Natural Resources Committee on Nov. 20th, 2017

[The Chair, Liberal, James Maloney]

We'll call the meeting to order.

Gentlemen, thank you for joining us today.

Mr. Downing, this is our second attempt at connecting with you, so we're grateful that you were able to come back and that it worked this time. I appreciate that.

Mr. Lebel, thank you for joining us. Welcome back in your new capacity. You're a former MP for Lac-Saint-Jean. I'd also like to welcome our new MP for Lac-Saint-Jean, Mr. Hébert. He is a newly minted member of Parliament and this is his first committee meeting.

Thank you and welcome.

Mr. Lebel, you don't have to listen to this next part. You can turn off your earpiece because I'm going to explain how committee business works.

Mr. Downing, each witness is given up to 10 minutes to make a presentation. You can do so in either official language, or both. It's your choice. Then after both presentations, I will open the floor to questions from around the table.

Mr. Lebel, we'll start with you because you are familiar with the process.

[Denis Lebel, Chief Executive Officer, Quebec Forest Industry Council]

Thank you for invitation. Merci beaucoup. I will do my presentation in French as I think it will be much easier for the translators. I'm very happy and proud to be here.

I would like to congratulate the new MP for the riding of Lac-Saint-Jean, Mr. Hébert, who is here with us today, as I just heard you say, Mr. Chair.

I am here to speak to you today as the president of the Quebec Forest Industry Council. I am responding to your invitation to discuss the economic aspect, among others, of the Canadian forestry sector. Our topic is the supply of secondary supply chain products in the forestry sector, but it is impossible to discuss the secondary supply chain or secondary forest product processing without first talking about the primary function. Before we get to the second and third processing of wood products, we have to ensure that we can first harvest the wood. I want to say a few words about the challenge this represents.

This is a big challenge today throughout Canada. As you know, the importance of the forest industry varies in various regions of the country. Mr. Hébert knows very well that 75% to 80% of the economy of a riding like that of Lac-Saint-Jean depends on the forestry industry. That is the case for several other regions of Quebec. And so the predictability of the wood fibre supply is important, and that depends on the provinces.

In 2012, the Province of Quebec changed the way in which it awards forestry contracts. A part of the wood is now auctioned off. This is a very important aspect. At the time this was done to respond to American demand, among other things. The Quebec market is extremely dependent on the American market.

We know that 56% of Canadian wood exported to the United States comes from British Columbia, and approximately 20% comes from Quebec. However, 96% of Quebec's exports go to the United States, whereas Asia is an important market for British Columbia's wood exports. And so it is extremely important for the province of Quebec to remember the importance of wood processing, and to keep its markets open in the United States.

One of the major problems we face regarding wood supply is the workforce we need to harvest that wood. From the time the tree is cut down until the wood leaves the plant, you need workers. This is a very important issue at this time. I know that you are fully aware of the fact that there is currently a labour shortage throughout Canada. The regions of Quebec are not an exception. In Quebec, we often say that we are going to run out of workers to process the wood before we run out of wood. Consequently this is an extremely important aspect for us.

I am repeating things you already know, but with close to 1.3 million projects starting up every year, the Americans need to import at least 30% of their wood to meet the demand. Why is it so difficult to make them understand that they should choose to buy wood from their neighbour Canada, their biggest economic partner, rather than wood from other countries? We know that that is currently creating a large price increase for American consumers. The number of new projects continues to grow, but that raises the risk of cost increases in home construction.

When we signed this agreement in 2006, Canada's market share was set at a maximum of 34%. Historically we know that Canada's annual market share in providing wood to meet American needs has never been more than 32%. Here we are talking about negotiating 28%. According to the econometric figures we have in Quebec, the drop of this rate to 28% will lead to the closure of about a dozen plants in eastern Canada, several of them in Quebec. And so it is extremely important that we follow this issue very closely.

I want to talk about the forest itself. From an environmental point of view, the forest is seen as a very promising solution for the future. That is one of the main reasons I decided to work for the forest industry.

I commend the initiative of California and British Columbia, who recognize the forest industry as an important component in their plans to fight climate change. They have integrated the forest into their plans, and have set the contribution of the forest to reaching their greenhouse gas emission reduction targets at 30%.

It is extremely important to see the forest as a carbon sink. We have to be able to regenerate our forests to go further still.

Of course, we have to be able to face natural disasters like forest fires and insect infestations like the mountain pine beetle or the spruce budworm in Quebec.

It is also important that we continue to reforest and replant our wood to capture and store carbon. You all know that the trees in a forest that reach maturity become windthrow, and will be knocked over by high winds or destroyed by forest fires. Not only do we lose their economic value, but they also emit carbon dioxide. Environmentally speaking, that is less interesting for society as a whole. Conversely, a young growing forest provides more food for animals, contributes more life and is more promising for the future. It's extremely important that we see the big picture.

I would like to make an aside here on the famous issue of the woodland caribou. When I was minister, I worked in cooperation with all of the opposition parties and tried to avoid getting into personalities or partisanship. We concluded that more scientific research on the woodland caribou was needed. In parks like the ones in Jasper or Banff, the woodland caribou populations are declining, whereas they are increasing in Quebec regions where there is a lot of forestry.

According to the Quebec forest industry, we have to know a lot more about the woodland caribou. Of course we want to protect ecosystems and ensure the sustainability of our forests, and the government of Quebec is helping us, but it is also important that we know more about the woodland caribou.

The vision we have of development, and of protecting our environment in connection with the use that is made of the forest, is extremely important. People say that we have to limit costs and reduce CO₂ emissions. The reduction of a ton of CO₂ emissions in public transit will cost between $400 and $500. Of course public transit is important; I am not saying that it is not important. All I am saying is that if we plant more trees and use more wood in residential construction, we will store even more carbon. Thanks to the savings that will generate, we can pay a part of the cost of public transit throughout Canada.

The future of the forestry industry and of the forest itself must be integral components of the federal government's environmental strategy.

Over the past few years, in its negotiations with the Americans, Quebec has always maintained its three-point position. First, we insist on the recognition of the new Quebec forestry regime, which includes auctions, which means that wood is sold at market value. Secondly, we try to hold on to the market share we have had, historically. Thirdly, we are counting on the recognition of border sawmills; 50% of their wood supply comes from the United States, mostly from Maine. These are aspects upon which we must continue to focus.

We must also see the forest as a source of energy for the future. In several regions of Quebec and Canada, there is progress in that area. Several forest biomass projects are ongoing, or completed, which provides good opportunities for the forest industry.

Of course this always leads to comparisons between the cost of new energy sources and the cost of other sources of energy. In Quebec the comparison is with hydroelectricity. In light of the lower cost of hydroelectricity, certain new energy projects may sometimes be less profitable, but I would rather see them as promising projects for the future.

The same thing applies to biofuels. In Quebec, several projects to create energy from resin or wood fibre are being pursued on the North Shore, in the Mauricie Region and elsewhere in the province. Soon we will be able to produce biofuel using wood fibre, which is clearly a promising avenue for the future.

Since my time is almost up, I will conclude by pointing out that we need to recognize the enormous environmental potential of the forestry industry and of the forest everywhere in Canada. The construction of houses, residences and multi-story buildings will be important to the future of the forestry industry in Quebec and the rest of Canada.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you very much, Mr. Lebel.

We can tell you're a veteran because you came in well under the time, and we're all grateful for that.

Mr. Downing, it's over to you.

[William Downing, President, Structurlam Products LP]

Thank you.

Good afternoon, everybody. My name is Bill Downing. I'm the president of Structurlam Products in Penticton, B.C.

I'm going to talk specifically about value-added and a specific product in value-added, and that's mass timber building elements, because that's what my company does. First, I'll give you a bit of history about Structurlam.

We manufacture two laminated wood products: glue-laminated beams, or glulam, and cross-laminated timber panels, or CLT. Our main business is taking those elements and prefabricating mass timber structures, mass timber packages, as we call them. The company has been in business for 55 years. We employ about 225 people in three plants in the south Okanagan. Over those 55 years, we've supplied some of the most iconic timber structures in the world, including the world's tallest wood building, which is UBC's Brock Commons student residence; the largest wood roof in North America, which is the Rocky Ridge Recreation Facility, in Calgary; and the most complex wood structure in North America, which is the facade of the Art Gallery of Ontario in Toronto. Those are flagship projects, and they've solidified our reputation as one of the best in the world. I'm proud of them, but they're not what gets me excited.

What gets me excited are the more mainstream buildings, because that's where the volume is. Here I'm talking about multi-family residential apartment buildings, office buildings, and the like. We have some examples. We provided two in Portland, Oregon: one is Carbon 12, an eight-storey building, and the other is the First Tech Federal Credit Union building, one of the biggest wood buildings. I thought I would bring a picture. I don't know if you can see it, but that's a picture of the First Tech Credit Union building going up. You can get a feel for the size and scope of that structure. That's what gets me excited. I know they're not the iconic structures, but they are very impressive and they use up a lot of volume.

Why would you build out of wood instead of concrete or steel? Mass timber buildings have three main advantages. They can be erected very quickly, so there are huge schedule savings. They're carbon neutral. They use renewable material right from Canadian lumber, which is cost-effective and plentiful.

You might be worried about wood buildings rotting or burning. I can tell you that if you don't design them and build them properly, that can happen. However, if we design mass timber structures properly, primarily keeping water and UV rays off the wood, they can last hundreds of years. CLTs have a two-year fire rating, even when fully exposed.

The good news is we've figured out how to design and build high-performance mass timber buildings, and I think that's going to change the way we construct our structures here in North America. Ten years from now, I envision a world where mass timber will be used extensively for buildings up to 30 floors high. I'm not saying that wood will completely replace concrete or steel; rather, wood will be on an equal footing with those other materials and will be considered with almost every construction project. Use the right material for the right application.

I believe that as wood use increases in taller and larger buildings, that will impact the supply chain in a very beneficial way. For example, most Canadian material is currently exported to the U.S., primarily to supply the single-family home market. This is going to change. In the future, I can see an increasing percentage of that fibre being processed by secondary manufacturers, like Structurlam. We will then prefabricate the structure to a much higher tolerance and quality compared to site-built. These prefabricated building elements will be used for construction in North America and overseas. Rather than exporting lumber, I can see us exporting prefabricated structures made here in Canada. That's happening already. Let me give you an example.

Structurlam just landed the largest mass timber building job in North America—it could be the largest CLT building in the world—to rebuild Microsoft's campus in Silicon Valley. We're purchasing the fibre from Canadian Forest Products, or Canfor. Last week, I issued them a purchase order for $4 million, which is a big purchase order even for a large multinational like Canfor. You can see the shift happening. Remember, our products go across the border duty-free.

What happens when the fibre is processed into value-added products in Canada instead of being exported to the U.S. as dimensional lumber? We literally triple the value of that fibre. In other words, we're extracting three times the value per board foot from our Canadian timber resource. In addition, the manufacturing process and Canadian labour is often in rural communities, as in Structurlam's case, where jobs are hard to come by. Finally, we're reducing greenhouse gas emissions by converting steel and concrete construction to wood. It's a pretty good story.

I know there is a private member's bill regarding using more wood in federally funded buildings, and I would encourage all of you to support this initiative. Remember that steel and concrete are well entrenched in the construction of large buildings, and all the players, from the architects to the engineers to the general contractors, are very comfortable with using the status quo. In fact, most structural engineers aren't even taught how to design in mass timber, and our carpenters aren't trained in how to erect a mass timber structure.

Without the help of things like a wood first initiative like we're considering, things will change very slowly and Canada will miss the opportunity to lead the world in mass timber design and construction.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you.

First up is Ms. Ng.

[Mary Ng, Liberal, Markham—Thornhill, ON]

Thank you very much to both of you for coming today and for your efforts in preparing your remarks.

I'm going to start with Structurlam.

We've been hearing from other witnesses who essentially are sharing the same sentiments as you are on the opportunity for value-added product, the opportunity for prefab, and the opportunity, therefore, to create those kinds of advanced manufacturing jobs and companies here in Canada that then allow us the opportunity for a greater supply chain.

You started touching on what it is we could do to incent or help accelerate that as an industry and essentially overall help the forestry industry by doing that. Maybe you could talk to us a little bit about that.

[William Downing]

What happened was when Structurlam took the leap and decided to build a manufacturing plant that was going to produce this new product called CLTs or cross-laminated timber panels, there was no market. We were very fortunate in a couple of ways.

First of all, the federal government, NRCan at the time, had funded a demonstration project. There were actually three buildings we got to supply with the first panels we made. That was very helpful and it gave everybody a reference site where they could go to see this new technology and this new building system.

Another thing that happened was that in British Columbia they had just introduced—we're talking around 2010 here—a Wood First Act, which said that if there was provincial money in a building, then wood had to be considered. It didn't have to be wood; it just had to be considered. That was a wake-up call to the architects, the engineers, the designers, and even the general contractors in B.C. that they'd better take a look at this stuff.

I think it would be very helpful if that was happening outside of British Columbia, if it was happening more as a federal initiative, as I mentioned. That would be very good.

After that we have to help educational institutions to train their engineers in how to build in wood. We need to have courses for those because everything now, a prefabricated structure, is all done on CAD. It's a three-dimensional model. We build the building virtually and then we build it out of wood. Those operators that can handle and do those CAD drawings are few and far between, so Structurlam ends up having to bring them from Europe. I would love to hire Canadians instead of Europeans. I don't speak very good German or Swiss, so it would be a very nice thing to see that kind of training happening.

In general, there's just the support of the wood industry as a viable alternative. As I mentioned in my report here, we have to help this baby along because the steel and concrete industries are extremely effective lobbyists. Don't forget that they have the systems in place so they have driven the cost out of those buildings so much. We are just getting going. We're just starting to bring those costs down with the development of new systems, and we're also getting the industry to recognize the fact that if the building goes up much quicker, they are going to win on the schedule side.

Those are a couple of ideas anyway. I could continue.

[Mary Ng, Liberal, Markham—Thornhill, ON]

That's great.

The company has won awards and has had environmental certifications. You talked about it being carbon neutral. Can you talk to us about that?

[William Downing]

Basically, building in wood is generally carbon neutral to carbon positive. We've done a life cycle analysis on our material, and we have the scientific basis for saying that our material is carbon neutral. That's done through an organization called FPInnovations, a wood research organization here in Canada. They do that work for us. It's definitely carbon neutral. Then we make sure that our fibre supply comes from certified forests. Those forests are either FSC certified or SFI certified as sustainable material. We don't buy anything that's not. By the way, we buy all our product from manufacturers in B.C. and Alberta, and they are all certified.

[Mary Ng, Liberal, Markham—Thornhill, ON]

I have one last question. It's about external exports. It's interesting to learn that you are building the new building for Microsoft, but where are the opportunities, from your perspective, around our ability to access markets in the future?

[William Downing]

As I mentioned, Structurlam has been in business for 55 years, and during that time we have exported all around the world. There are two markets that are really key to us. Obviously, the U.S. market is huge, and it's just gaining momentum on building with mass timber. The other market is the Pacific Rim, which includes Japan, China, Taiwan, and Korea. We've exported quite a few buildings over to them. From my perspective sitting as the manufacturer out here in British Columbia, it's North America and those four Pacific Rim countries.

[Mary Ng, Liberal, Markham—Thornhill, ON]

You were talking about safety standards. Maybe there is a lack of knowledge or a need for greater knowledge, but people associate wood with fire. In your experience, what can we do to help people understand what new innovations might help us get over that understanding?

[William Downing]

That's a good question.

There is an organization in Canada called the Canadian Wood Council, and a subset of that, the Wood Works initiative is doing a lot of that great work. The research is being done with FPInnovations and various universities across Canada on the fire side, as well as acoustics and durability issues. That message is being distributed to the specifiers. Let's not forget that nothing ever happens until an architect says, “Build that out of wood.” You have to get to that audience, along with the general contractors and engineers, with that message.

I don't know what you can do to assist and continue those programs, because they are massively important and have had a great impact.

[Mary Ng, Liberal, Markham—Thornhill, ON]

What about building codes? We heard from others that building codes need to be modified. What's your perspective on what needs to happen in that realm to help facilitate this?

[William Downing]

That's another good question. I'm sorry I missed that, because I live and die in the building code world.

We have a system in Canada where you can go for an alternative solution. If the engineer says, “I believe that's going to work and I'm willing to stamp it”, I can go outside the building code and build buildings. Many of our wood buildings have been outside the code but have been signed off as an alternative solution.

What you are talking about is changing the mainstream building code, the national building code, to be able to build up to six storeys, or even higher, in wood. Those initiatives are on the way. They will be out there, presented and evaluated. I can see in the not-too-distant future up to 12 storeys in wood being inside the building code, if the support is there.

[The Chair, Liberal, James Maloney]

Thank you.

Ms. Boucher, go ahead.

[Sylvie Boucher, Conservative, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

Thank you, Mr. Chair.

Good afternoon, Mr. Lebel.

[Denis Lebel]

Good afternoon, madam.

[Sylvie Boucher, Conservative, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

I am very happy to be here today and to see you here in your new capacity. I miss you a great deal.

[Denis Lebel]

I miss you too.

[Sylvie Boucher, Conservative, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

I too represent a riding where forestry is very important. We've talked a lot about secondary forest products. Since you have worked on these dossiers for a very long time, I would like you to tell us about the current and future challenges and opportunities in the secondary wood products sector in the provinces, and for Canada as a whole.

I would also like you to tell us how the federal government and the provinces can take advantage of Canada's competitive advantages to further trade and economic development in the secondary wood products sector.

[Denis Lebel]

First of all, thank you for the question.

Of course, I do miss you and life on Parliament Hill, but I have been in my new position for a month and a half, and I am still learning every day.

It is important to remember that in order to be able to do secondary processing, you have to make sure that you can harvest the wood first, as I was saying earlier. The important thing is to keep our markets open.

Of course, the future belongs in part to wood processing. There is an organization in Quebec that is related to the Forest Industry Council called Cecobois. The organizations that promote the use of wood in Canada and Quebec are working very hard to develop markets and increase the number of wood buildings. As we were saying earlier, it's important that building codes allow for this, while respecting all security standards. So you need that first processing level.

Secondly, we must continue to work on facilitating access to various markets. For all sorts of geographic reasons, British Columbia is much closer to Asian markets than Quebec. As we heard earlier, the United States is still the most important market for British Columbia, followed by Asia, which is easier to access from British Columbia than from Quebec. We want to continue to work with the industry in British Columbia, as it is essential for us that the forestry sector throughout Canada does well.

And so we need to continue to promote the culture of wood. My colleague was right to say that in educational institutions, in universities, cegeps and high schools, we need more stakeholders from the sector, whether they be architects, engineers, technicians, carpenters or cabinet makers, who can promote the value of wood, so that people are aware of the value added by using wood in construction.

Our governments could highlight the environmental value of the different products. Of course, you can build using steel and cement, and that is a choice that is up to the consumer. However, if the environmental value of the product used in construction were recognized, this would allow the forest industry to sell more wood. I believe this is a promising avenue for the future. The forest is a promising solution for the environment in Canada, and must be seen as such.

At the same time, we must continue to keep our markets open. Our workforce is extremely important, and we have to facilitate the entry of the workers we need in several areas of the country. I know that there is a shortage of labour in your riding, Mrs. Boucher, for forestry enterprises. The same thing applies to the Saguenay—Lac-Saint-Jean region for forestry work in the summer, and when reforestation needs to be done. Who is doing that work at this time? Workers from Africa. We are lucky to have them. We have to open our hearts, our minds and our doors to immigration; it's a necessity. It's not necessarily easy, but a lot of things can be accomplished.

That is my answer, in part.

[Sylvie Boucher, Conservative, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

Thank you, Mr. Lebel.

I am going to yield the rest of my time to Mr. Schmale.

I have no questions for now.

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

Thank you very much. It's great to hear the comments from both of you. They're greatly appreciated.

Mr. Lebel, it's nice to see you again. I hope all is well.

[Denis Lebel]

Thank you, Mr. Schmale.