Thank you very much.
Wow. My presentation is going to be a little simpler, and I think my friend Andy Rielly made a good choice of staying at home in B.C., because I'm probably going to be trapped here until spring by the sounds of what's going on outside. Anyway, thank you for your time.
I was asked to present here from a common sense point of view as somebody who is on the ground and experiences the softwood lumber agreement. I will tell you now that I am not a NAFTA expert or a USMCA expert—which is apparently what we're going to be calling it.
Kalesnikoff Lumber started in 1939 with three brothers: my uncle Koozma—CUSMA, so you confused me right out of the gate—Sam and Pete.
We grew from a horse logging operation of about eight people to 150 people currently, and are heading for 200. I'm the third generation in our business. My two children are very engaged, which is very unusual—they're really keeping the old man in line—and they are our fourth generation. We're located in Thrums, B.C., between Castlegar and Nelson in the West Kootenays; and we're about an hour from the U.S. border.
Who are we? Through our innovation, we care for the environment, the communities, our employees, and that is a focus for us in everything we do. We are always looking for the next opportunity. Our experience in the forest industry and our ability to be nimble and continue to uphold our positive reputation as wood experts have allowed us not only to survive, but also thrive and grow through industry changes and to be where we are today.
Value added is a big piece for me. That's always been important. We've always been about adding as much value as we can to every log that comes into our hands. We make decisions based on maximizing the value from that log depending on its best end-use in the particular wood, our customers, our employees and even our communities. I believe that adding value also creates a diverse, much-needed forest industry.
We reinvest. In 1987, we started by spending $5 million on a small log line, and in 2000 spent $3 million on our remanufacturing facility called Kootenay Innovative Wood. In 2005, we put an end matcher in that cost us $800,000. We upgraded the sawmill in 2012 to the tune of $20 million. In 2014, we upgraded the planer for $6 million, and we have just recently announced our adventure into the mass timber industry—$35-million greenfield project is happening now in the Castlegar area.
We have been successfully growing our business from a horse logging operation and, as I said, we're now investing into that $35-million dollar world-class mass timber facility. We did this with only 15% to 20% of our timber under tenure. We buy over 80% of our logs on the open market.
A big advantage for our getting into mass timber is just our experience with value-added specialty manufacturing, our pre-existing relationships, and our understanding of what it takes to go up the value chain.
There are drawbacks to the softwood lumber agreement. Over the years, the softwood lumber agreements have unfairly penalized the value-added specialty manufacturing sector. I'll give you an example. There was an opportunity for us in 2006, I believe. It was when Mr. Emerson was negotiating the deal. We had just spent $800,000 on an end-matching system—that was the upgrade to enable us to do end-matched softwood flooring, which would then go into panelling and siding as far as end matching was concerned. There was a rule that if the product was end-matched all the way around the piece—in other words, both sides and the end—that it would be exempt. Well, that got negotiated away, and I don't even know that he realized what he had done in the stroke of a pen.
But that affected us. We didn't even turn that machine on and we lost that advantage. It affected Huscroft in Creston, Wynndel Box in Creston and Gorman Bros. in Westbank. We all had those types of machines being installed.
Earlier this year, because of the softwood lumber agreement and the 20-point-whatever per cent duty, we had to make a really difficult decision and shut the remanufacturing plant down because we couldn't afford to make products that were going into the U.S. with a 20%-plus duty on them. Now, our people, because of our moving into the mass timber side, have all been utilized. So, nobody lost a job, but it's causing us a major amount of grief. We also have had customers for 20, 30 or 50 years that we are not able to do business with because of that hurdle.
Because we're a smaller operator, we're more nimble and are able to develop niche products, especially products for customers' needs. That's what we focus on, and the softwood lumber agreement is getting in the way of that all the time.
What's next? To be successful in business, we need a predictable and supportive environment. This is an area where I really believe government can help. We also need open and free access to the markets. Companies such as ours have a track record of being committed to their people and community and don't shut down when things get tough, never mind shutting down permanently. Small, independent companies such as ours are much more nimble and we create more value, far beyond the two-by-four. We just need the right log to make the right product, and access to an open market. In our case, that means taking a high-value log and creating more jobs per cubic metre and more economic payback per cubic metre, instead of focusing on volume. However, again, the softwood lumber agreement does get in the way.
I do not know whether there's an opportunity to have the softwood lumber agreement encapsulated in the NAFTA agreement. It's probably much too late. However, it would have been very beneficial to have something such as that happen to stabilize the industry, especially for the smaller, independent manufacturers, because we are the ones that are getting hit really hard by this type of penalty.
Thank you very much.