Natural Resources Committee on March 10th, 2015

[Joe Hanlon]

I would agree with that. The Ontario government put out the forest competitiveness process to try to get people to utilize it, but a lot of it went to pellets. As for a veneer plant, if we could make plywood.... We had a couple of plywood plants in northern Ontario, in that area. One burned down and the other one's basically been closed since 2008.

We talked earlier about the best end use of the wood. We should be taking the peelers and making plywood out of that, and then basically utilizing the rest to make pellets, because doing that would be more profitable.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

We don't have a connection to the other gentlemen yet, so I'll follow up with one last question.

British Columbia has been very successful exporting to China. Looking at some of the maps, if you're from New Brunswick and different places, Europe is going to be closer. You're a little bit more in the centre of the country. Are there export markets that are of particular interest to northern Ontario, or because of where you are, are you going to be disadvantaged relative to the rest of the country?

What export markets would you look to? Where are the opportunities, be it for pellets or other things? Is there anything the government should implement in its trade policy or marketing policy that would specifically help the markets northern Ontario is targeting?

[Dennis Brown]

In relation to the Rentech plant in Atikokan, which produces pellets, part of their market is over in the United Kingdom. They ship pellets by rail to Quebec City, and then load them on boats and take them over to Great Britain. That's one opportunity.

There's another opportunity we think may be out there. Right now we're using white biomass. We think and hope that maybe someday when there's a need for more electricity, they'll use advanced biomass, and that involves pellets that can be stored outside. There's a company in Norway that has a lot of expertise in that. I think on that particular point, there's an opportunity for Canada, and we're hopeful that maybe even in Atikokan we can work with that company in Norway to get something going in northwestern Ontario.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Trost. Your time is up.

Monsieur Caron wants to speak to the witnesses we can't communicate with. Probably others do, too.

Can you hear us yet, gentlemen?

[Sylvain Labbé]

We can hear you.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

I would like to thank the witnesses for their presentations.

I will start with Mr. Lessard. Mr. Labbé can answer afterwards, if he wishes.

Mr. Lessard, you spoke about the Softwood Lumber Agreement. Actually, I will sort of go back to what Mr. Rafferty said earlier.

With something like the Softwood Lumber Agreement, there has to be an agreement between the two parties. The agreement is about to expire, but we don't really know what the Americans would like to see in a potential new agreement.

You said that it wasn't an ideal agreement, but that it was better than no agreement at all. We want the agreement to be acceptable, but if the Americans want a more restrictive agreement, how far can we go?

[Jocelyn Lessard]

Well, we should take part in the negotiation to see what is being counter-offered and what is being put forward.

I haven't talked to people in the American coalition. I don't know what to expect. If we don't have an agreement in October 2016, I really fear that we will stop exporting wood to that market or that the cost to do so will be so high that it would no longer really be worthwhile.

I know there are differences of opinion. Some people think Canada was penalized. I think so, too, but we feel that we need to do everything to renew it.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Labbé, in article XII, we know that the Canadian government tried to get an exemption for Quebec, which didn't work because the Americans wanted to hear nothing about it. Given this dynamic, do you think it would be plausible for us to negotiate an agreement that would be acceptable for Quebec and for Canada?

Once again, how high do we set the bar to get an acceptable agreement?

[Sylvain Labbé]

That's a sensitive question.

If we want to touch briefly on numbers, Americans use 53 billion feet of softwood lumber. They produce about 42 billion feet, I think. So they need 10 to 11 billion feet from Canada. The problem is that we produce 13 or 14. If we removed these two or three billion feet as well, it would be more balanced.

Let's mention that the goal of the American coalition is to have high prices so that its members can survive. And American investment funds that invest a lot in forested lands want good returns on investment. That's why they need high prices. So it's a negotiation between an elephant and a mouse, and the elephant is going to win.

I think we can negotiate and renew the agreement because anything is better than imposing high taxes. Renewing the agreement would be preferable to an attack, a tax or a countervailing duty, which would be high.

This doesn't prevent us from trying to diversify our markets and our products. We need to target everything outside the United States, but also everything that is outside the Softwood Lumber Agreement, namely, products that have been partly processed that we can sell to the United States and that would be outside the system. All of that helps avoid the problem. We should also probably have thought about it five years ago, if we had been strategic.

The agreement expires in one year, and I don't think it's too late to start. By negotiating, we will be reducing the pressure. We currently sell $2 billion in wood to China. We were selling nothing to them 10 years ago. So we removed a little pressure, but the American market is becoming profitable again, and everyone has sort of backed off because prices are high.

Our prices dropped below the floor price and have been subject to a tax since the day before yesterday. They dropped recently. Frankly, I don't think our negotiating power is very strong.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Since I only have about a minute left, I would like to come back to another topic that is of particular interest to me because I am from eastern Quebec. I want to talk about pellets.

We have heard from FPInnovations and Luc Bouthillier.

In terms of the pellet market, we seem to be seeing some projects in my riding, but they are only export projects. The company is in Saint-Jean-de-Dieux. Pellets are also being produced in Causapscal, but only for export.

How can we stimulate demand domestically, which might help unblock production that will be used only for this domestic demand?

[Jocelyn Lessard]

We need to develop this industry. We need to have a critical mass of projects in order to be able to start. In Quebec, the Fédération québécoise des coopératives forestières has an agreement with the Fonds d'action québécois pour le développement durable and the Government of Quebec. We received $20 million in loans to finance the facilities and infrastructure to be able to use the pellets and chips.

In terms of the pellets, you know that using energy slightly reduces their effectiveness. A forestry cooperative supplies biomass to all the major industrial or institutional projects, such as the Amqui hospital.

As for the projects, as soon as we have the processing centres set up in every region, the clients will become interested and gradually, this will be very appealing. Heat things directly also has an impact on local development. We therefore have to invest to develop the domestic market. I think the exporting pellets is a last resort. We are exporting carbon credits abroad. Moving away from the source leads to a considerable loss of ecological benefits.

[The Chair, Conservative, Leon Benoit]

Merci, monsieur Caron.

We go now to Ms. Davidson, for up to five minutes.

Welcome to our committee.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

Thank you, Mr. Chair.

Thanks very much to all of our presenters for being here today.

First of all, Mayor Brown, congratulations on your conversion of the OPG site. My riding is Sarnia—Lambton, and Lambton Generating wasn't quite as lucky as you. I know the pain you go through when you lose those kinds of good-paying jobs, so I congratulate you on being able to have that conversion take place in your community.

I would expect that you probably have the same number of jobs generated from the conversion as you did before, and the same paying jobs.

[Dennis Brown]

In my view, there aren't quite as many people working at the OPG plant now as there were when the coal-fired plant was operating. We do have the operation in forestry and the wood pellets making up for it. From that point of view, it's roughly the same, but as you know, the OPG jobs are good-paying jobs. From that sense, it's probably a little less.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

You referred to a couple of things that the forest sector relies on. The first thing you said was the access to a reliable, predictable, and affordable supply of wood fibre for manufacturing. Can you tell me a little bit about the sustainability of the product, of the natural resource, and who regulates that? Is it the MNR that regulates it in Ontario? How does that happen?

When you're talking about that, maybe you could talk a little bit about the timeframe for renewals. You talked about the use of hardwood, and you talked about poplar not being harvested, and other trees being harvested instead. But isn't poplar one of the quickest regenerated species?

Perhaps you could talk about those things a bit.

[Dennis Brown]

I should maybe let Joe answer that one. He's had more experience in actually dealing with the wood on a day-to-day basis.

On the poplar, I know we have a mill down in Mr. Rafferty's riding, a place called Barwick. They use a lot of poplar down there.

Joe.

[Joe Hanlon]

Yes, but for companies, spruce is one of the best things for pulp, so they don't utilize it.

They started actually taking a percentage of hardwood. They used to use chemicals to whiten the pulp. They actually found that if they used part of the hardwood in with that mixture...but it didn't cover the amount of hardwood that's sitting around in the bush. When you get a couple of veneer plants where, as I said, one burns down and one closes down, that's the biggest problem in northern Ontario.

Yes, it grows fast and it grows quickly, but unfortunately no one is utilizing it. That's where the pellet plants come in. If you don't mind, I'll go back quickly to a comment earlier. There's a company in Maine that is actually experimenting, and doing quite profitably, converting 200 houses to heating with wood pellets. They took two old fuel trucks and converted them into pellet trucks. Twice a year they go around to homes and deliver it. You have to realize that not all communities have access to natural gas. What are they burning? They're burning home heating fuel. Pellets are 50% of the cost.

There is a program that's out there. I talked to the individual who's basically been dealing with it, and it's going pretty well. We should start something like that in Canada.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

Could one of you address the sustainability of the natural resource?

I think, Mayor Brown, you mentioned that about 44% of the boreal forest right now can't be harvested. Is that what you said?

[Dennis Brown]

Yes. For one reason or another, parks and so on, it's not accessible.

[Patricia Davidson, Conservative, Sarnia—Lambton, ON]

What is the sustainability, then, of the remaining 56%?

[Dennis Brown]

You have to remember that, especially in the province of Ontario, they have some of the most rigid forest standards of anywhere in Canada. I think around 40% of the forests in Ontario have been certified. A third party group audits the forest, and so on. This all helps to protect the forest.

You're right that it's the MNR's job to ensure that the plans are in place and that they have the forest management agreements with all the companies. I think they have a very good system in place that looks after it and ensures that the wood is there. It's also in the best interest of the companies, because if the wood runs out, they're in trouble. They need it to be there as well. It's the same with the municipalities. We want to make sure it's there.

[The Chair, Conservative, Leon Benoit]

We go now to Monsieur Lapointe, followed by Ms. Block, and then a New Democrat and a Conservative, if you choose.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chair.

Mr. Labbé, Mr. Lessard, can you hear me?

[Sylvain Labbé]

Yes, we can hear you.

[François Lapointe, NDP, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I assume that this intervention will not affect my speaking time, will it, Mr. Chair?