Natural Resources Committee on March 6th, 2008

[The Chair, Conservative, Leon Benoit]

Good morning, everyone.

We will start this meeting, which is our fourth, I believe, dealing with the unique opportunities and challenges facing the forest products industry.

We have today, from the Canadian Parks and Wilderness Society....

Point of order, Mr. Alghabra?

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Good morning, Mr. Chair.

I just wanted to ask if we could allow the last 15 minutes to discuss the motion I tabled two days ago.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Alghabra. We will do that.

I'll continue to introduce the witnesses today. From the Canadian Parks and Wilderness Society we have Tim Gray, chair, conservation committee of the board. From the Township of James and the Town of Elk Lake, we have Jeff Barton, community development forester. From McMaster University we have Robert Pelton, professor of chemical engineering. From the Maritime Lumber Bureau, we have Diana Blenkhorn, president and chief executive officer.

I would ask each of you to introduce anyone you have brought with you and just explain who they are and why they're there.

We'll start in the order in which you are listed on orders of the day. First, from the Canadian Parks and Wilderness Society, Tim Gray, chair. Go ahead, please.

[Tim Gray, Chair, Conservation Committee of the Board, Canadian Parks and Wilderness Society]

Thank you for inviting me here today.

Chris Henschel is with me from the staff of the Canadian Parks and Wilderness Society here in Ottawa.

My name is Tim Gray, and I've been working on forest conservation, forest policy, and forest economic issues for about 15 years. I worked as the executive director of CPAWS's Ontario office for a long time, and now I'm the program director for the Ivey Foundation in Toronto. We support forest conservation here in Ontario and in most jurisdictions across Canada, with the goal of completing a protected areas network and improving sustainable forest management in Canada.

Today I am here to represent the Canadian Parks and Wilderness Society. I'm going to read from my presentation and I'll be leaving an updated version of that, which can be translated and distributed later.

CPAWS is a national wilderness conservation organization. We have 13 offices in nine provinces and two territories. For over 40 years, CPAWS has been working to establish new protected areas and improve forest management.

Canada's forests give us globally significant economic opportunities. If we can treat them as a capital asset in a rapidly changing world, we'll be able to welcome a world eager to buy the products they produce in the coming century and beyond. Climate change, loss of wilderness, and past harvest practices all threaten the ecological underpinnings of Canadian forests. As well, the forest industry itself faces significant challenges caused by the erosion of the quality of forests, as well as factors related to rapid change in the economic underpinnings of the industry.

Fortunately for Canadians, we still have time to make changes that can put us on the road to prosperity. Governments must play a central role in setting a new table for business opportunities that attract financial capital and provide community benefits. We recognize that the Canadian division of governmental authority means that often the provinces, and not the federal government, hold the levers to plan for the future of our forests. However, by working with common cause, both levels of government can contribute to transformation of our forest-based economy. As a result, in this brief we seek to identify actions that are best undertaken at the federal level, and those that are best delivered provincially with federal support.

CPAWS has worked collaboratively with the progressive forest industry, aboriginal people, governments, and communities. We've been instrumental in working with industry in the development of rigorous third-party certification systems. We have helped to create progressive land-use plans, and we've provided advice to governments and communities across Canada. We're committed to working to help make the recommendations included in our brief deliver real benefits.

As to wilderness conservation, only about 9% of Canada's boreal forest, where most of the logging occurs, is permanently protected from industrial activity and oil and gas development. Forestry and mining continue to move into remaining areas of wilderness, most often without setting areas aside for the protection of other values. We know that climate change is stressing forest ecosystems and threatening their survival, and that intact systems have a better chance of adapting, surviving, and providing migration corridors, fresh air and water, and wood for the future.

We also know that Canadian wilderness is a high-quality resource in a global market where there is diminishing supply. With access to fresh water, clean air, and a valuable recreational resource, many communities near wild areas will have a bright economic future.

Finally, proof of wilderness protection is becoming a requirement to access global forest product markets. Increasingly, the forest industry must help protect wild areas to sell its products, and government can help make this task easier.

In terms of recommendations, we believe that governments should require the completion of land-use plans that include ecologically appropriate protected areas before any industrial development is permitted in all remaining wild areas of Canada. This would mean across northern Canada, northern Ontario, northern Quebec, into the territories. Completing a protected-area network before new forestry moves into that area, before mining begins, makes the most sense, both from an ecological perspective and a community perspective, but also in terms of the long-term ability of the forest industry to sell its products in a market that is increasingly demanding environmental performance as part of their way of doing business.

To their credit, the Forest Products Association of Canada supports this approach. Unfortunately, we've seen very little adherence to this by provincial governments. I think the federal government record in the Northwest Territories, for example, in undertaking a protected-areas initiative there is the right way to go. And there are ways the federal government can help to persuade provincial governments to do the right thing and plan for the future.

One way is to require that the Canadian Environmental Assessment Act require land use planning in areas where new industrial developments are going to proceed. Examples of this would be in places like northern Quebec and northern Ontario, where there is rapid new mine development, and part of the screening process for the Canadian Environmental Assessment Act could be the requirement that land use planning be done before industrial approvals are given.

In places where the federal government has lead authority for land use planning, the federal government can work with aboriginal people to undertake that before development proceeds. That is happening in the NWT, to the government's credit.

Governments can also move to require wilderness protection in independent forest certification systems. This is aimed more at the provincial governments, but the federal government, through NRCan and the Canadian Forest Service, has some influence. When provincial governments are requiring certification systems—this is happening in Ontario and New Brunswick, and Quebec is considering this as well—there would be a requirement that systems that include wild area protection be the ones that are mandatory.

Forest tenure reform.... Canada’s industrial forest tenures were originally established as a social contract between government and industry. Industry provided the capital that created infrastructure and jobs in logging and in the mills. Governments provided wood supply and a favourable policy regime in terms of timber pricing, taxation, and direct support: road construction, staff for management planning, reforestation. Since that time, governments have sought to ensure the persistence of this relationship by requiring that industry keep mills in communities where wood supply was being provided.

In recent times that relationship has broken down. Industry would like an end to the requirement to have the wood flow from local areas, from their licence area, to mills in those local communities. As well, because of technological change, fewer people work in the mills and in the forests than previously. Industry feels that it needs an end of what's called “appurtenancy” requirement, the licensing requirements to force wood to flow from a given licence area to local mills. They need to be able to move it around the province or even move it between provinces in order to stay economic.

We've also heard from industry that they would like tenure reform. They argue that more private ownership over public land would ensure investment security, that there would be more capital flowing to the Canadian forest industry if we privatized public land. Interestingly, the large forest tracts that are privately held have no better record of forest management or no better record of long-term tenure than public land. In fact, large areas of private forest land have recently been put on the auction block as a revenue generator.

However, given both of these things, industry is asking for an end to the social contract that originally provided it with a wood supply, and it's also asking at the same time for greater ownership rights over public land. We, as Canadians, do need a healthy forest industry, so we do need to look at the request that the forestry industry is putting in front of us and look at them from the public interest perspective. What is the best for communities? What is the best way of rearranging that social contract under changing conditions?

We think the best way to move forward is to create area-based tenures on all crown lands and require that these be managed as not-for-profit or for-profit corporations with independent boards of directors. So instead of having our forest lands be seen as a cost centre for the forest industry—right now it's where you have to pay to get the timber from, and you're always looking to minimize those costs, always looking to get the wood as cheaply as possible—instead of looking at forests that way, we think they need to be rearranged. Set up independent corporations that sell the wood at market price to the highest bidder. It meets the industry demand for changes to appurtenancy. The wood could flow wherever it wants, but the communities surrounding those forests and the people who are running the boards of directors would have a mandate to get the highest value and the highest price for the wood that's publicly owned and to produce employment benefits for the community.

In tandem with that, we want to enable this and move to market-based pricing of timber. If we moved to setting up forests as a profit centre, we could sell wood at market price. Companies that are new entrants to the system would have access to wood if they could pay for it. There would be wood supply, of course, available for the existing companies, and they can compete on the open market. It would also help the federal government, especially the Department of Foreign Affairs and Trade, deal with frequent U.S. industry accusations that our administratively set stumpage system unfairly provides a benefit to the Canadian industry. If we moved to a market-based pricing system we would get away from their demands for public land privatization and take away their key argument around our stumpage system, because it would be market-based.

On forest certification, as you likely know, there are three certification systems operating in Canada. Only one of them enjoys the support of aboriginal communities and NGOs and delivers tangible benefits in the marketplace, and that's the Forest Stewardship Council. That system and companies that are certified under it have been enjoying growing market share and growing sales at the same time as the industry overall has been declining. I'm sure most of you will have seen Jim Lopez's comments in the media over the last few days about how being certified to that certification system helped that company recover from its bankruptcy protection.

The federal and provincial governments can support that system in a number of ways. The federal and provincial governments can require that when they develop purchase preference policies for wood products and paper products for their own use, they choose FSC; when they're doing marketing in Europe that they profile the gold standard companies that are FSC-certified; and that provincial governments, with federal government encouragement, move to new area-based tenures.

Lastly, on new business opportunities, I'd like to support the work that provinces and the federal government have done to create loan funds and financial guarantees for investment for the industry, and require that to be matched by actual capital, new capital that's flowing in, and not just turn it into handouts and grants, but actually require that there be a business case for this stuff to go forward. I think that's a very positive improvement over the way the industry has been treated in the past.

Lastly, the biofuels and biomass industry is new, and it has huge potential to be an important contributor to the Canadian economy. Government's role here is to set the policy playing field about how we're going to extract resources for this new industry. There are no rules out there right now; it's a completely new economic driver in our forests, and we need to think about the policy framework for that. NRCan and the Canadian Forest Service have the expertise to help, and help the provinces move forward, hopefully, on a Canadian standard for what biomass extraction would look like.

Thank you very much for your time, and thank you again for inviting me here today.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Gray.

We go now to the Township of James and Town of Elk Lake. We have Jeff Barton, community development forester, and Terry Fiset, reeve, Township of James.

Go ahead, please, Mr. Barton. I believe you're going to make the presentation.

[Jeff Barton, Community Development Forester, Township of James and Town of Elk Lake]

Actually, I'll make the first component of it and then pass to my colleague.

Firstly, I'd like to thank you individuals for including us on the schedule today to speak about this important matter. I applaud your efforts to date and your recognition of this important issue. I'd like to specifically thank Mr. Boshcoff for his efforts with us and in getting in touch with us earlier in the year.

My name is Jeff Barton. I'm the community development forester with the Township of James. Accompanying me is Terry Fiset. Terry is the reeve of the township, and he will make some comments. Also with us is Mr. George Lefebvre, a community development adviser who works closely with us on resource-based initiatives.

On that note, I'll pass it over to Terry.

[Terry Fiset, Reeve, Township of James, Township of James and Town of Elk Lake]

Thanks, Jeff, and again, thanks to the committee.

We have a package here. We'll have more to circulate. I think some of you have it in your hands now, but we will hand it out after the presentation.

I'm reeve of the Township of James and Elk Lake. I've been reeve for 26 years. It's been a long time. I've been through a number of issues in that timeframe provincially—significant parks issues, parks expansions, native land caution over an area of about 4,000 square miles. It was the only one in the province of Ontario that stymied development for almost 20 years in our area, from 1973 on into the nineties. Through that timeframe, the only thing that was allowed to take place in that area was forestry. So we have been an advocate for the forest industry for a long time, as far as the community goes.

The Township of James and Elk Lake is a small community in northeastern Ontario, in Temiskaming region, between North Bay and Timmins, with a population of approximately 470 people. The Town of Elk Lake is home to Elk Lake Planing Mill, a medium-sized lumber producer and a major employer, with a long history and deep family roots in the region. The Grant Forest Products oriented strandboard mill is located 45 kilometres from Elk Lake in the Town of Englehart, and it shares a long family commitment to the region. Together the two mills consume over 1.7 million cubic metres annually and contribute directly or indirectly to the economies of over 30 communities in our region.

The forest industry and communities like ours need each other. Our family is a fourth-generation logging contractor. That's what we do. We are the people the forest industry is talking about when they indicate that we are the lifeblood of hundreds of communities across the country. As such, we are in an extremely vulnerable position right now as the industry navigates through this perfect storm. Despite the vulnerability, we believe that we are in a position to assist the industry in its efforts to not only survive in the storm, but to emerge from it stronger than it ever has been. We've always been of a cyclical nature in the forest industry, and we are probably in one of the longer lows that we're going to be in, but we know there is a light at the end of the tunnel and we will move ahead.

The following comments represent recommendations and observations that we have evolved over several decades of proactive, progressive, and sometimes aggressive involvement in the forestry sector. The first one is don't give up. The forest industry is not dead, nor is it dying. It's in a cycle. So what can we do through those cycles? That's going to judge the merit of why we're here today.

Although there are applicable comparisons to the events in the east coast fishery with respect to the impacts on communities, Canada has a healthy forest resource and world markets for forest products continue to grow. The future is bright, but the present is abysmal.

The industry is in a state of transition, and there will be more pain, as the industry continues to consolidate, before this transition process is complete. Although we recognize that some communities will be more directly affected than others, we believe that governments need to allow this rationalization to occur in order for the sector as a whole to survive. They also need to be prepared to assist these communities directly following closures or shutdowns of mills.

We support training initiatives. However, retraining indicates an assumption that qualified, skilled forestry workers need to move out of the sector and on to something else. That is not the case. There was a big push in the mining sector back a number of years ago when the mining was in a downturn that we have to retrain. And right now there's a shortage of miners right across the nation. We can't get enough miners. So retraining is not the answer. Training to upgrade skills, that is one thing, but to retrain to get them into another sector, that's not the sole answer here.

When the industry emerges from this sectoral transformation, there will be need for trained workers at all levels. In the interim, it is critical that the government support training programs that will lead to the development of creative, qualified individuals who can play important roles in the re-establishment of Canada as the global leader in forest products.

On security of the wood supply, in order for the forest industry to emerge as a competitive sector and attract investment, it is critical that a predictable and consistent supply of affordable timber is available. Although it may be tempting for policy-makers and politicians to create new parks and policy during a period of time when the industry is not utilizing these forests for fibre, this temptation must be strongly resisted. In conversations with community leaders and forest managers in northern California recently, where the industry was devastated by a number of coincidental factors in the early nineties, it was estimated that creation of parks replaced less than 17% of the jobs associated with the forest industry. A large number of those were seasonal. Furthermore, these jobs tend to be lower paying and require less training.

The third point is that the model forest program, the forest communities program, and the community forest program are initiatives that were set up. The model forest and the forest communities programs are federal; the community forest was set up by the province back in 1992.

Over the past 16 years, the Township of James has had the opportunity to participate in the provincial community forest program and has submitted proposals to both the model forest program and the forest communities program of last year.

The most recent initiative, the forest communities program, sought to address the challenges to resource-based communities brought about by the crisis in the forestry sector. Based on a stated budget of $4 million annually shared among 11 projects, this initiative needs to be expanded to make a meaningful contribution, given the magnitude of the challenges we've got.

Despite our disappointment at not being selected for this program, the Township of James has continued to work with the forest industry in looking for opportunities for economic diversification and industrial survival through this critical period. These endeavours have included the examination of opportunities for the production of bioenergy and value-added products. We are also working with educators to enhance resource-oriented programs and have initiated a relationship with the community of Hayfork, California, to learn from its experiences from the restructuring of the forest industry there.

We have two other points, which I'll let Jeff speak to.

[Jeff Barton]

I'd like to talk briefly about forests and carbon credit in the context of community development. As forests grow they sequester, or store, carbon. The maintenance of healthy forests across Canada is expected to provide an opportunity for significant participation in the global market for carbon credits. Although the market for credits in Canada has not been developed to the extent of other countries' around the world, the management and trade of these credits will present a great opportunity for economic benefit at some point in the future.

We believe forest-dependent communities should be given an opportunity to participate and benefit in this emerging sector.

In order to move forward with this initiative, we would like to explore the potential for a pilot project, through which our community would play a role in the development of a mechanism for marketing and management of credits. Presumably the financial benefit would help to offset economic losses associated with the restructuring of the forest industry.

Lastly, I'd like to address the issue of the timeliness of release and assistance. It's critical that governments at all levels get more involved in assisting the forest industry and affected communities through this crisis. Although we were very pleased to learn that the government had decided to release the funding for the aid package, we have had great difficulty in getting specific information from either the provincial government or the federal government, with respect to accessing this funding.

We also urge you to work closely and quickly with your provincial counterparts in Ontario, and appropriate municipalities, to provide some short-term relief to the industry. Possible actions are the elimination of crown dues for a period of time, the elimination of provincial fuel taxes, the adjustment of worker safety insurance board rates, the notion of offsetting assistance to municipalities to allow for a deferral or reduction in municipal taxes, and interim direct assistance to municipalities to allow for infrastructure maintenance while the industry is unable to contribute.

In closing, I'll pass it back to Terry.

[Terry Fiset]

There are a number of things out there. We've been through it for a lot of years, from significant provincial and local issues. I say it's a viable industry, but communities are one of the forgotten players in it. Even in forest management planning initiatives that were mentioned, they have economic impact modelling but it's just a check box. The actual hard aspect of it is the municipalities and the communities where you may have to put roads in, drainage systems, and have that infrastructure for an industry and then an industry happens to close for a period of time and you've spent a lot of money and there's nothing in there for those communities. It's really a hard row to hoe, and there's no moving ahead after.

So those are some of the things. Key infrastructure programs have to be maintained in those municipalities while things like this transition take place. Those are things that all levels of government have to be committed to. To maintain that infrastructure level—and I'm not talking about building new rinks or anything like that, but water, roads, and sewers—the main infrastructure has to be maintained and in place for those communities. It allows them at least the opportunity to diversify and do what positive workings can come out of a committee like this.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Fiset and Mr. Barton, for your presentations.

We will now go to Robert Pelton, professor of chemical engineering from McMaster University. Go ahead, sir, for up to ten minutes.

[Prof. Robert Pelton, Professor of Chemical Engineering, , McMaster University]

Thank you, Mr. Chair.

Good morning, honourable members. Thank you for giving me a chance to come and speak with you today.

My name is Robert Pelton, and I am a professor of chemical engineering at McMaster University. I've brought along with me Dr. George Rosenberg, who works with me on something called the Sentinel Bioactive Paper Network. I'll tell you a teeny bit about that.

For most of my career I've worked in research in the pulp and paper industry, so I'm here representing the academic research sector in pulp and paper. I want to tell you the state of that community, and I think you might be surprised. It's pretty much a good-news story. However, before I get into that I'd just like to make a couple of comments, as a Canadian, as an individual.

My first comment is that my heart really goes out to the small communities that are struggling across the country with mill closures. This is very, very tough, and there are no simple answers to this.

Secondly, on a more optimistic point, I'm told one in ten trees growing in the world are growing in Canada. Goodness, this has to be worth something, so the long term has to be an optimistic vision.

What about the Canadian academic community who are researching pulp and paper? Who are we? Well, there are about 100 university professors across Canadian universities who spend at least part of their time doing research on pulp and paper. There are major pulp and paper research centres situated at universities, spanning from the University of British Columbia all the way to the University of New Brunswick. So it's a big effort.

What do we do? Well, we do what many academics do. We produce well-trained people, and I think this is really important. We produce scientists and engineers who are going to be vital for the revitalization of the forest products sector.

The other thing we do is research crazy things, and this eventually leads to new technologies, new inventions. And this too is a key. I think the community has a lot to offer to the revitalization of the forest products sector.

How are we doing? How successful are we at that? Here I want to make a very clear distinction. I want to separate the research, and particularly the academic research sector, from the pulp and paper producers. We all know and have heard in great detail of the troubled times the pulp and paper producers are going through. The situation is quite a bit more optimistic in the research sector.

Canada, in my opinion, is a world player in academic research in pulp and paper. Our major competitors are Sweden and Finland, and in some areas we are leading the world. I'd like to give you one example, and it's a good example, because we can ask, then, why it is successful and whether we can do more of this.

In September 2005, 28 university professors and 50 graduate students and post-doctoral fellows started working together towards a common goal. They're doing this under the auspices of something called the Sentinel Bioactive Paper Network. This is an NSERC, Natural Sciences and Engineering Research Council, network. What this group is doing is trying to produce something we call “bioactive paper”. The simple explanation is to perhaps give you a couple of examples.

Perhaps you could envisage buying packaged meat with bits of paper in it, and the paper signals you and says, “Don't eat this meat. There is something dangerous in there.” Or perhaps you could envisage a disaster scenario in a developing world situation where you have a water filter and you can filter water through the paper. The paper kills the pathogens and tells the user that the water is safe to drink.

This is what we're trying to do. We're essentially trying to create a litmus paper that, instead of detecting acid and base, detects pathogens.

We've only been doing this for two and a half years now. We've had a lot of attention. In the December issue of The New York Times Sunday magazine they had a “Year in Ideas” piece where they listed Sentinel as one of the top 70 new ideas in the world in 2007. That's a big statement.

Our major competitors, the Finns and the Swedes, are starting to copy us and put together the same kind of organization. We have a lot of good results coming up—patents and that sort of thing. So I think we're successful.

Why are we successful, and how is this going to help the forest products sector? In my opinion, we are successful because Canada is a world leader at doing research networks. A research network is when you get a group of professors in a whole bunch of different areas all working together to tackle a similar problem.

Our American friends to the south don't do this very well. They believe in competition, and individual research groups fight each other to be the best. Our European competition has these huge EU-funded things that are very bureaucratic. But Canada is special.

These networks are funded by you guys. These are federal government networks. We have the networks of centres of excellence program, the NCEs, we've had the new business-led NCEs, and we have the NSERC research networks. These are really special, and they're giving results.

There are areas where we're lagging behind our competition on the science and technology front. I'll give you a couple of quick examples and then finish up.

One example is in the area of printed electronics. The vision is that you print simple circuits on paper or packaging to do smart things. We are way behind the Swedes and the Finns in this area.

Another area, one that has perhaps a lot more impact for us and has been mentioned already this morning, is this concept of biorefining. Biorefining has become a bit of a buzzword, but what it really means is turning the biomass—and in our case, this morning, the forest products—into fuels and chemicals. There are things going on in biorefining in Canada, but we're behind the Americans and we're particularly behind the Scandinavians already.

I want to finish up. I have two messages and two recommendations.

My first message is that the academic sector is important for the revitalization of our resources. Two, we're doing pretty good. We're a world player.

A lot of our funding is coming from the federal government, so what can you do? You can continue to support the existing programs, the networks of centres of excellence, the business-led NCEs, and the NSERC programs. These are all vital for us. If you want to do more, and it would be nice, I would recommend considering sector-specific research funding. Target some money at the biorefineries or the Sentinel renewal or some of the other really great projects that are coming down the pipeline.

It seems to me that things like this have been done, where the federal and provincial governments have worked together to support the auto industry. I think this is a good model.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Pelton and Mr. Rosenberg. I'm sure you'll receive questions when we get to the question period.

We will now go to the final presentation of today. Diana Blenkhorn is the president and chief executive officer of the Maritime Lumber Bureau. Go ahead please, Ms. Blenkhorn.

[Diana Blenkhorn, President and Chief Executive Officer, Maritime Lumber Bureau]

Thanks very much for that, Mr. Chairman, and thanks to all the members of the committee for the invitation to appear here today. More importantly, I think we'd like to thank you for your focus on and commitment to reviewing the opportunities and challenges that are before Canada's forest sector.

I have worked with the Maritime Lumber Bureau for over 30 years. I can tell you that in that 30 years, I have not experienced a situation in which there has been a convergence of factors like we have today.

I'm aware that a number of my colleagues have appeared as witnesses before this committee as you study the issue of opportunities. And I know that you've been reminded numerous times that the forest products sector is Canada's largest industrial employer and the largest provider of high-tech jobs.

Much of the information that's already been presented before the committee reflects the situation we are experiencing in Atlantic Canada. We are experiencing a perfect storm: a strong Canadian dollar, a weakening demand, and even weaker prices. There are a number of additional challenges specific to Atlantic Canada, which I'll touch on later in my statement, that impact us directly and that others may not have talked about.

We concur with the recommendations of Avrim Lazar, of the Forest Products Association of Canada, and John Allan, of the Council of Forest Industries of B.C., earlier this week that the government can help by improving the business climate—the investment climate—through tax incentives: changes in the corporate tax rate and the capital cost allowance and refundability of R&D tax credits.

We agree with the submissions of other witnesses that in the climate change plan the industry should receive credit for measures already taken to cut greenhouse gas emissions. We would concur with previous suggestions that there are opportunities to assist with aid to develop the biomass industry as an alternative source of energy. I think the previous speaker touched on that as well.

We would also concur that the industry needs to restructure to improve efficiency. However, we would caution that rationalization does not mean regionalization. There needs to be a healthy forest sector in Ontario and Quebec and Atlantic Canada and British Columbia, not in just one of these areas.

There should not be disproportionate impacts across this country. There are—or should I say were—over 75 communities in Nova Scotia and New Brunswick where the forest industry has been the sole industrial employer. The forest products sector is and has been the cornerstone of the Atlantic economy.

Eight months ago, our records indicate, there were 97 full-time sawmills operating. If you look at provincial records you will see hundreds, but I'm talking about full-time, serious sawmills that make a year-round livelihood.

The results of our most recent survey, which took place on January 30, indicate that only 24 of those 97 are operating, and most of those are operating on reduced shifts. Over 1,500 employees have been laid off in the last six months.

In the Maritimes, the factors that result in a perfect storm are not being felt just by the manufacturing facilities. They are also being felt by 72,000 private landowners. I heard the comments earlier about that. More than 75% of the raw logs that supply maritime manufacturing facilities are sourced from private lands. The average in the rest of Canada is approximately 6%.

It is the market-based structure of the industry, with fibre costs controlled by the private sector, that results in wood costs being the highest in Canada. It is the market-based structure and the operating conditions in the region that result in the disproportionate impact of the current downturn.

I have with me three charts that demonstrate the point. I've asked the clerk to distribute them. I think you have them in front of you, and I would like to speak to them.

You're no doubt aware that it is the market-based system and the volume of private land production that has resulted in Atlantic Canada's exclusion, since 1986, from trade remedies in the Canada-U.S. softwood lumber dispute. These are the same conditions that have resulted in the historic exclusion being maintained in the current softwood lumber agreement.

Many consider this to be an advantage. Atlantic Canada did not receive an advantage. It was the only equitable conclusion that could be incorporated in the agreement if it was going to work as intended for all interested parties on both sides of the border.

Even with the exclusion, comparing the period of October 12 to December 30, 2006—and October 12 was the day the agreement entered into force—with the same period for 2007, October 12 to December 30, using Canada's Export and Import Controls Bureau's published statistics.... And you might say that's a pretty silly period, Blenkhorn, for one to use, but it's the only period that's published on Canada's export and import controls statistics, because during the most recent arbitration Canada was careful not to publish export data. So that's the period I had to use, and you will see that Canada's shipments, including for the Maritimes, to the United States have declined by 7.59%. British Columbia's shipments have declined by 6.88% and the Maritimes' shipments have declined almost double that, in the amount of 12.11%.

The other two charts simply show the gradual decline, either quarter by quarter over 2006—that's the only period where we had quarterly data leading up to the implementation of the agreement—or in annual data from 2001 to 2007. And 2001 was the beginning of the most recent softwood litigation and the exclusion of Atlantic Canada.

The vertical lines just mark the entry into force of the agreement. In looking at that, it's difficult to find any advantage. And statistics confirm what is, in our view, a disproportionate impact with the current downturn in our region. We would concur with previous witness statements, however, that government needs to find innovative ways to partner with industry and approach opportunities and challenges: everyone is suffering from coast to coast.

Our industry, coast to coast, is one of the most over-regulated industries in Canada. Government regulations impacting the forest sector cross numerous departments—Natural Resources, Environment, International Trade, Department of Agriculture, and I could go on. The litany of regulation is complex, and it's costly to both industry and government. Red tape reduction is important, and practical and effective regulation is essential to achieving a competitive business climate.

In the time remaining I'd like to outline an issue that's currently facing the Maritimes that has been both a disappointment and a challenge, and which we believe provides an opportunity. The witness statements of the Deputy Minister of Natural Resources and the assistant deputy minister, which I think were from around February 12, frequently reference the problems and impacts of the mountain pine beetle in British Columbia. We concur that this is a devastating problem that has impacted British Columbia directly, but all of Canada has indirectly felt the impacts of the mountain pine beetle problem. We would agree that the federal government has responded appropriately through the allocation of $1 billion over ten years to fight the problem.

However, it is a disappointment that there has not been any acknowledgement of the impact to the Maritimes as a result of the brown spruce longhorn beetle. The presence of the beetle has been a growing problem since it was first identified in 2000. There are differences in the two beetles, but each—excuse the pun—bug and negatively impact the respective regional industries.

The B.C. beetle was born in Canada. It's indigenous to this country. The Nova Scotia beetle is an invasive and alien pest imported from Europe. The B.C. beetle has caused mass devastation of the forest resource. The Nova Scotia beetle has caused devastation only in Point Pleasant Park in the city of Halifax. But despite the ability to trap it and confirm its presence in the forest, there is no evidence of dead or dying trees.

There are other differences. The 2006-07 budget allocated $300 million out of the $1 billion over ten years, $200 million for research and $100 million to deal with the economic reality of the economic impact after mountain pine beetle infestation has passed. The federal government has allocated only $1.5 million over three years towards the Nova Scotia beetle problem, and we're 10% of Canada's forest industry.

In British Columbia, because the mountain pine beetle is indigenous to Canada, there are no regulations—which impact the industry's ability to transport fibre—imposed by the Canadian Food Inspection Agency.

In Nova Scotia, the Canadian Food Inspection Agency uses regulation as the primary tool to restrict the movement of the forest fibre in any areas where the beetle is known to exist. There is a great deal of available science on the mountain pine beetle, but there are great gaps in available science on the brown spruce longhorn beetle. In the Maritimes we are dealing with excess regulation and insufficient science to support the decisions that are being taken today. Landowners, the province, and the industry are being severely impacted. And as the Maritimes operate as a single wood basket, the impacts are being felt in both Nova Scotia and New Brunswick, and Prince Edward Island to a lesser degree.

We need the federal government to recognize the devastating impacts of the BSLB on the industry. The forest is not dying as a result of the presence of the BSLB, but the industry is suffering. I agree with Tim, it's not dying, and we don't want to leave those inferences. But again, we're exacerbating our suffering for a totally unrelated issue. We need proportionate investment in science to determine conclusively associated risk and to develop and/or recognize practical and effective mitigating measures to address real risk, not just for what is perceived as possible, but to address what is probable rather than what is possible.

We need the government to partner with industry to develop solutions, not just regulations for the sake of regulations. Many practical and effective solutions have been proposed. They have been agreed to by individuals, both officials and bureaucrats, but the difficulty has largely been in implementing legislative authority and its restricting ability to implement changes. Is this a challenge or an opportunity, or both?

Already, the Department of Natural Resources' Canadian Forest Service laboratory in Fredericton has, with limited resources, developed a chemically produced pheromone lure that has proved effective in attracting the beetle. This is an important pioneer discovery and has been used in the beetle's native habitat in Europe. However, we don't know if the forests of Canada or the United States, as we're contiguous with the United States, are at risk. We don't know if this is a forest pest of significance—the science is inconclusive—or if it will act in Canada, as it does in its native habitat, as a secondary pest. We need science and we need it now, before the industry in the Maritimes suffers any further disadvantage.

If science determines that this is a pest of significance, then there is the opportunity to develop effective and practical measures that will protect the forests of Canada and the United States. But if science determines that this is not a pest of significance, then there's an opportunity to deregulate the trade-restrictive measures currently imposed on the Atlantic region. The opportunity to address this issue before this committee is timely, as yesterday 32 stakeholders, including the Province of Nova Scotia, the Province of New Brunswick, landowners, and manufacturing facilities met and made unanimous recommendations to the federal Minister of Agriculture. Those recommendations have been presented in a letter to that minister bearing all 32 signatures. This is a critical issue to the stakeholders in the Maritimes, and the significance of the issue must be recognized in Ottawa. I would suggest that this is something that many of you have not heard of before.

In conclusion, I've confirmed concurrence with many of the suggestions of the other witnesses before this committee. I hope I have identified an additional opportunity to directly invest in much-needed research and related programs that should not be seen as specific to Canada but should be seen as the outcome and results potentially benefiting all of North America. The benefits of that research, as I said a minute ago, will reach throughout the continent.

Yes, these are difficult times, but ours is, as Tim said, a cyclical industry. This industry is as old as this country is itself. This is not a sunset industry. There is a future, and we need to partner and build strong partnerships as the foundation to really any of the suggested areas where the government response will add value to this important and fundamental sector to the future of this country.

Thank you for listening to me.

[The Chair, Conservative, Leon Benoit]

Thank you, Ms. Blenkhorn.

We now go directly to questioning, starting with the official opposition. Mr. Boshcoff, for up to seven minutes.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Thank you very much, Mr. Chairman, and welcome to all witnesses.

As a note to our friends from Elk Lake, the Deputy Minister of Natural Resources was here, and she mentioned that she had very few details on the billion-dollar fund for forestry, so you aren't the only ones who are looking for more information.

I'll direct my first question to you. I'll give my questions first and then anybody can take a shot at them if they'd like.

For reforestation in Ontario, in particular over the past five years, we're looking at 650 million trees, about 130 million trees a year. You had 16 projects in your own study area. I'm wondering, knowing that all forested areas have to be regenerated, what more can we do in terms of sustainability.

Mr. Gray, forty years ago there were about eight white pelicans left on Lake of the Woods, the cormorants were disappearing all over the place, and you could count on your hand the number of bald eagles in northwestern Ontario, or peregrines or ospreys. Many of those species have made a comeback--even cougars, mountain lions, and now we're looking at woodland caribou as being the defining species. When a species recovers, is taken off lists, how can government be flexible in terms of adapting this so that we can essentially put lands back into production?

My third question, for the other two groups, is are you familiar with the term “biofibre” and its rapid ascent as the hope for the future for the forest products industry?

Your Worship, please.

[Terry Fiset]

On what can be done, Jeff would probably be better on the technical side to answer that. I'll just add a bit after.

[The Chair, Conservative, Leon Benoit]

Mr. Barton, go ahead, please.

[Jeff Barton]

Actually, prior to working with the community of Elk Lake, I spent some time with the Ministry of Natural Resources prior to the sustainable forest licence invention or creation. Since that time I haven't been directly involved in the management, but I have played roles in sitting as a board member and the president of our cooperative sustainable forest licence.

I can't speak from a broad perspective, Mr. Boshcoff, in answering either at a provincial context or a national context, but with respect to the Timiskaming forest, our area, which is roughly 1.5 million hectares, is a very well-managed forest. In terms of direct technical sustainability issues, I don't think there's a lot that can be done at this point. It came through the independent forest audit about four years ago, three or four years ago, with flying colours. A separate, removed, independent body recognized the efforts of that administration to do everything and more that was needed to ensure that forest base was sustainable.

I think where a group like this can go is in respect of forest-dependent community sustainability, and that ties into some of my comments with respect to the forest communities program and how we make sure that those things fit together.

As Terry mentioned, we're the people who FPAC talks about being directly affected by this downturn. We need to be front and centre and involved in how the industry moves ahead and how it ultimately emerges from this. We want to be there to support them, but we want to be at the table.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Barton.

Mr. Gray, could you answer the question directed to you?

[Tim Gray]

I think with the species that you mentioned, the peregrine falcon and the bald eagle, you need to look at what the cause of the original endangerment was. In the case of both of those species it was chemical contamination, DDT principally, that caused eggshell thinning and less reproductive success. As that's disappeared out of the environment because we've banned the chemical, the birds have become more abundant, and as a result they've been moved down the endangered list. I think that's a success story, where we recognized the problem, we did something about it, and now the situation has improved.

With the situation with woodland caribou, what we've noticed over time is the range of that species has moved northward because of their inability to adapt to the type of industrial activity that we do in managed forests. As a result, it's moved up the attention list and now it's been listed as a threatened species under both the federal act and the provincial act in Ontario, and in many other provinces as well. The emerging consensus is that we need to do something different about how we manage forests in order to conserve that species.

I think what you'll see is the same kind of trajectory. If in twenty years, after we make some changes to the system and the woodland caribou is doing better, and it's reoccupying range it was lost from, we'll take whatever methodology that's been developed and we'll move it throughout the forest so that species can persist.

I think we've learned something from the way we've dealt with some of the species that became endangered twenty years ago and we've made the changes necessary and now we're recovering some of those. And I think we need to apply the same kind of experience to something like the woodland caribou.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Pelton or Mr. Rosenberg, would you like to answer the last question?

[Prof. Robert Pelton]

I will answer.

Biofibre is a new one. I haven't heard of that. I know that FPInnovations, who I believe you've heard from already, are doing some really interesting things in nanofibres that look very promising.

I think, at this level, it's very hard to predict what are going to be the winners in the new forest industries. If the enzyme people figure out how to make ethanol really efficiently out of wood then there will be enormous pressure on it as a fuel source and the lumber people will be competing with that. Other things may come about. I don't think we can predict right now what the new forest industries are going to look like.

[The Chair, Conservative, Leon Benoit]

Ms. Blenkhorn.

[Diana Blenkhorn]

I don't have anything to add on biofibre other than what Mr. Pelton said.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Boshcoff, your time is up.

We'll go to the Bloc Québécois, Monsieur Ouellet, for up to seven minutes.