Natural Resources Committee on June 22nd, 2006

[The Chair, Conservative, Lee Richardson]

Good morning. We will get started.

As witnesses today, from the Department of Natural Resources, we have Jim Farrell, a director general, who, if required, will be assisted by Paul Bailey, the deputy director of the softwood lumber division at the Department of International Trade. From the Forest Products Association of Canada, we have Marta Morgan.

Marta, you also have Jean-Pierre Martel with you, I understand.

And from the Canadian Boreal Initiative, we have Mary Granskou.

Thank you for being here.

I guess we don't have someone here from the World Wildlife Fund, as expected, but you're going to—

[Mary Granskou, Senior Policy Advisor, Canadian Boreal Initiative]

He was not able to make it today and sends his apologies.

[The Chair, Conservative, Lee Richardson]

Thank you.

From J. D. Irving, Limited, we have Christopher MacDonald, the director of government relations, and Mark Bettle, the director of corporate planning.

I think we're ready to begin. Have you had discussions with the clerk as to the order? Maybe we will go in the order as on our orders of the day.

We're going to try to keep the opening statements to 10 minutes, and we're going to have to be fairly firm because we are starting a little late.

Catherine, did you have a comment?

[Catherine Bell, NDP, Vancouver Island North, BC]

I don't have an agenda. I wondered if you had one.

[The Chair, Conservative, Lee Richardson]

I'd better get you one.

Essentially the agenda is as usual. We're going to hear from the witnesses for 10 minutes each, without a break, then we'll go to questions by the committee for all of them. We're going to start the questions with Mr. Cullen today, after we've heard from the witnesses. And we have agreement that we're going to go with seven minutes in the first round and stick pretty firmly to it today, as at our last meeting.

We'll being with Mr. Farrell, from the Department of National Resources.

[Jim Farrell, Director General, Policy, Industry and Economics, Canadian Forest Service, Department of Natural Resources]

Thank you very much, Mr. Chair.

Good morning, bonjour, committee members. Thank you very much for the opportunity to be here today.

It's a pleasure to present issues affecting the forest sector with my colleagues from the Forest Products Association of Canada, the Canadian Boreal Initiative, and J.D. Irving, Limited.

My discussion this morning, my brief remarks, will focus on the future of the forest sector in Canada.

Nature has given Canada a forest resource of staggering size and variety. We have 10% of the world's forest cover and 30% of its boreal forests. Canadians recognize that with great gifts comes great responsibility, and they expect that Canadian governments, federal and provincial, will meet exacting requirements of social, economic, and environmental stewardship on behalf of the citizens who own the resource.

In fact, this is the mission and mandate of the Canadian Forest Service of Natural Resources Canada: to employ our scientific resources, which are amongst the largest in the world, to ensure that our forests are used sustainably and that we extract wealth from our forests in ways that meet high environmental and social expectations.

We feel that industry, governments, communities, aboriginal groups and non governmental organizations work well together to oversee a forest that directly and indirectly supports 900,000 jobs in over 300 forest-dependent communities across Canada.

Canada now has the largest area of third party independently certified forests in the world--120 million hectares of forest lands as of December 2005.

But as Charles de Gaulle observed, writing in the 1930s, the only way to stay the same is to change. Applied to the forest, this means two things.

First, it means recognizing that we can always do a better job. We can always work with our partners to meet higher and higher standards that will be expected of us. We need to embrace change in a framework of continuous improvement.

Second, it means that the business of the forestry sector will need to change if it is to survive, and some of these changes will no doubt be painful. We are in the midst of a restructuring from a period when our resource and its infrastructure were enough to secure our place in the market. This is no longer necessarily true. Issues such as increasing global competition, weak markets for some key products, combined with changes in fibre supply, increasing input costs, and the appreciation of the Canadian dollar are challenging the industry's ability to remain competitive. I suspect you'll hear more about that from my colleagues of the Forest Products Association of Canada.

This means that for the industry to stay the same, that is, continue to be a big contributor to Canada's economy, it will need to focus on technology, innovation, and skills, as well as on the forest endowment. Ten years from now, it will not only be producing paper, 2x4s, and other panel products, it will offer a range of products from energy and bio-products to a variety of specialty services.

The array of products and services will be determined by our determination to seize opportunities, which are grounds for optimism when talking about this huge renewable resource. But we are at the beginning of a revolution in understanding what the forestry sector can do for us. One thing is a given: Canadians and customers will demand that whatever we do meet the highest standards of environmental, social, and economic performance.

The Canadian Forest Service of Natural Resources Canada is not just talking about these issues. We spent the last year restructuring our internal resources to focus our efforts on five strategic directions to support them: promote sectoral competitiveness, ensure forest sustainability, pursue a sustainable future for rural Canada, promote a culture of innovation and R and D, and expand our international influence.

This has not been easy but will pay dividends in helping the sector increase the economic value of Canada's wood fibre assets.

Canadian forestry has a bright future, but the future will look different from the past. I believe that Canada's forest sector has the courage to change and the talent to succeed, creating more value and expanding opportunities by harnessing Canadian innovation and ingenuity. Natural Resources Canada is here to support this.

This concludes my formal remarks. I look forward to responding to any questions you might have.

Thank you very much, Mr. Chairman.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Farrell.

We'll now move to Marta Morgan from the Forest Products Association of Canada.

[Marta Morgan, Vice-President, Trade and Competitiveness, Forest Products Association of Canada]

Good morning, Mr. Chairman and members of the committee.

On behalf of the member committees of the Forest Products Association of Canada, let me first say that we greatly welcome this very important opportunity to provide the committee with our perspective on the key challenges and opportunities for Canada's forest products industry.

By way of background, FPAC is the national and international voice of Canada's wood, pulp, and paper producers in government trade and environmental affairs. Our 20 member companies include the largest integrated producers of pulp and paper, lumber, and other wood products. We're responsible for 70% of the working forests, and we have operations in every province of the country.

FPAC members are strongly committed to the principles of sustainability. As a condition of membership, all FPAC members ensure that their forest lands will be certified to independently monitored standards for sustainable forest management by the end of this year, and we're well on our way to meeting that goal.

FPAC has a range of partnerships with civil society to work on issues of common concern, including with our colleagues who are here today from the Canadian Boreal Initiative. We've recently launched the sustainability initiative, under which we've committed to a range of sustainability principles and to report regularly on the progress of our members in achieving them.

With annual sales of more than 80 billion dollars, the Canadian forest products industry accounts for 3 percent of Canada's GDP, employs directly some 320,000 people in well-paid high productivity jobs and is the major economic contributor to over 300 communities from coast to coast. Every year, the industry exports over 45 billion dollars' worth of products, which makes it the largest forest products exporter in the world. Obviously, our industry not only underpins the rural economy of Canada but is also a major player in Canada's overall economy.

This industry is unique in its broad reach across rural Canada where the industy provides high-tech, high-wage employment to many Canadians.

With that as a backdrop, I would like to now address the subject at hand and provide the committee with a sense of the challenges currently facing Canada's forest product sector. I'd like to talk about three things: the outlook for the industry, what the industry is doing, and how the government can support industry efforts.

For Canada's forest products industry, the challenges are significant. The industry is in a period of rapid transformation. Indeed, over the last few years, Canada's forest products companies have faced a confluence of challenges that some observers have referred to as the perfect storm: high and rising energy prices, increasing competition from low-cost overseas producers, declining demand in some market segments, and a softwood lumber dispute that has drained $5 billion out the industry.

It is very likely that if these were the only components of the perfect storm, the industry could ride through the rough water with little difficulty, but the magnitude and impact of these challenges have been amplified by the rapid rise in the value of the Canadian dollar. This alone is arguably the single most critical challenge affecting this sector today. Consider that the dollar has risen by nearly 46% in a mere four-year period and the significant consequences this increase has for an industry and indeed a national economy that's almost entirely export oriented. While the dollar's rise certainly affects all Canadian manufacturing, its impact on the forest sector is particularly acute because the industry's input costs are almost entirely in Canadian dollars, while the majority of the industry's sales are in U.S. dollars.

This has created intense pressure for the industry to adapt, and adapt quickly. There are real and growing opportunities in this sector. Global demand for forest products has been increasing steadily over recent years. By way of example, paper and paperboard consumption has increased by 3% per year globally over the past decade. In addition, in the solid wood sector, markets have been strong and considerable opportunities exist to create new markets for traditional products in countries such as China, and new applications for traditional products in our largest market of North America.

With this in mind, Canada's forest products industry has substantial strengths that can be used as building blocks for renewed and revitalized industry. Taking immediate action will allow the industry to capture its share of growing world markets, revitalize its capital stock, sustain rapid productivity growth, and provide high-quality jobs in communities across the country.

So what has the industry done?

Canadian forest products companies have continued to diversify and to invest. The industry spends 500 million dollars every year for research and development, which makes it one of the largest private sources of innovation in the Canadian economy. Furthermore, it invests 4 billion dollars yearly in improving its capital assets. This is how it was able to reach a productivity level that compares favourably to that of the Canadian economy as a whole and of our American counterparts.

The industry is investing in capital and R and D and is aggressively reducing costs. As we look ahead, the key factor is where future investment is going. This will determine the future of the industry, and this is where the public policy framework that the industry is operating in can make a real difference.

I'd like to move now to what governments can do. The public policy framework within which the industry operates is a critical competiveness factor. Governments are central players in establishing the industry's business climate or hosting conditions. As the industry keeps pace with global competition, government must also keep pace to ensure that hosting conditions are equally, if not more, competitive than the hosting conditions faced by the industry's international competitors.

Before the dollar faced its free ascent, addressing these hosting conditions was perceived as something that was important but perhaps not of the greatest urgency. However, with the dollar's unchecked rise and showing few signs of abating, ensuring that Canada has the most competitive domestic policy framework becomes an absolute imperative.

With this in mind, the industry is urging the government to take action in the following areas:

First, ensure that Canada's investment climate is as attractive as possible. A recent C.D. Howe study concluded that while Canada's overall tax rates are middle of the pack among OECD countries, our tax on capital investment is among the highest. Canada is not competitive when it comes to capital investment, and it is capital investment that will allow our manufacturing industries to thrive over the longer term.

Second, federal competition policy needs to be reviewed and impediments to market-based adjustments removed to allow the industry to achieve further economies of scale. Canadian producers need to be able to achieve the same world-class scale as foreign-based competition and major North American customers. Just to give you an example, Canada's largest company is Abitibi-Consolidated. It's our largest forest products company, but it's only the 21st largest forest products company in the world. Its top three competitors in North America are five times as big. Another example, Canfor, a west coast lumber producer, is 20 times smaller than Home Depot, one of its major customers. We are competing with, and selling to, giants. Further consolidation in the industry will help lower the industry's cost of capital, increase R and D capacity, accelerate the deployment of new technologies, and improve the sector's capital investments.

Third, there needs to be more competitive pricing in Canada's rail sector. As the largest user of railways in Canada, the forest products industry is particularly affected by the high freight rates and inferior levels of service that are the result of lack of competition throughout significant parts of the rail system. Where competition exists, freight rates are up to 50% lower than they are where only single freight rate carriers are available. The government needs to look at ways to introduce more competition into the system.

Fourth, Canada's forest products industry takes great pride in its record of domestic and international leadership on sustainability issues ranging from sustainable forest management to air quality and climate change. For example, the pulp and paper sector has reduced its greenhouse gas emissions by 30% since 1990, while increasing our volume of production by 28% over the same period. This progress has been made possible in large part by the industry's unique ability to self-generate energy from renewable carbon dioxide-neutral biomass, mostly derived from wood wastes and other by-products of our production processes.

Our industry already has 1,700 megawatts of renewable electrical generation capacity, roughly enough to power a city the size the Vancouver. But we can do more. FPAC believes that a robust national renewable energy strategy should be a centrepiece of Canada's response to addressing climate change and clean air issues. It should be market-based, where equal treatment is afforded to all low-impact renewable energy technologies.

Finally, the government can partner with industry on transformative R and D to create new leading-edge products and processes, and to diversify Canada's export markets into more non-traditional geographic and end-use markets for Canada's forest products.

By undertaking action in these five priority areas, governments will help to provide positive hosting conditions for the industry that will ensure the long-term competitiveness of the industry.

In conclusion, I'd like to leave you with three messages.

First of all, this is an industry in transformation. The industry is working hard to address the challenges facing it.

It continues to have tremendous potential. There are new markets, new opportunities, and new products under development that will keep Canada's forest products industry vital.

Third, as is the case in many Canadian manufacturing industries, both government and business have to act quickly in order to sustain our advantages in the face of accelerating change.

Mr. Chairman, that concludes my formal remarks. I look forward to exploring in detail any issues of further interest to the committee.

[The Chair, Conservative, Lee Richardson]

Thank you.

We'll now hear from Mary Granskou from the Canadian Boreal Initiative.

[Mary Granskou]

Thank you very much. It is a real pleasure for me to make this presentation here today.

Our three recommendations are for the committee to study and to look at in the coming months. We would like to focus your attention today on three areas. One is federal support for land use planning; the second is climate change in forests; the third is natural capital accounting.

You have our brief in front of you in both languages. Today I am going to touch on some of the highlights of our brief and try to maximize the time we have in our question-and-answer period.

Before I give you an overview, I want to tell you about the Canadian Boreal Initiative. You could look at us somewhat as an all-party committee on Canada's boreal forests. We span across industy, first nations, and conservation groups. We have formal agreements with industry associations, which we are very proud of, with the Forest Products Association of Canada, with the Mining Association of Canada, and others. We are reaching out to the banks. We are bringing the investment sector on board. We are reaching out to develop consumer demand for sustainably managed and marketed forest products. We stand behind the concerns of the industry that they be sustainable over the long term, and we are working toward a vision of balance across our boreal region in Canada, which spans over half of the country.

That is a balance across community sustainability, industry, and conservation. We blend all of those interests together around our table, and we're moving forward together.

I hope that gives you a good context for our focus here today.

Before we speak to our recommendations, we'd like to spend a few moments on the overview of the boreal region in Canada, which Jim Farrell began quite nicely.

There is growing international and national recognition of how important our boreal region is for communities. There are over 600 aboriginal communities that find this region their home. It spans an area from Newfoundland to Yukon. It's uniting to Canadians through many of the symbols of our nation, the art of our nation, and the culture of our nation, and it is the backbone of the industry, our economic sustainability, and it is very much an area of opportunity for conserving a region that is internationally celebrated.

Our boreal region is home to billions of migrating songbirds and some of the largest caribou herds in the world. I'm not sure if you are aware of this, but while the tropical rain forests get a lot of attention as being carbon reservoirs, in fact--and this has been studied--the northern boreal forests around the world are actually the largest land-based reservoir of carbon internationally. That is very significant for climate change in terms of what we can offer the world.

The three countries that have the largest intact areas of boreal forest are Canada, Russia, and Brazil. We all know which country has the best chance. Because of our stability and what we are committed to socially and otherwise, and because of our commitment to sustainability, Canada has the best opportunity in the world to advance a strategy for balance across this region.

The Canadian Boreal Initiative was formed to work across parties and to move forward more proactively on solutions because we don't have the benefit of time. The land base is changing very rapidly. The dynamics are changing very rapidly. And we call ourselves a living lab for solutions, to put solutions forward at a time in Canada where the region is in transition. We are working in partnership with resource companies.

Some of our leadership companies are Suncor, AlPac, and Domtar, and in the midst of this tough economic time that particularly the forest sector has been facing, our forestry companies remain committed to forest certification and have certified 42 million acres collectively in Canada. So to be able to certify and change logging practices is also a tool for sustainability.

We have over 15 first nations partners across Canada. The reason I am here solo today is that we have a first nations partnership meeting actually right now, this morning, in Edmonton. They are moving forward on some very exciting work, and the keystone of that work is called comprehensive land use planning. I will get to that in a moment. We are working very much in partnership with them to advance how they design across their traditional territories road maps for balance. We are working very closely with them.

We have agreements in development or finalized with various governments. In Newfoundland and Manitoba we're working with two federal agencies. We're working actively in all provinces and jurisdictions across the boreal region and we work very closely as well with conservation organizations, which are focused a great deal right now in terms of advancing protected areas.

One of the major regions we're focused on right now is the Mackenzie Valley and how we can bring balance collectively in the Mackenzie Valley. These decisions are being made now in advance of the proposed pipeline in that region.

I'd like to focus on three recommendations we would proactively support the committee in studying. We feel you have a very important role to play. We would very much like to work with you in the months ahead.

The first is restoring federal support for land use planning. One of the best solutions the Boreal Initiative and our partners are supporting is regional land use planning. This is where aboriginals--first nations and Métis--work on a government-to-government basis with the provinces and territories and at the federal level to design the future look of the landscape. Where do we develop? What do we protect? Where are the culturally significant areas?

Many of our industry partners are engaged proactively and say to us that this is a tool for business certainty. This is a way to map for the future, where we operate and where we do not. There are very positive initiatives in many jurisdictions, and we are supporting those very actively in a number of ways.

About 60% of Canada's boreal region is under some form of planning right now. The challenge there is that many of these exercises require significant costs to do well. The provinces are struggling to cover that. They feel the federal government has supported more in the past than they are now. We are working in partnership with a number of jurisdictions to try to bring the federal government back to the table more actively. It very much fits under the duty to consult. That is a responsibility at the federal level as well. We would really encourage you to look at this issue because it's a very important one. The jurisdictions and the first nations would like to see the federal government back at the table in a stronger way.

The second area is climate change and forests. We're not sure if you're aware of this, but under the Kyoto Protocol a decision needs to be made in 2006. That decision is whether Canada decides to include forests in its climate change plan or not. This is an issue right in front of us right now, and we would encourage the committee to look at this. This has been an ongoing issue for FPAC as well and many players from many sectors. We feel you can have a very interesting analysis of this, and it really has not captured the kind of attention it needs. It's an issue that has certain complexities. You can't just take energy solutions and apply them in the forest. Certain gains have been made by the forest sector in terms of renewable energy. We would like to look at how we incentivize taking that out into the field.

I have some basic statistics on this. Forests are now responsible for about 25% of all emissions worldwide. That's largely due to changes in forest practices. There are ways you can manage. As Marta said, you can manage your forest practices for climate change benefits. As an example, the Innu Nation, which is a partner of ours, has a forest management plan where they've reduced their carbon dioxide emissions by half--very fascinating. We think you could be very interested in that story. There also is a place for protected areas as carbon reservoirs. So it's very much a tool and an area of focus that can be applied across the board.

The third area is natural capital accounting. Of all the provinces and territories, Alberta has done the most work in this area. It looks at how nature provides an economic benefit, how we can protect those capital reserves for the future, and what kind of capital preservation and accounting strategies we should follow to make those a standard part of our decision-making framework. Right now, the recognition of ecosystems and the wealth that they generate for Canada is not accounted for on the balance sheets in our accounting systems at Statistics Canada, and we would very much support your looking at that. It's a very interesting area.

We did a study over the last two years. We contracted an environmental economist who actually advises China and Alberta most closely, and we came up with our own system of natural capital accounting, which showed--and this is preliminary--that there's roughly two and a half times greater overall non-market value from boreal ecosystem services than from capital extractions. So that's flood control, and that's carbon sequestration. We're not trying to denigrate the value of the other activities in the forest but just show you that there's a great value of, for instance, birds for pest control. That's a very interesting area.

There are real data gaps. There are fiscal and monetary policies that could be looked at in this area. It actually aligns with accountability to Parliament in terms of proper reporting. So we think this could be a fruitful area for you as well.

In closing, I just want to recognize that one of our partners, the World Wildlife Fund, has also sent in a letter encouraging the committee to look at issues in and around the Mackenzie Valley, an area of great importance that I referred to earlier. What we might suggest is that this could fit neatly into an exercise where you look at a live case study in a region--the Mackenzie Valley could be one--in terms of how you could look at forest practices, other activities, and protected areas, and how they could contribute to the greenhouse gas emission reduction agenda.

So thank you very much. I probably didn't save any time here, but thank you for allowing me the time to give you an analysis of the boreal region.

[The Chair, Conservative, Lee Richardson]

Actually, you went three minutes over.

We'll now hear from Chris MacDonald, from J.D. Irving, Limited.

[Christopher MacDonald, Director, Government Relations, J. D. Irving, Limited]

Good morning, Mr. Chairman and members of the committee.

My name is Chris MacDonald. My colleague Mark Bettle and I are both employees of J.D. Irving, Limited. We're here today to talk specifically about biological sequestration and, in particular, forest management in the context of climate change.

I believe everybody has a copy of the presentation. We're hopefully going to go through that quickly.

[The Chair, Conservative, Lee Richardson]

Apparently not. They were sent to the offices, but sometimes the system doesn't work. Okay, I think most of them have it.

Mr. MacDonald, would you like to continue?

[Christopher MacDonald]

Thank you, Mr. Chairman.

I'll quickly go through the table of contents on page 2, just to let everybody know what we're going to be talking about.

I'm going to give a little overview of J.D. Irving, Limited, a backgrounder on our company. Mr. Bettle will talk about what biological sequestration is and why it is important. He'll also speak to forest management, what we're doing and what the impact is, and he will speak to the current situation and potential opportunity. I'll wrap up with policy implications.

Certainly Mr. Moore and Mr. Allen know a lot about our organization, being from New Brunswick, but we weren't sure how much the other committee members would know about us. So we thought it was a good idea to quickly cover what's involved in our organization.

We're a large group of companies based in Saint John, New Brunswick. We have diverse operations, including forest products, shipbuilding, retail, transportation, and construction. We employ approximately 10,000 people in several provinces and states. We're known as the tree-growing company, and as a result, as you can tell from that, we're fairly heavily involved in the forest products sector.

Our forest products group is made up of three divisions. I just want to cover these so you understand exactly where we're at.

As indicated on page 4, in our woodlands division, we manage six million acres of property, made up of 3.4 million acres of freehold land and 2.6 million acres of crown land. We are the largest private landowner in Canada.

We have a sawmills division, made up of 15 sawmills and four value-added mills in New Brunswick, Nova Scotia, Prince Edward Island, Quebec, and Maine.

We also have a pulp, paper, and tissue division. We operate a kraft pulp mill and a specialty paper mill in Saint John, New Brunswick; a corrugating medium plant in Lake Utopia, New Brunswick; and tissue mills in Saint John and Moncton, New Brunswick, Toronto, Ontario, and Fort Edward, New York.

I'll now hand the presentation over to Mark.

[Mark Bettle, Director, Corporate Planning, J. D. Irving, Limited]

Thank you.

I'm on page 5, on biological sequestration. By way of background, I want to talk about a couple of ways to reduce greenhouse gases, of which carbon dioxide is the main one.

One way we can do this in Canada is to reduce the emissions of carbon dioxide into the air. That can be achieved in a number of different ways: cleaner fuels, energy efficiency, and technological and process improvements. Marta mentioned the success story of the forest products companies in Canada as a whole; since 1990 our companies, our pulp and paper operations specifically, have reduced carbon dioxide emissions by over 20%, while increasing production by over 50%. If you do the math, that is a dramatic decrease in emissions intensity over our operations. We're quite proud of that, but the fact of the matter is that to get from where we are--and probably where we're going to be--in terms of energy consumption to where we want to be in terms of emission reductions, there needs to be another factor in the equation. Emissions reduction won't do it on its own.

The other factor in the equation is the capture and sequestration of carbon dioxide from the air. That can be achieved in two ways. One way is through geological sequestration, which is basically pumping carbon dioxide from the air into the ground. It's a dramatic and kind of cool way of doing it, but there's another way that is every bit as effective, although perhaps not quite as dramatic: biological sequestration. Biological sequestration is the capture of carbon dioxide into our natural resources--agriculture, oceans, forests. We are the tree-growing company, as Chris mentioned, so I'm here to talk about trees.

During its lifetime a tree will breathe in carbon dioxide and breathe out oxygen, sequestering over a tonne of carbon dioxide over the life of the tree. Forest management, as has been mentioned by Mary, is a way of increasing the amount of carbon dioxide sequestered by the forests.

I'll move on to page 6, forest management. What is it? There are a couple of ways of increasing the number of trees on a piece of land and thereby decreasing the amount of carbon dioxide in the air. One is to take a parking lot and plant trees on it. You would increase the number of trees on the land.

Another more subtle approach is what we're doing, which is taking the forested land we already have and increasing the intensity of forest, the intensity of trees, on that given piece of land. J.D. Irving is the leader in the industry in forest management.

There are many things you can do that I won't spend a lot of time talking about in terms of forest management. We've made substantial investments in such things such as tree planting; tree improvement, which is creating faster-growing trees through breeding; vegetation control; fire and pest control; and pre-commercial spacing of our natural forests.

We've also planted over 750 million trees, more than any other private company in Canada. The result is that there are clear and quantifiable benefits to the environment happening now and projected into the future.

I'll go on to page 7. We say it's quantifiable; what does that mean? You can't measure the amount of carbon dioxide that's being sucked out of the air by a tree with a meter. There is scientific research that has shown the extent to which certain forest management activities will increase the carbon stock and thereby increase the amount of carbon dioxide that is being and will be sequestered by trees.

Since 2003 our company has been working closely with the Canadian Forest Service on a model that will assess the future net decrease of carbon dioxide in the air. We've used this model, a carbon budget model, with the Canadian Forest Service to estimate on our land--the land we own and the land we manage--how much carbon dioxide we are taking out of the air through forest management. We're planting trees and we're harvesting trees, but on a net annual basis we are taking 1.2 million tonnes of carbon dioxide out of the air. That's the amount of carbon dioxide we are taking out of the air on a net basis.

I'll move now to page 8. We've done a lot--we're industry leaders, as I mentioned--but we can do more, and we intend to. There are other countries that lag behind us in what they have done and what they can do, so there's a lot of low-hanging fruit out there yet to be picked. There's a lot more that can be done in Canada in terms of forest management and carbon dioxide sequestration. There's enormous untapped potential to achieve additional greenhouse gas reductions through forest management in our company and, more significantly, across the national forest inventory.

I'll move to page 9 now. Just yesterday--hot off the presses--there was a report released by the National Round Table on the Environment and the Economy. They looked at the potential role of land use, land use change, and forestry. It predicts that in the next 40 to 50 years these things could contribute a net sink of over 100 million tonnes of sequestered carbon dioxide per year. That's an enormous potential. The report goes on to say that this impact could make a significant contribution to achieving overall climate change policy objectives.

With that, I'll turn it back to Mr. MacDonald to close.

[Christopher MacDonald]

In a nutshell, at the end of the day, what are we suggesting? What I would like to focus on for a brief period of time are some of the government policy suggestions that we have. They're addressed on page 10.

First of all, we suggest that you capitalize on Canada's natural resource base by emphasizing the role of biological sequestration.

Second, we should recognize the unique nature of the Canadian forests and their potential to reduce greenhouse gas emissions and address climate change by rewarding and incenting superior forest management performance. We have demonstrated the potential for this ourselves, for our own company, and for the industry as a whole.

Third, we should recognize future reductions in greenhouse gases from forest management, within the context of an overall climate change policy, by recognizing biological sequestration within offset and trading systems. In the past few years, the inherent potential of our natural resources to address the challenge of climate change has fallen off the table. Recognizing biological sequestration and, more specifically, forest management as a key component of an overall climate change action plan will put it back on the table and tap into Canada's natural advantages.

Those are our formal submissions. If there are any questions, we'd be happy to answer them.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. MacDonald, and thanks to all of you.

We're back on track. We're going to start the first round with Mr. Cullen, who is going to keep it to seven minutes today and astound us all.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you, Mr. Chairman.

Thanks to all the presenters. There was a lot of interesting material there, and I thank you for that.

You could go on forever on a bunch of these things. I want to really get into the softwood lumber agreement

Ms. Granskou, you threw out a statistic that flies in the face of everything I've ever learned. I thought I heard you say that the forest sector globally produces 25% of the world's carbon dioxide greenhouse gas emissions. Is that what you said?

[Mary Granskou]

To clarify, it's 25% of the carbon dioxide emissions that are currently being emitted from forest regions. It's not the forest sector, but emissions that are coming from forest regions, from a variety of activity.

[Roy Cullen, Liberal, Etobicoke North, ON]

Do you mean the boreal forest regions?

[Mary Granskou]

No, I mean forests internationally.

[Roy Cullen, Liberal, Etobicoke North, ON]

Generally. Okay, that helps.

[Mary Granskou]

I'm sorry about the confusion.

[Roy Cullen, Liberal, Etobicoke North, ON]

That's okay. I think the forest industry has a pretty solid performance in terms of greenhouse gases, so that puzzled me.

I'd like to go to the softwood lumber agreement. I see we have someone from International Trade here, Mr. Bailey.

The Free Trade Lumber Council made a presentation to the international trade committee. I'd just like to read a couple of excerpts from their brief. They say that the second paragraph of the softwood lumber agreement, in a preamble, says:

...Canadian softwood lumber that the United States has found to be dumped and subsidized and threatening material injury to the softwood lumber industry in the United States.

They go on to say:

...we cannot build a long-term durable peace on the foundation of a lie.

We know that the NAFTA panels have consistently shown that there is no subsidization. They go on to say:

The current design of the deal, as we understand it, does exactly what the Coalition wants. We face absolute quotas or, alternatively, graduating export taxes. The tougher the market, the more we pay. The U.S. industry becomes completely insulated from competition in down markets. So, we want free access, and they want protection in down markets. The deal imposes trade restrictions that get tougher on Canadians the more the market slows down.

They go on to summarize:

...we want our legal victories, they want them erased. We want all our money; they want a lot of it. We want free trade; they want trade restricted and managed. We want to manage our forests according to our own rules and ways, and they want significant oversight over our forest policies.

So I ask you--and I want to get into the anti-circumvention clause, because I think that's an area where I have some big concerns--how would you respond to those statements?

[Paul Bailey, Deputy Director, Softwood Lumber Division, Department of International Trade]

Thank you for your question, Mr. Cullen.

I think the Free Trade Lumber Council is perhaps overstating its case, to say the least. They're drawing on an earlier draft of the legal text, which has changed. This is the back and forth of negotiations and fleshing out of the agreements. The U.S. puts forward text, Canada puts forward text, and that's--