Natural Resources Committee on May 12th, 2015

[Robert Aubin, NDP, Trois-Rivières, QC]

Yes.

[Daniel Archambault]

There are differences in how the regional offices handle the files. We do have to deal with that. Certain projects will be accepted in one geographic region, but not in others.

[Robert Aubin, NDP, Trois-Rivières, QC]

Have you been able to identify any reasons for that difficulty? Is it simply because the offices have different assessment criteria?

[Daniel Archambault]

Our job is to fill out the forms and answer the questions asked by the people who administer these programs. There is no doubt that it would be easier for us if the rules for applying were more consistent all across the country. We do have to deal with that.

[Robert Aubin, NDP, Trois-Rivières, QC]

I guess that will be part of our job.

I would also like to hear your thoughts on some of the success Kruger has enjoyed. You talked about a new fibre that is being developed and some of its potential applications.

Are the potential applications intended for a secondary processing industry, or are there any applications for a product that consumers could purchase directly on the market?

[Daniel Archambault]

Our research and development project on cellulose filament spans three years. We have three objectives. The first is to develop the manufacturing process from the laboratory to a semi-commercial stage. We are starting with a laboratory that produced one tonne per week. We have a demonstration plan that could produce from five to 10 tonnes a day.

The second objective is to develop applications in the traditional sectors, meaning pulp and paper. We have conducted 17 or 18 trials of different products in the plants: printing paper, toilet paper, facial tissue. We will also conduct trials for packaging.

The third objective is to develop applications other than those related to pulp and paper. This cycle will be much longer, since we will have to develop partnerships with all kinds of companies. For example, for some components used in the manufacturing of automobiles, there is an advantage to using cellulose fibres to reduce the volume of material required but that has the same resistance.

We have signed eight research partnerships with different universities and conglomerates—universities, businesses and research centres—in the composite material, polymer and adhesive sectors. We hope that this will lead to applications in processing companies. FPInnovations has also undertaken similar initiatives.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you very much.

I have a question for Ms. Berube.

In your speech you said that you wanted the federal government to promote wood or wood frame construction.

Is that because the private sector or the residential sector is still not on side with wood construction?

[Marianne Berube]

You are correct. The residential sector does use wood as 90% to 95% of our homes are built of wood, but as I mentioned, when you're looking at urban densification, especially in the Toronto area or southern Ontario, you're not going to see as many single family homes. There's going to be a cap on it.

Urban planning in the GTA, Golden Horseshoe, and across Canada, you have to go up. Right now no one's building six to eight storeys, the concrete industry has to go higher to make it economically feasible. Even in Ottawa there's a restriction on height, so a huge market segment is not being tapped right now in six to eight storeys. That's why it's so important that we get these codes passed to allow for wood construction because we will be losing market share from single family residential homes.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Aubin.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you, Mr. Chair.

[The Chair, Conservative, Leon Benoit]

Mr. Regan, you have up to seven minutes. Go ahead, please.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much, Mr. Chair.

I thank all of the witnesses for being here today.

Mr. Archambault, Kruger had to close down one-third of a paper mill as a result of increased costs and lack of demand, from what I understand.

Would it be possible to use the unused space in such a mill to develop new products, and if so, how could the government contribute to that?

[Daniel Archambault]

At Kruger, we have shut down nearly 45% of our facilities since 2010, including machines at all of our plants: two in Newfoundland and Labrador, five in Trois-Rivières, two in Wayagamack, in Cap-de-la-Madeleine, and one at our plant in Bromptonville last November. In the first quarter of 2015, global demand for newsprint dropped nearly 10% compared to 2014. It's clear that the market is declining. Under the circumstances we have two priorities: lower our costs to stay alive, of course, and try to find new opportunities for our plants. We are doing this through research and development projects, such as those on cellulose filaments. Obviously this is a longer process that doesn't get up and running in three years.

Some product development groups are trying to find new products that we can manufacture with our paper machines. We are also considering transforming plants to manufacture completely different products in growing markets, while still remaining in the pulp and paper field. Right now there are two growing markets in Canada and the world: tissue and packaging products, cardboard, and others.

You asked how the government could help. That was what I talked about in my speech earlier. Since the market is currently declining and this has a negative impact on our finances, we are limited in what we can finance. I think that the federal and provincial governments should continue to support the industry through research and development, not just for technology and new products, but also for the retrofit of our plants.

It's all well and good to develop a technology, but if bringing it to market requires an investment of $50 million, $100 million or $150 million, the pulp and paper industry will not have the necessary financial resources. We need to find a way to support the industry so that it can finance these projects.

[Geoff Regan, Liberal, Halifax West, NS]

I'd imagine this would have to be done without violating international trade regulations.

[Daniel Archambault]

There are certainly regulations. I think there are some creative ways of doing things that comply with international regulations. As we know, this is being done elsewhere.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

Mr. Innes, we heard last week from witnesses that it's very difficult to produce competitive products from cellulose filament and crystals. There are a few things that are happening but it's awfully hard to get much going in terms of the amount of fibre that's available for that.

You seem to think that's a real possibility, so what is the key? If you're advocating strongly that we go in this direction, what's the secret to opening up markets, producing products that the market will buy, and using up more of that material?

[Prof. John Innes]

I'm not really in a very good position to answer that. I think that actually the vice-president of Kruger might know the answer to that better than I do. My knowledge of these products is that they do not require large volumes of material, but the key is commercialization and finding a buyer who is going to use those materials in large quantities in a relatively short time period. That has been the challenge.

This is right at the edge of my area of expertise and I would not want to mislead the committee.

[Geoff Regan, Liberal, Halifax West, NS]

Fine. I have a different question for you then, which is in your area, because you did mention the importance of monitoring what's going on. In your view, has the government issued appropriate indicators and measurements to ensure the success of this sector?

[Prof. John Innes]

The Canadian Forest Service is responsible for large-scale monitoring. Then the provinces kick in for the finer detail. Very few provinces have taken advantage of the rapid developments that have occurred in remote sensing, which would enable us to get a much better idea of the resource that we have.

There are private companies that are deploying cameras and videos in space. There is also a huge surge in the use of drones by companies to get better information. We also have lidar, a radar-based technique that is enabling us to get three-dimensional images of the forest. We're making very rapid progress in that area, with some companies already adopting it even though the provinces have not.

I think there is a lot of potential here for the federal government, but probably more importantly, for the provinces to update their inventories and get a better idea of the state of the forest resource. At the federal level, I think we issue reports that are informative. The difficulty is that they are for the whole of the country. Canada's a very large country, and what is applicable in Ontario is not necessarily applicable in British Columbia.

[Geoff Regan, Liberal, Halifax West, NS]

I understand that you also study what influences the capacity of first nations to implement sustainable forestry and what the barriers are. Are any of the barriers from government?

[Prof. John Innes]

I think first nations currently have a great number of difficulties, some of which are historical, from government, some of which are related to their self-government.

There are remarkable opportunities, in my view, for first nations to take control of their territories and manage them effectively. That's something that we have been involved in helping a number of first nations with. We are providing economic advice as to how to develop their forest resources in a way that not only ensures a supply of timber and, therefore, revenue for those first nations, but also respects the values that they're so concerned about protecting.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Regan.

Now we go to the five-minute rounds, starting with Mr. Anderson.

Welcome back to our committee, Mr. Anderson. You were a long-time member. You were probably here when the first forestry study was carried out, although I'm not certain of that.

He's followed by Ms. Crockatt and Mr. Caron.

Go ahead, please, Mr. Anderson, for up to five minutes.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you, Mr. Chair.

I was here, I think you were, and I'm wondering if Mr. Regan was at the same time. I think we may be the only ones who were here at the time. Anyway, it's good to be be back, even for a short time.

Mr. Archambault, I just wanted to ask you, when you talk about help moving into newer technology, are you talking about a program that would be one-time help, or are you talking about sustained, long-term subsidization of your industry and companies in order to make sure that you can make that transition? Those are two different things.

[Daniel Archambault]

Kruger is not looking for subsidies to run our business, but in the industry in Canada I think we have a fantastic pool of talent among research centres, like FPInnovations, all the universities, and other schools in Canada.

If the government can support all of these institutions to work on projects that can benefit the industry and give the industry some areas of solution to retool itself, to reinvent itself, I think that is the role of governments. Then industry will take the ideas, which we did with the CF. We put in our share and government put in its share, and now we have a three-year program and hopefully it's going to lead to something. But then at one point we're going to have to find a way to finance the next step, which would be to go commercial.