Natural Resources Committee on May 14th, 2015

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Ms. Crockatt.

We'll go now to Monsieur Aubin and others. We have a bit of time left.

Go ahead.

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

Thank you, Mr. Chair.

I will be sharing my time with my colleague.

I thank the guests for being here, especially the representatives of the two universities, which, coincidentally, are those where I got my degrees.

My first question is for Dr. Mangin.

My venerable age allows me to remember my first walks in the forest. At that time, logging was done quite differently. We were told that the tons of forest residues that were left behind helped the soil regenerate. When I listen to the guests before us, I feel that forest residue, today, is a gold mine.

Does the biomass make it possible to carry out, commercially and profitably, all the projects that have been proposed? I know you have others in the pipeline that you have not talked about yet.

[Dr. Patrice Mangin]

I am currently working on a big project seeking to set up a biorefinery that will process 650,000 tonnes of forest residue per year. It is in the Haut-Saint-Maurice, or region number 4. I think that, first, we have to clarify exactly what is meant by “forest residue”. For example, when paper mills talk about residue, it is often slash residue, or wood chips that sell at a very high price and we cannot use to transform biomass into energy. For my part, I am talking about what you saw as you walked about, that is to say, logging residue that can be used. In Mauricie, for example, we are talking about 650,000 tonnes per year. This is obviously wet biomass.

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

You were also talking about trees that were not necessarily profitable and burnt forests.

[Dr. Patrice Mangin]

When we had the pine beetle infestation, FPInnovations worked on adding value to the wood that was salvageable. The rest could be used for something else, as fuel.

I would like to go back to the original question, namely costs and prices. We are starting to see these forest residues from logging on the markets. According to the FOEX index I consulted again yesterday, the cost of forest residues—and this data is from Finland—is $7.6 per gigajoule. This measurement is used because of moisture. There is no longer any water in these residues. If we adopted the appropriate regulations, we would be able to set the price of these forest residues in Canada, including Quebec, at $4.7 or $5 per gigajoule. In fact, it is often noted that this is the province where fibre is most expensive.

We would be extremely competitive and we could then plan on setting up these famous biorefineries.

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

In those circumstances, would we have to make choices by region? If your project was carried out in the Mauricie, we could forget the possibility of manufacturing wood pellets in the area, which does not mean it could not be done elsewhere.

[Dr. Patrice Mangin]

That is a very insightful question. The fibres used for wood pellets are not necessarily the same as those used for bioenergy. For now, I do not think that the members of Mr. Arsenault's association collect these forest residues in the forest. These residues are in the process of decomposing and producing methane and carbon dioxide, period. They are not used.

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

Is there an authority that can coordinate these diverse needs, or these various possibilities?

[Dr. Patrice Mangin]

Yes. This is very region-specific. That is why I have talked so much about regions. The studies must be conducted region by region. We should not rob Peter to pay Paul. If biomass is actually used for pellets in a region, those are steps 1 and 2 of the development of the biorefinery. We should let it develop. Nevertheless, for me, it is a transitional stage.

I feel sorry for Mr. Arsenault, but exporting pellets to the U.K. could well draw the ire of Greenpeace. The social acceptability is not there. As I said earlier, to create a certain image and engage youth in sustainable development, the pellets should be used locally. In short, yes to incentive programs for local use, but no to exporting large volumes to the U.K. That is what Greenpeace would tell you.

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

Thank you.

Unfortunately I must stop you there. We will resume later.

[Dany Morin, NDP, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chair.

Mr. Beauregard, you said that the sustainable future of forestry in rural communities matters to you. I'm from Saguenay-Lac-Saint-Jean. As I listened to your presentation, what came to mind immediately with respect to ensuring the sustainability of forestry in my part of the country were aboriginal claims, protection of the woodland caribou and the failure of some businesses to maintain FSC certification.

Given your background, you are very familiar with the forestry industry. How would you solve the three problems affecting my region?

[Robert Beauregard]

It's a complex problem, but I think that it is possible to reconcile promotion of traditional first nations use and protection of the woodland caribou, even though protecting the species is extremely complex. With good collaboration, we can reconcile forestry production—for much less than it currently costs to supply mills—with the pursuit of nature conservation goals and the promotion of first nations participation in their socioeconomic development through their contribution to forestry activities.

It's very complex and requires a lot of collaboration. On the ground, it's hard, but I believe it's possible. We need lots of good will to keep the dialogue going between all of the parties, including first nations, environmental groups and the industry. I think it's possible to reconcile the pursuit of these different goals with integrated and economical approaches to managing our resource for the development of society as a whole.

[Dany Morin, NDP, Chicoutimi—Le Fjord, QC]

Mr. Beauregard, what advice would you give to the federal government? What is the federal government's role in this area?

[Robert Beauregard]

The federal government can really help with this. For one thing, the federal government is the entity that plays the most important role vis-à-vis first nations. The federal government can implement programs to help first nations develop their ability to train people, particularly in forestry and entrepreneurship, so that communities can be involved in economic development and in their relationship to society as a whole. The federal government can certainly play a role there.

The federal government also plays a role in forestry product certification. As you know, there are three major certification systems in Canada. One of them is under the federal government's jurisdiction. Generally speaking, the three certification systems play an important role in reassuring markets and the public that we are managing the forestry resource responsibly and sustainably.

I believe that the best feature of this particular natural resource is that it is completely renewable. If we do it right, we can create lots of added value and lots of socioeconomic development while balancing the relationship between society and nature, which is another long-term goal we need to achieve for ourselves and our children.

[The Chair, Conservative, Leon Benoit]

Merci, Mr. Morin.

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

[Geoff Regan, Liberal, Halifax West, NS]

Thank you, Mr. Chair. I would also like to thank the witnesses for being here today.

Mr. Arsenault, I know that combustible dust has caused explosions in wood pellet plants in recent years. You are researching ways to reduce fine dust in the combustion of wood pellets.

What measures do you think should be in place to make wood pellets safer compared to natural gas and coal? How can the government help facilitate those changes?

[John Arsenault]

I don't really think you can say that pellets are less safe than natural gas or coal. The same standards apply. It's a fuel and has to be used with care. Explosions happen in natural gas systems too. Wood pellets certainly have to be handled with care.

There haven't been any explosions in residential applications. There can be problems with fire in chimneys. Proper installation practices have to be followed, and installation codes have to be regulated accordingly. Wood pellets for residential use have a very good safety record. For heavy industrial use, just like for coal, safety precautions must be followed for protection from potential explosions and problems caused by the use of pellets because of gas emissions in enclosed spaces. It's actually the same technology.

[Geoff Regan, Liberal, Halifax West, NS]

Merci beaucoup.

Mr. Marcoccia, first of all, I appreciate your mentioning that over 50% of your research and development is being done in Canada. That's terrific. That's very encouraging to hear, because those are important jobs, obviously, and there is important work being done.

Your website indicates that something like 79% of your paper production is done in the U.S., even though you're headquartered in Canada, which is an interesting development, and your U.S. mills far outnumber the ones you have here. What is it that pushed Domtar to increase its production by expanding into the U.S.? What recommendations do you have to help the Government of Canada convince strong companies like yours, or make it easier for companies like yours, to keep production at home?

[Dr. Bruno Marcoccia]

The paper statistic might be a little misleading. We manufacture two main products: pulp fibres, which go into market pulp, and paper, which is a primary conversion of the pulp into a higher-value-added product.

The paper industry is an interesting one. Much like tissue grades, it has a bit of a moat against transportation costs, because paper historically didn't transport very well. So one of the reasons why we have a lot of paper mills and paper machines in the United States is that they're closer to market. The converse or the opposite would be that one of the reasons why a lot of the paper mills in Canada shut down was that they were too far from market. That is one of those key structural cost disadvantages that I was referring to.

You can think of certain examples. Domtar had to shut down in Prince Albert, for example, and it had to shut down the paper machines in Dryden and repurpose the Dryden mill to a pulp mill.

Every one of these is very much a site-by-site specific evaluation. When you're in secular decline, the first to go are the high-cost producers, and then you start cutting into the muscle. Now we're at the point where we're cutting into the bone. We're shutting down profitable machines and operations in the United States, actually, simply to match our productivity with our customer demand.

As for what can be done to stop the flow of capacity into the United States—and elsewhere, actually, because I think there are more ferocious competitors beyond the United States, such as South America and Asia—I would come back to the notion that if you have structural cost disadvantages, which Canada does.... A simple fact of the matter is that in northern climates trees grow slower, the landmass is vast, and transportation and access are very costly. That's a key factor here.

Another thing that I would ask the committee to consider is that there hasn't been any significant capital modernization in the Canadian industry in over 20 years. The last green fuel mill in Canada was 20 years ago. One of the things that happens as a consequence is that not only do we have higher transportation costs in and out and higher costs to market within Canada, you also don't enjoy the economy of scale. That's because we haven't been building in Canada and because you simply can't feed a mill enough wood to enjoy the kinds of economies of scale that you'd get in a facility where the trees grow faster.

Again, I would repeat that the way out of that quagmire is to create value-added propositions and focus on that. I think Professor Mangin's comment about “local”—having a locally based economy—is a good way to go. An example of that is this discussion about the use of biomass for solid fuel. Domtar burns two million tons a year of biomass solid fuel in our combined heat and power systems. We do it because it's a fuel of convenience for us. As the honourable member mentioned, it's there, so we do it.

But I can't think of anything that has stopped more projects than the low cost of natural gas. The low cost of natural gas will stop all of these projects. For example, for any one of our mills, the technology exists, and it has been demonstrated that you could go entirely fossil-fuel-free in a pulp and paper mill. You could go completely with bio-based fuels and generate electricity, but we're not doing that because of the price of fuel. The economics don't pencil out when you have natural gas at a price of $5 per million BTUs.

[Geoff Regan, Liberal, Halifax West, NS]

Let me ask about—

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Regan.

[Geoff Regan, Liberal, Halifax West, NS]

Oh. Okay. Thank you.

[The Chair, Conservative, Leon Benoit]

We'll go to the five-minute round now, starting with Mr. Trost, and then we'll have Ms. Perkins and Monsieur Caron.

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

Thank you, Mr. Chair.

One of the first issues I dealt with when I joined the natural resources industry committee about 10 years ago was how do we target our science dollars? I suspect that I may get a few volunteers to answer this one.

When it comes to how we've dealt with forestry programs, are we doing it right in terms of the balance in basic versus applied research, the whole spectrum? I know we have engineers and pure scientists here, so we might have a little bit of a cultural difference in approach. But relative to how the government's been spending its science dollars aimed at forestry in the last few years, applied and basic, etc, in each of your opinions, of those who care to comment, do we have the right mix? If so, should we be putting more emphasis somewhere? Or what should we do?

I see one hand up to volunteer. After that, I suspect that I might get a couple of different opinions here.

Professor Mangin.

[Dr. Patrice Mangin]

I'll try to be brief, because we could go on for some time on this one.

I've been back in Canada for 10 years now—I was in Europe before—and my feeling is that we're lacking in good fundamental research right now. When I talk about fundamental research, I don't mean academic research, blue sky research; I mean the kind of research that is targeted towards innovation.

I'm sick and tired of hearing about “innovation”, because if we forget the research part, the fundamental research part done in the universities, we're missing a link. We're missing the boat. That's why, in one of my points, I said we need a very good link, while preserving the independent thinking of the universities in fundamental research, with FPInnovations. They're the innovative people who will basically target and tell us that they need these kinds of these fundamental things to be known, and to go ahead, because right now we do not know. The fundamental research right now is either purely academic or the professor thinks about it in his office, with no link to reality. It's very nice, very good. Is it useful? That's hard to say.

We don't have the real dollar value in fundamental research right now. We could. I was mentioning the innovation framework. The director of FIBRE, the network of networks, is invited from time to time when it pleases the members. That's not good. To know what's needed from the industry at the fundamental level, he should be there.

By the way, Dr. Theo van de Ven, the director, is a very good fundamentalist.