Thank you, Mayor Compton.
My name is Bill Candline. I am general manager of Kenora's Timberstrand mill, which is a division of iLevel by Weyerhaeuser.
The focus of iLevel has been on the residential housing market, and Weyerhaeuser has really gathered together all those businesses they have acquired over the years and built over the years under the iLevel banner to really focus on the residential housing market, mostly within North America. This includes oriented strand board; lumber; plywood; laminated strand lumber, as in the plant in Kenora; laminated veneer lumber; i-joists; etc.
The Kenora mill opened in 2002. October 2002 is when we pressed our first board in Kenora. It's a new mill and it's very modern, and we produce value-added engineered wood products. We are one of two plants in the world that now manufacture this specialized laminated strand lumber product.
It's a product made from previously underutilized species of mostly poplar and some birch, utilizing some German technology like a steam injection press to produce a billet that's 64 feet long, 8 feet wide, and up to 3.5 inches thick, weighing up to 7,500 pounds. And then we take that billet and we run it through what is almost like a traditional sawmill to produce beams and headers, and we even cut it all the way to two-by-four studs. So it's a very unique process.
Our company has invested $300 million in our Kenora operation. We have 160 associates currently. We have a very diverse workforce--25% of our workforce are female, and 25% are also aboriginal.
We have worked continuously since 2002 to reduce our costs and increase efficiencies in our operation. Like most facilities in Canada, we have been significantly affected by the downturn in the U.S. housing market. Three years ago there were well over two million housing starts across North America and we're likely to see around one million this year. We are now operating at about one-half of our capacity. But to our credit, we remained open last year when Weyerhaeuser was shutting down a sister operation just across the line in Minnesota. The majority of our costs are fibre, so our plant economics are very closely tied to provincial policy around natural resources.
My presentation here is going to focus on five main areas of opportunity: taxation, markets, greenhouse gases, the quota system, and aboriginal partnerships.
On item number one, taxation, our industry is seeking full refundability of the scientific research and education tax credits to support innovation and research by Canadian companies, and an extension of the two-year capital cost allowance for a minimum of five years. The recent budget did not act on either of these recommendations.
In my view, the Kenora Timberstrand plant is the perfect example of the type of innovative development that should be supported by this program. We earn credits in Kenora on innovations in technical advances that were incorporated into the new Timberstrand plant. We also received support on developmental activities undertaken on the process side as we struggled to expand the products made at the Kenora plant. While the Kenora facility has benefited from this program in the past, it is currently undertaking no development activities.
I think our message on Kenora is very clear. This is the type of development that comes from supporting the SR and ED program. This program does not provide support during an industry downturn, and a program like this that does not provide support during an industry downturn is of much less value to the industry and results in much less innovation and development. And it's really innovation and development that will help this industry recover.
We need access to new technology to see our forest sector companies perform like their Scandinavian counterparts. Support is necessary to encourage research and development to identify new products and value-added additions to existing companies, explore lower-cost energy options, and open markets beyond the U.S.
On item two, outreach to markets, Canada has a good story to tell regarding the forest products industry. We also have some of the best fibre and resulting products in the world. We'd like to recommend the establishment and funding of a multi-year, national-level initiative to deliver facts and information on Canada's forests and forest products industry in significant markets. It is our understanding that the recent federal government identified $10 million to be used as part of such an information campaign. We believe this is a positive step and we congratulate the government.
We would further like to recommend an extension of funding for existing initiatives targeted at developing new markets and uses for Canada's wood products.
Item number three concerns greenhouse gases. The forest products industry has invested billions of dollars over the past 15 to 20 years to reduce emissions from their facilities. We would like the federal government to provide credit and recognition for the industry's progress to date with respect to lowering greenhouse gases. We also urge you to continue to work with industry to ensure that the government's air quality regulations are implemented in a manner sensitive to the industry's current economic circumstances.
Other environmental considerations include greenhouse gas offsets. The federal government has started to address whether and how to develop a greenhouse gas offset system. The system would outline the potential for greenhouse gas emission reduction opportunities for non-regulated facilities and from biological sequestration.
The Forest Products Association of Canada is finalizing its position on this issue. Having a properly designed offset system could be a huge benefit for the forest industry. Specifically concerning Kenora facilities, if such a system were in place we could generate offsets by reducing the amount of fossil fuel we use through fuel switching. On the forestry side, offsets could be generated by activities such as forestation, reforestation, avoided deforestation, and forest management.
Also, recognition/credit for what we have done to date is key. We also support the Forest Products Association of Canada forestry coalition position regarding exclusion from applying VOC emission targets to the wood products sector. In addition, we support their position regarding applying particular emission targets only to wood product combustion units.
Item number four deals with the softwood lumber quota.
Before I go much further, I want to confess that I'm not an expert on the softwood lumber wars. Thankfully, my operation in Kenora is not affected by the current softwood lumber agreement; however, Kenora and the region have a vital interest in how the current agreement is being managed.
The original softwood quota system was developed prior to the latest set of unprecedented and unforeseen market circumstances. Prices and demand are at record low levels for wood products entering the United States. The Ontario industry has worked very hard to get consensus to provide a two-year change to the provincial lumber quota system, which would allow mills to make rational economic decisions regarding market supply without prejudicing their ability to restart after a curtailment.