Natural Resources Committee on Nov. 8th, 2017

[Catherine Cobden]

No, it's more expensive. It's what we think. Actually there is a federal program. Do you know about the federal program aimed at this, actually to help get at that differential? It is more expensive now because of what I'm talking about. There is no local supply. Those factors are all going to disappear, by the way. They're not permanent but we're in a transition. We're trying to build that market.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

To follow up on the question regarding new market opportunities, what would be some of the barriers you'd see here in Canada to businesses starting up and then creating those opportunities that you see? Maybe since you're from northern Ontario, you can talk about northern Ontario.

[Catherine Cobden]

One factor that is a huge barrier for all of us to wrestle with is the geography of our country. For example, there's a potential new market in Canada—we don't even have to go international—that's significant. I don't mind saying it's the steel sector. They're very serious about this. I work with them as well as with some mining companies, and it's very interesting.

However, to get the material to them...and the barriers to entry are huge because of the location. What do you do? Do you just decide it's over? No, you actually work on technologies that convert at source to make things much more efficient and affordable to then get to these new markets. That's what we're seized with. That's why it has to be comprehensive. We can't just look at market creation, because we may not have the supply chains to get to market. We have to look at all elements from feedstock, to supply of raw material from the sawmills and other sources, to conversions and maybe even second conversions, and ultimately to use in new markets, some of which might even be domestic.

You've seen some of this with OPG for example. I believe Capital Power is doing some conversions as well. There are many other sectors that are very serious about undertaking that same type of.... Whether they'll actually be able to do it is unknown at this point.

[Sandy Ferguson]

Can I add on to that? It's an important reason why so many bioproducts projects are co-locating beside forest products operations, because it costs a lot more to transport a log, a pile of shavings, or a bunch of sawdust than it does if you convert it into a higher-valued product, whether that product is a biofuel or advanced chemical. There is too much water and too much weight in the primary product.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

How much time do I have left?

[The Chair, Liberal, James Maloney]

You have 10 seconds.

Go ahead, Richard.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you all for being here. I have a million questions. I'm going to start with Mr. Moonen.

You talked a lot about the tall wood buildings. Fortunately, we had Michael Green here in the last meeting, on Monday, and I think he gave us very compelling and interesting testimony on all of this, but I just want to follow up with you on the role that governments could play. He talked about how—and I think Ms. Cobden mentioned it—time is of the essence here in terms of the Canadian industry and where we are versus the Americans and the Europeans and how we get to that place where those materials are accepted and used on a broad scale.

I'm just wondering about the government's role in providing the research to give people the comfort.... Government procurement, building these buildings as examples, would provide that comfort, as would building the local industry. I think we have only two plants in Canada doing this. How can we multiply that?

[Peter Moonen]

A few months ago I was sitting with a number of municipal officials on Vancouver Island who said they wanted to expand the value-added sector. I told them that they needed to be the first and best customers of what is growing in their backyard. We have to make a mental commitment to look at the materials that are available to us. We have to be willing to buy them—because they are actually of better value. They may cost more, and I think there are some things on CLT that are actually going to be almost a wash, but it has to be something for which we set objectives that are realistic and palatable. Maybe it's low carbon. Maybe it's a commitment to design flexibility. There are a bunch of features that wood can meet. As I say, it's not a perfect material, but we need to be the first and best customers.

The research Catherine mentioned is covering the difference. For Brock Commons, there is some additional engineering and some testing. That's not going to be there on the second building. That structure type is now understood and accepted. The contractor likes it. The engineer likes it. The thing went up in nine and a half weeks. We've gone over that 18-storey hurdle with cross-laminate and glulam. That was largely funded by Natural Resources Canada, and my thanks to you, because it's an iconic building globally. People say, “Wow, you can do that with wood.”

We need to be the first and best customers and then take our research and apply it in our buildings because it makes sense from an economic point of view and from a structural and functional point of view. It isn't rocket science, but it does take a mental switch to thinking that we can do it.

[Catherine Cobden]

I have a really exciting story to add. It will take one second. When the tall wood building in Toronto that we're discussing went out for bid to the architectural community, it was astounding how much—and this is maybe news to Peter—the international community is now taking this issue seriously. They got high-quality bids from dozens of firms right across the world, whereas for Brock Commons that was not the case. So the point that Peter is making, that you learn, you grow, you get better, and you attract the attention of the world—that's what we've done.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I promised Ms. Ferguson I would ask about softwood lumber.

[Sandy Ferguson]

Can I just add to what she said for one second?

The clean fuel standard would be a huge driver. If we had something equivalent to what's in the U.S., we would see our renewable fuel sold here and used here for low carbon. Loan guarantees like the ones in the U.S. would be effective. We could have more IFIT funding. It's been a fantastic program. There are green investment banks, as we've seen in the U.K., and green procurement. Just in terms of the other areas of bioeconomy, those are all really good ones for your committee to look at.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I just wanted to ask you about softwood lumber and the fact that perhaps these other uses of wood like producing CLT panels would give you some buffer against having to export 90% of your materials to the United States and still provide those residuals for your power.

It seems that this model can be put out across Canada in rural areas that are suffering, and also.... My last point has just vanished.

Can you comment on that while I rethink?

[Sandy Ferguson]

The whole structural lam side is not really a good fit for lumber producers. It's a very different kind of business. The harvesting and the feedstock collection is all very different. Structural laminate remanufacturers—I think you heard from somebody earlier this week or last week—purchase finished lumber.

The whole supply chain is really different. It's not an easy business for a lumber producer to move into. What's more interesting for us is the use of where our residuals can find a higher value-add. If we had spare residuals, which at the moment in Mackenzie, because of the biomass power, we don't.... But it's a potential for our Fort St. James operation, trying to find those additional value-added applications that can either create products we can sell in the export market or use for low-carbon economy purposes here in Canada.

We are very grateful for all the hard work that the Canadian government is doing on our behalf with the softwood lumber agreement. I do want to stress that. We're very disappointed with the recent announcements, however.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I just remembered what I was going to ask. What advice would you have for any other companies that were thinking of getting into biomass energy?

I have mills in my riding that have vast piles of residuals, especially cedar peelings, that they can't easily get rid of any other way. Bioenergy is one obvious thing. I'm wondering because you have done this successfully, what would you—

[Sandy Ferguson]

You have to do the right match of what your feedstock profile looks like to what the energy demands are either in your own market or externally, and there's an awful lot of due diligence and an awful lot of patience. This is not a fast game.

If I can leave anything with the committee, its that this is the future of our children and our children's children. It's a long-term game.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you very much.

[The Chair, Liberal, James Maloney]

Mr. Harvey.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

First of all, I completely agree with you, Sandy, on the difficulty with primary lumber producers transitioning to build secondary manufactured products like laminated I-joists or....

I had a company in my hometown. When I was growing up there were two sawmills. One of the companies attempted to do that. It was when that product first came on the market. One of the main struggles they had was they had originally intended on using the two-by-threes they produced from offsize lumber within their own plant, but they didn't pass the strength test. They had already built the plant and ended up having to bring.... I live in western New Brunswick. They ended up bringing two-by-threes in from northern Quebec in order to get the right strength, and it led to a substantially higher-cost product.

In the end it was not a good move for them, but I'm really interested by the biomass energy side of your business. Prior to running, I actually built a biomass cogeneration plant for the company I worked for, so I'm interested. It's a very small plant, 3.5 megawatts, and uses two turbines, a condensing turbine and a negative-pressure turbine, in order to get the maximum allowable usage out of it.

[Sandy Ferguson]

I'm sorry. Is it for independent power, or for use in—

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

No. They have a power-producing contract that we power. The reason it works for them is that they make potato flake, the process for which is very similar to making paper. I was intrigued by the fact that you were using the remnants of a paper plant to do that.

What is the break-even size you identify? You're producing 36 megawatts, but there obviously is an economy of scale that you needed to reach in order to just produce power even though you're using remnants from your sawmill operations. What is that identified...?

[Sandy Ferguson]

I can't share that with you because that would back us into pricing, for which we're under a confidentiality agreement. What I can say is that we looked at the amount of residuals we have, so 170,000 oven-dried tonnes per year was the reasonable amount we needed. We knew we couldn't source that entirely from our own supply, but we were confident that in the area we could get the additional supply either from in-forest harvesting or from other producers.

The in-forest harvesting is the part that's a really tricky nut. If this committee has ideas to help accelerate the work that's being done by FPInnovations and others...because that's really crucial. It's getting that feedstock that's sitting out in the forest often creating fire and pest risk and putting it into a value-added, purposeful, and efficient use for producers.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

That's something we've struggled with too. It's what value proposition it offers to government to have that feedstock cleaned up in order to make it worthwhile for the generator to consume that, because it's obviously very costly to go and gather up that feedstock, especially after the wood's been harvested.

[Sandy Ferguson]

Yes. It's the transportation costs, typically, especially in markets like ours, where a lot of the harvesting is done quite far from the mill now. It's not within 25 kilometres anymore. Those were the good old days.

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

Absolutely. Right, I get that.

Similarly, a huge by-product from the process of making power is steam, waste steam. I'm just wondering, have you looked at alternative uses for your waste steam in order to lower the costs?

[Sandy Ferguson]

We don't have much, because when we originally went out to look at this, the only opportunity we had was to produce power. B.C. Hydro did not incent power and heat, and we were too far from the local town to build any infrastructure to do community heating. I think most of you know that in Canada we don't have a lot of district heating, and it's very expensive any time you're having to look at about 25 miles. That's just too far.