Natural Resources Committee on March 5th, 2013

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Has ending it had a negative impact?

[John Dickie]

Yes, to some degree it has within the sector.

The references I've made to the U.S. and the U.K. in the written paper were specifically with respect to tax programs that gave a preferential approved tax treatment to energy-efficiency renovations. They are more akin to the one we were pitching for in the written presentation than the subsidy program you're referring to.

Certainly, in making the pitch here, we're members of a coalition. We call it the Building Energy Efficiency Coalition, and it includes manufacturers and installers of the energy-efficient equipment, and includes the commercial building sector, as well as ourselves.

The installers have indicated a preference for tax reform, rather than the incentive programs, because they find that when the incentive programs come out, their work goes up. Toward the end of it their work is high, and then it's cut and their work falls off. So they're on a kind of roller-coaster ride, which isn't good for their employees and isn't good for their businesses. They would prefer the tax improvements, because that provides a more long-term and sustainable advantage.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you. I have to move on, because I only get seven minutes.

I'll move on to Mr. Young. Thank you very much for being here.

I want to refer to a previous appearance by the National Aboriginal Forestry Association. Harry Bombay was the executive director at the time. This was back on April 28, 2009, and it was a presentation done before a Senate committee. At the time, what Mr. Bombay said was:

Despite its constitutional responsibility, the federal government has been silent on the relationship between Aboriginal rights and interests and forest management processes in Canada.

I'm wondering to what extent that has changed. Have you seen any improvements?

[Bradley Young]

That's a real policy-type, government-type answer.

I think what you're talking about in terms of the overall relationship between first nations and non-first nations people in Canada is an ongoing project. Every government in recent history has moved the yardsticks forward in whatever imperfect way it can, and first nations are going to continue to push for improvements there.

As to where I see the relationship right now, for the political questions there are always a thousand options to deal with. What I like to think about in terms of our work at NAFA is connecting it back to home fires. What I'm talking about is working families and working communities in first nations. When I see such things as Meadow Lake and the Government of Canada....

But there are other first nation forestry businesses out there too that are accessing the different programs, that are working with various industry partners. When they're putting these together, I see real hope for me, because —and this is where Brad talked a bit about being “in the water”. I come from a working-class first nations family that worked in the bush. They were loggers. They held a contract. They did the silviculture.

I come from a working-class family in the bush. Seeing that working culture being supported through first nations businesses, whether by accessing tenure or accessing some type of capital program to invest back into their businesses or through policy discussions around making room for them in the industry, is important. That's where I see things going.

Can it be better? Yes, Peter, it can always be better. Members of Parliament, it can always get better, all right?

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much for that.

I'll move on now to Ms. Cobden. I'm very appreciative of the work your organization is doing as well.

I come from a community that was absolutely devastated by the softwood lumber sellout that was signed by the Conservative government. We lost 2,000 jobs within the span of a few weeks after the signing of that agreement. We had Canfor, Interfor, and Western Forest Products all go under.

To see, despite that huge mistake, that the Forest Products Association is still managing to move forward is a source of some hope to all of us who come from forest-dependent communities and who are dependent on the softwood lumber industry.

I have two questions.

We are last in the industrialized world in terms of public investment in research and development. It's a lamentable state of affairs. We have to turn that situation around. First, to what extent can having research and development support from the federal government make a difference in your industry?

The second question I want to ask is around the black liquor credits and the pulp and paper green transformation program, PPGTP. That was basically wrapped up; you couldn't claim the credits after March 31 of last year. To what extent was the industry unable to access those credits because of that deadline? Are you aware of companies that were unable to access the program because it was wrapped up early?

Those are my two questions.

[Catherine Cobden]

Thank you very much for the questions. It's great to see you again.

The first thing I'd like to say is that in fact we are getting tremendous support for our innovation system not just from the federal government but from a number of provincial governments from coast to coast.

We have the luxury in the forest industry—and to me this is the whole reason we are leading the world in some innovative new products.... I can tell you, I go to Sweden and Finland, and they are envious of such things as the nanocrystalline cellulose plant in Quebec. This is a global first anywhere, brought to you by the good work of FPInnovations, of which the federal government is a strong and committed supporter. I sure hope that commitment continues; it is absolutely critical.

It is making a difference and it must continue to make a difference. If we don't innovate, we in this industry are going to be the BlackBerry of tomorrow, and we don't want to be that; we want to be the Apple of industry.

I really am a BlackBerry supporter, so I hope I'm not going to be quoted out of context here.

WIth respect to the PPGT program, I didn't think it was possible, and this is a confession, to move a billion dollars as effectively and efficiently as the Department of Natural Resources Canada did with the PPGTP.

In fact, the 21 member companies of FPAC have asked FPAC to ensure that we are communicating the success of the program, because none of us believed it could happen, and it did.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Julian.

I go now to the five-minute rounds, with Mr. Leef, Ms. Crockatt, and Mr. Nicholls.

Oh, Mr. Hsu, I apologize deeply.

We'll finish the seven-minute round first, and that's with Mr. Hsu.

Go ahead, for up to seven minutes.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thank you. I thank the witnesses for coming today.

I want to start with Mr. Dickie. You mentioned there were no meters approved in Canada for submetering heat. Could you get into some of the technical details? I guess I'm a little surprised, because we have district heating projects in Canada. I'm thinking of one in Alberta in the Okotoks community, which is built around district heating. Maybe you know whether they have meters or not.

I'm wondering who is responsible for approving this metering. Is it NRC?

[John Dickie]

I also had the same surprised reaction when my researcher gave me this information. Her reference was not to Okotoks but to another area in a western province for which her information—I think it came from government sources—was that these people were not supposed to be doing this but were going ahead anyway, because they want this energy submetering to happen.

Quite literally, if neither party complains about it, then no one complains about it, and on you go. I think that is a technical problem out there.

In terms of the federal department responsible for approving these submeters, I believe it is Measurement Canada within Industry Canada, although we also heard tell there was some jockeying for position. The image one has of officials is that they always want to grow their empires. We were told the jockeying in this respect was, “No, our little group doesn't want it; your group should do it”, and group B was saying, “No, our little group doesn't want it; you do it”. They both consider it this baby that they don't want.

I don't know why they don't want it, whether it's because of a lack of resources that they feel are stretched already and would just become more stretched, or what it is. We looked into this last week in some significant measure and were told that these meters for heat are simply not approved. There are none approved in Canada.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

There's another issue that comes up, so let me give you an example. Actually, this comes from my own experience, but I'm sure lots of people have this experience.

I live in an apartment, or used to, and I pay the utilities. I don't own the refrigerator. The landlord owns the refrigerator, and it's a crappy old refrigerator. In these situations in which property rights are not carefully defined, the markets don't work very well, and so there's no incentive for anybody to change the refrigerator and save energy.

Has your group thought about the kinds of regulations we might need—say in this specific example, to have refrigerator standards—because the market has broken down?

[John Dickie]

Electricity is a provincial matter, and the province has a regulation with respect to refrigerators, the age at which it was installed, in order to get to the refrigerators that are more sound from an energy point of view. That has been addressed on the refrigeration side.

On the heat side, buildings are what they are. When tenants come in to rent them, there are all kinds of sites, and information is available about whether the building is good or not good in terms of heating. The same principle applies: while the refrigerator is not within your control, the lighting is within your control, and whether you leave your computer on overnight is within your control. There are certainly things the landlord controls and things the tenant controls.

We shouldn't just pitch out submetering as a technique because there are these issues. There will be these issues, and they should be addressed by effective means, but if we give up the ability to submeter, we're giving up a serious ability to conserve energy.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Okay.

I want to ask you about the request to change the capital cost allowance depreciation for high-efficiency heating. You want to change it from 4% over some large number of years to 50% over two years, I guess.

[John Dickie]

What happens is that in the classes that provide for a 50% CCA rate, there's a half-year rule, so in the first year you get 25%, and then it's a declining balance. You get 37.5% in the second year, about 25% in the third, and about 10% in the fourth year. People think of 50% and think that means two years, but it's not two years because of the half-year rule.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

All right. It makes sense to me, because you can get that depreciation for, say, renewable energy.

[John Dickie]

Exactly.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

But this is an even better way to save energy, to reduce fossil fuel use, for example.

Is this something that needs to be implemented by legislation, or can it be done by a regulation by the Governor in Council?

[Catherine Cobden]

We believe it could be done by a regulation under the Income Tax Act.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

All right. Thanks.

Ms. Cobden, you talked a bit about the forestry industry having reduced its greenhouse gas emissions and its use of certain fossil fuels by using forestry residue as energy. Do you think there are government policies that could encourage the use of those resources beyond the mills that you have in the forest? There are issues such as transportation. It's really hard to transport all that biomass.

Also, the availability of forest residue in large amounts is highly dependent on economic conditions and on how much activity there is in the primary part of the industry. Do you think there's a role for government in facilitating the use of forestry residue elsewhere, outside your own industry?

[Catherine Cobden]

I definitely believe that economics drives the answer to that question. For example, could we make the forest-based biochemicals in Sarnia instead of in Thunder Bay? Probably we couldn't afford to get the woody debris to Sarnia.

Is that the nature of your question?

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Yes.

[Catherine Cobden]

Yes, okay.

The interesting thing is that we can produce the chemical at the pulp mill in Thunder Bay, so why wouldn't we? Why would we transport all that material? This is the type of elaboration that you have to do.

Economics definitely drives.... As you may have heard, FPAC works very hard to try to reduce the costs of transportation to facilitate the next thing. We might not be able to do chemical y in Thunder Bay and might have to do it in Sarnia, and so we have to figure out how to have lower transportation rates, for example.

Certainly, the technology breakthroughs have been fascinating. We looked at more than 80 different technologies, and as I say, found 36 that we could start using. It's very fascinating.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Would you say it's very important for the long-term economics of transporting biomass around if it's needed, to make sure that we can manage the water levels in the Great Lakes so that they don't fluctuate wildly from year to year?

[Catherine Cobden]

I'm not really equipped to answer that question. Whether shipping—

[Ted Hsu, Liberal, Kingston and the Islands, ON]

It's a question about transportation costs, really. Around the Great Lakes you can transport a lot of biomass on water, which would reduce....

[Catherine Cobden]

I'm ignorant of the degree to which the implication of water levels is impacting the cost structure of shipping on the Great Lakes. I'm not an expert in that area. But it's a fascinating question.