for fibre has increased considerably. It has probably tripled in 10 years. We are close to the point where we can compete with other forms of energy relatively easily. Mr. Beauregard is right. We need to optimize the supply chain and reduce supply costs.
5 p.m.
Conservative
The Chair Conservative Leon Benoit
Thank you, Mr. Caron.
Finally, Ms. Block, we have a couple of minutes, if you'd like to just ask a question or two.