Evidence of meeting #81 for Natural Resources in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was biomass.
A recording is available from Parliament.
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
The complexity of the loan, the bookkeeping of it is—
Conservative
Jamie Schmale Conservative Haliburton—Kawartha Lakes—Brock, ON
My concern here is the taxpayer. They're putting their money forward for this risk, so this is where my concern is.
In, say, mining or other sectors there's an exploration tax credit, that kind of thing. Is there such a thing in your industry as well?
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
There's nothing specific to the industry, like a specific R and D—
Conservative
Jamie Schmale Conservative Haliburton—Kawartha Lakes—Brock, ON
That would take care of some of the risk.
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
Yes, that would actually be useful, from my perspective, in terms of getting my budget funded. There are R and D tax credits, which we take advantage of, but to my knowledge, there isn't any specific tax credit for forest-related research and development, deployment, and commercialization projects.
Conservative
Jamie Schmale Conservative Haliburton—Kawartha Lakes—Brock, ON
That's interesting. That could be a different way of pursuing things.
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
Yes.
Conservative
Jamie Schmale Conservative Haliburton—Kawartha Lakes—Brock, ON
It could also give you maybe more flexibility such that you don't have to go into the government box where they say this is what they want to look at. You would probably have more freedom. That's interesting.
Thank you.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
Thank you, both, for coming before us today.
I'm going to start with Mr. Marcoccia because I'm interested in how the forest industry is integrated within itself. I know we have sawmills that produce sawdust and chips. Selling that material to the local pulp mill is a valuable part of their balance sheet, and it's a valuable source of material for the pulp mill.
However, when I talk to those people in my region, I hear there's often push and pull about access to those resources, especially when they're talking about residuals left out in the bush. I'm from British Columbia and every fall I look up at the mountains and there are great plumes of smoke from the mountains because we're burning all that slash when it could be used for any number of these things that we've been talking about today. I realize it's probably mostly provincial jurisdiction in how those materials are divvied up.
I'm wondering if you could comment from Domtar's position. What proportion of the materials you use in your mills is from residuals and what proportion is from raw logs that you have harvested on licence areas? How important are those residuals to you, and how can an expansion of that base help?
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
That's an excellent question. It is extremely site-specific and region-specific. Domtar is a corporation that operates in the interior of British Columbia. As I said, we're in Ontario and Quebec, but we also operate down in various regions of the United States, including the Appalachian Mountains in the southeast. The nature of the supply chain will be a function of regional conditions, and that's true for the whole industry. In our Kamloops, British Columbia, mill, we're 100% residual. We are full, and we do not own any of those sources of the residual chips. The chips are coming to us through sawmills. Kamloops used to be a warehouse at the time they were integrated with the sawmill, but that has since been “disintegrated”, if you will.
In that regard, a healthy lumber industry is absolutely critical to our supply chain and our input costs. If anything happens to reduce the activity on the sawmill side, our costs go up. We have some provisions for chip mills to chip whole round logs—usually juvenile thinnings—to sort of supplement sawmill chips, but those would come at a greater cost.
That's the first part of the answer. Then, if you look at other facilities like our Windsor, Quebec, mill, our Windsor, Quebec, mill is in a hardwood forest and there's very, very little milling of that for structural lumber. We have extremely large, internal whole-log chipping operations. To answer your question, we have anywhere from 0% to 100% residual chips coming into our facilities. Fifty-fifty is not unusual. If sawmill residual chips are available, generally, those are the preferred source of fibre because they will, generally, be at the lowest cost.
Does that answer your question?
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
Yes, thanks.
Mr. Price, I wonder if you could comment on that. You talked about provincial incentives for multiple use. Have you had any experience in Alberta with what can be done to kind of enhance that flow of products between the various levels?
Executive Director of Bioindustrial Innovation, Alberta Innovates
I do. In fact, in the province of Alberta, regulation was put in place quite a number of years ago—probably 15 years ago—to require mills to move chips from a sawmill into a pulp mill and to move sawdust into an MDF plant. It was through regulation that the province governed wood transfer from mill to mill. That can lead to problems. The advent of mountain pine beetle in Alberta had an impact on those saw logs, with bluestain in the chips that were coming off the edges of the logs. That then created problems in the pulp mill, which created a whole new need for research to look at how best to deal with that situation.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
I'll just follow up with an entirely different question to Mr. Price.
You mentioned being “fibre agnostic” and how it would be ideal to use fibre from agriculture or forestry or whatever, from municipal waste. When you're talking about agriculture, are you talking about agricultural waste or are you talking about agricultural fields or products that are dedicated to producing fibre? There are concerns out there that we hear. With regard to the production of ethanol, for instance, we're using food-producing areas of Canada to create a fuel rather than food, and people view food as a higher priority.
Executive Director of Bioindustrial Innovation, Alberta Innovates
When I made the statement earlier, I was thinking specifically of waste materials left on an agricultural field, the straw or things like that. In this day and age, with controls being exercised on electrical generation in the province, companies are looking at the opportunity to co-fire biomass and coal. The biomass that's being considered is, in fact, agricultural residue as well as some municipal solid waste and mill waste, bark, and other segments coming out of the sawmills and pulp mills in the province. There's significant opportunity.
On the subject of food versus fuel, yes, you can look at off-grade canola oil as a feedstock to produce biofuels, and some companies are doing that. You can look at purpose-grown crops, triticale and camelina, to be moving into the bioindustrial sector as opposed to food. There are also animal wastes that can be the feedstock for bioindustrial product development, so there's quite a broad spectrum available.
Earlier, yes, I was specifically thinking of straw that was left on the field, but it's much broader than that.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
Very quickly, could you comment, perhaps, on using biofuels, especially forest waste products, in helping remote communities get off diesel for their energy needs?
Executive Director of Bioindustrial Innovation, Alberta Innovates
Yes, it's something that, when I was with the Canadian forest service, we looked at on a number of occasions. More recently, the province has been looking at the opportunity to utilize biomass as a heat source and for electrical generation in communities.
There hasn't been a lot of development in that respect. I think there's been more development in the province of B.C. when it comes to CHP and electrical generation in more remote communities. One problem we have in this province—
Liberal
The Chair Liberal James Maloney
Mr. Price, unfortunately, I'm going to have to stop you there.
Mr. Hébert, you're up next. Maybe you can pick up on that so we're not left in suspense. We have about five minutes left.
Liberal
Richard Hébert Liberal Lac-Saint-Jean, QC
Thank you, Mr. Chair.
I want to begin by acknowledging Mr. Marcoccia, who is sharing his time with our committee today to advance the quality of practices in the forestry by-products industry.
Your 2017 report on sustainable growth stated that 73% of lumber manufacturing by-products—such as bark and wood residue or ash from boilers—had been reused.
I would like to know whether it is possible to increase the proportion of reused products and, if so, to what extent.
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
Yes, it is possible. I think what ultimately drives it from our point of view is the profitability of a by-product. Today the most profitable material we can make out of our supply chain is fibre, and fibre conversion into paper. As we move up the supply chain, we can create more value and have better margins.
That's not to say, for example, that we can't make value-added by-products from lignin that will generate more profit than fibre. We don't have the markets and the technology to do it today, but this is what we're investing into in terms of creating a pipeline of new products. We would love to be able to make more profitable products of the fibre, but in truthfulness, we think that the pulp fibre and the paper will be around for a long time. As well, I will say that there's great opportunity to extract more value from the co-products than what we have done historically, simply because in the past we would use almost all of the co-product potential as fuel without differentiating between different types of co-products and different types of fuel.
I'll give a very specific example related to softwood. Turpentine comes out of softwood, and it's a great fuel. We would burn it if we could, but we would sell it for its fuel value if we could not burn it efficiently or safely. Well, in the last five to 10 years, the value of turpentine has gone from 25¢ a litre to over a $1.50 a litre. That's because it's being used in value-added products, including perfumes and soaps. That is quite remarkable, because if you've ever smelled turpentine coming out of a mill, it is the worst-smelling thing there is.
There is this opportunity to take these by-products that we're presently either not utilizing or more likely burning and extract the more valuable components. In some cases, the technology is mature; in other cases, it's in development. Our biggest weakness in this whole approach is in market development, in the marketing piece of it. We're not used to doing business in these spaces. They're different markets, and that's where we need to focus.
Liberal
Richard Hébert Liberal Lac-Saint-Jean, QC
According to the 2014 report by the American Forest & Paper Association, the industry reuses about 50% of its products.
Can you tell me why you are able to reuse your by-products more than your competitors? Is that simply a matter of will or is it also a matter of technology?
If that performance is due to special processes and technologies, can you tell us how we could ensure the application of those practices across the industry?
Director of Research and Development, Pulp and Paper Division, Domtar Inc.
Again, it's an excellent question. I would say that it's a combination of both. It's execution, a willingness to go out there and take the risk to develop new products and new markets and new business sectors. That's a very big component. I'm proud to say that at Domtar we have differentiated ourselves in the last 10 to 15 years by being more willing to do that than most North American forest products companies.
On the technology aspect of it, there's a spectrum of technology readiness. One comment I would emphasize is that we believe in open innovation, which is another way of saying that we're looking externally for the technology. We like to get in early to support it to leverage our support, but the basic research is not going to be done at Domtar. We look to universities, research institutions, and small start-up companies and entrepreneurs that in many respects could be competitors with us for our wood supply. Our view is that the key to being able to be successful in that space is to learn to collaborate and to improve our skills when it comes to collaborating.
That's easier said than done. Dr. Price mentioned that when some small start-up entrepreneur companies come into the space, often there's a clash of attitudes and a lack of alignment and objectives, but it is sort of a necessary, messy process that we have to go through. We have to learn to work with different stakeholders under different terms, and the essence of this is collaboration, particularly given that we're looking at technologies we're not familiar with, at markets and products that we're not familiar with, and we have to learn quickly.
Liberal
The Chair Liberal James Maloney
We're going to have to stop there, unfortunately.
Gentlemen, thank you both. We never have enough time to do what we would like to do here. We're limited by time constraints. Both of you provided very valuable evidence. We always learn something new every time we have witnesses. For example, I always thought turpentine was just used for cleaning paint brushes. Who knew it was used for perfume? Anyway, on that note we will suspend for only two minutes because we have some committee business at the end. The next segment has to end a little bit early too.
Thank you.
Liberal
The Chair Liberal James Maloney
We're going to get started here again. For our second segment here, we have two groups.
We have Christopher Struthers. Thank you for coming, sir.
From Resolute Forest Products, we have Pascale Lagacé and Alain Bourdages. The process is that we'll give each group 10 minutes: Mr. Struthers will have 10 minutes, and the two of you will have 10 minutes in total to make your presentations. We are under some time constraints, so I will stop you right at 10 minutes if you've not concluded, and then we'll follow with some questions from around the table.
Mr. Struthers, we'll start with you.
Christopher Struthers As an Individual
Good morning and thank you for the invitation.
My name is Chris Struthers. I run a small electrical power engineering consulting business in Penticton, British Columbia. My specialty is electric power. I'm not a forestry expert, but my work does take me to a wide range of clients in the resource industry, including pulp mills and biomass generators. I've worked on four different biomass power generation projects in the last few years and am now starting to work with some new clientele who have some very exciting innovative technologies that are showing a lot of promise for the forestry business. Particularly, these are sort of marriages of existing technologies that have been improved, and so the cross-pollination between different disciplines is starting to show up in some really interesting combinations.
The first one I'll talk about briefly is the marriage of traditional biomass combustion to power generation with large-scale grid battery technology. Thermal biomass power generation is not a particularly new thing. You burn wood to heat a boiler or some kind of fluid heat exchanger, and that can drive a turbine to make electricity. There's a thermal challenge with this, though, for some applications. It takes a long time for a thermal system to heat up or to cool down. It can't respond to load on demand very quickly. A good analogy is using wood to heat your house. If you've ever tried to fire up your wood stove on a minus 20 day to try to get your house heated up right away, you'll know it takes time. Conversely, it takes time to cool off again when you don't need that heat. The same challenge exists when you're trying to make electricity from biomass.
It makes it impractical to use biomass generation for, say, remote communities where the power load fluctuates during the day. Everybody gets up in the morning, fires up the toasters and the coffee makers, and you get a peak demand on the grid. You get another peak usually around suppertime, and then you get very little power consumption overnight. A traditional biomass generator has trouble with that.
Now we're seeing, with the rapid improvement in battery technology, that the marriage between biomass generation and batteries now makes for very interesting and worthwhile combinations specifically for remote communities that are not connected to the grid. Take, for example, a small remote community of, say, 500 people working on diesel power. Diesel engines are the generator of choice because you simply fuel them up, and the load can go up and down to match the demand very easily. Now, of course, you can take a biomass generator that is sized for the average load for the day, so it cannot provide all the power for the peak time, and it has to run fairly consistently over a 24-hour period. You couple that with a large-scale battery system and now you have a winning combination.
To give you an idea on the cost savings, diesel power is generated in a remote site for a cost somewhere between 25¢ and 35¢ per kilowatt hour. Biomass-plus-battery technology offers significant savings in the order of 15¢ to 20¢ per kilowatt hour. That includes the amortization of equipment, things like battery replacements, and the long-term costs. It's financially looking like a real winner, and of course the impact on greenhouse gas emissions is a very attractive improvement. Obviously, depending on the type of renewable feedstock you're using, you could essentially say it's almost carbon neutral. Certainly compared to diesel power it's a very attractive opposition.
One of the challenges in getting this technology in place is the inertia and the lack of willpower from power generation companies that have established ways of doing things, and finding the investment and capital to put it together.
The second technology I'm going to talk about briefly is the marriage of biomass gasification with another technology for gas to liquids, which is used to produce biodiesel, diesel fuel.
Just to give you a rough idea of what's doable, one cord load of typical pine firewood, if you like, can be converted into enough biodiesel fuel, roughly one barrel, to drive a mid-sized pickup truck from Ottawa to Toronto and back. One cord load goes into one barrel. It's quite a neat conversion.
There's a bit more to it than that. The process starts off with wood chips that get dried using waste heat from other parts of the process. We try to reuse as much of the off-product as we can, including waste heat. The waste heat is recycled and used to dry the wood chips. The wood chips are fed into what's called a pyrolysis chamber, where heat and pressure break it down into synthetic gas, also known as syngas, which is hydrogen and carbon monoxide. The waste product that comes out of the bottom is biochar, which is a clean charcoal source, which has a commercial use for soil enhancement. It's very good for replenishing soil, and it helps with moisture retention and things like that. Another very interesting property of biochar is that it essentially sequesters the carbon. In this process, some of the carbon in the wood will be sequestered if the biochar is put to use elsewhere.
The gas, of course, is the most interesting product coming out of it. It's converted to liquids using what's called the Fischer-Tropsch process. The hydrogen and the carbon monoxide basically get converted into longer hydrocarbon chains, such as diesel fuel. The technology is not new. It was invented in Germany in the thirties, and up to 25% of their vehicle fuel in the war effort came from this technology via gasified coal. So it's been around for a long time. There are some large commercial plants converting natural gas to diesel fuel in South Africa, Qatar, and Malaysia. These are huge, large-scale plants producing several hundred thousand barrels per day between them.
What's different about the technology now, and why is it of interest to the forestry business? When you combine this technology with the gasification of biomass, obviously you get a biodiesel, which is an attractive product. One of the interesting things about one of my clients is that they have managed to downscale the technology. Instead of having to build these huge, massive billion dollar complexes, they can get away with as little as 300 barrels a day of output and still be economically viable. This makes it very interesting for distributing this sort of system to locations that are smaller centres, more remote centres, where they have an abundance of both biomass and natural gas, and, of course, don't have refining capacity. They import all their diesel fuel. I'm thinking of areas like Peace River region, for example, that import huge quantities of diesel fuel for all their industries. They have an abundance of natural gas and an abundance of forest products. These would be ideal locations for this kind of technology.
Regulatory-wise, there are a lot of advantages to biodiesel for greenhouse gas emissions. We're seeing the development of Canada's clean fuel standard. A lot of provinces already have incentives or regulations in place for blending the fuel. This biodiesel, when blended, really makes a superior fuel. It's very clean and has almost no particulates from the biodiesel component, so you don't get any smog from it, and when it's blended it makes the base fuel even cleaner. It obviously reduces the greenhouse gas intensity of the total fuel, which is a big target in the market. It helps upgrade a low-quality fuel, and one of the very useful properties is that it's temperature stable. Some of the biofuel additives at the moment have problems in winter conditions. They're not temperature stable, whereas the biodiesel from these processes is very useful for cold places.
The economics are now there. One of my clients is in the process of siting a biomass-to-diesel fuel plant in the south Okanagan. They're in the process of dealing with the landlord and the permits now. Some of the other spinoffs are going to be waste heat. Some of the waste heat will be piped to greenhouses, potentially.
The process also produces clean water, which can be used for irrigation. There's, of course, the biochar, which again is very good for intensive horticulture. It's very good for soil enhancement. So there are a lot of real advantages.