Natural Resources Committee on Jan. 30th, 2018

[The Chair, Liberal, James Maloney]

Mr. Struthers, I'm going to have to ask you wrap up very quickly.

[Christopher Struthers]

Okay.

That's a summary of some of the technologies we've been working on. I'm happy to answer questions. Thank you.

[The Chair, Liberal, James Maloney]

Thank you.

We'll move over to you, Ms. Lagacé.

[Pascale Lagacé, Vice-President, Environment, Innovation and Energy, Resolute Forest Products]

Thank you, Chair and members of the committee.

My name is Pascale Lagacé. I'm the vice-president of Environment, Innovation and Energy at Resolute Forest Products. I'm accompanied by Alain Bourdages, the vice-president of Innovation and Energy. We are very pleased to be here today to speak to you on behalf of Resolute as part of your study on the secondary supply chain products in the forest products sector in Canada.

Resolute Forest Products is a global leader in the forest products industry with a diverse range of products, including market pulp, tissue papers, wood products, newsprint and specialty papers, which are marketed in over 70 countries.

The company is also a major player in supporting and deploying innovations in the forest products sector in Canada.

Our business starts with the great privilege of sustainably harvesting large areas of Canadian forest, then focuses on extracting as much value from that precious resource so that nothing is lost. For the last century, the forest products supply chain remained largely unchanged. Logs from the forest would be brought to a sawmill, where they would be turned into construction lumber. Secondary products such as bark, chips, or sawdust would be dispatched to the highest value use and input into pulp, paper, board-making, or fuel to generate energy to support those same manufacturing activities.

But more than anyone else, we recognize that this supply chain is undergoing profound changes. Significant trends, especially in printed media, led several years ago to a shift in Resolute's business strategy and in a repositioning of its activities toward products most likely to offer features and attributes that will remain attractive to consumers over the next decades.

This thinking also led to the conclusion that changes in certain consumer habits and preferences could also create opportunities and be a chance not only to explore new alternatives based on the properties of forest fibre all along the supply chain, but also to develop new business models.

For example, as you may have seen last week, FPInnovations, one of the leading forest products research organizations in the world, and Resolute Forest Products were proud to announce they were joining forces through a strategic research alliance, investing in the transformation of Canada's forest sector through the implementation of a TMP-Bio pilot plant in our Thunder Bay mill in Ontario. This project will develop processes that utilize equipment and fibre traditionally used to manufacture newsprint and other paper grades and repurpose them to produce biochemicals from sustainably harvested non-food sources.

We are also creating partnerships with small and medium-sized companies that bring innovative solutions to the challenges we are facing. You may have heard of Serres Toundra, a joint venture between local entrepreneurs and Resolute, that have made the first Canadian deployment of a European greenhouse technology that is now in operation, occupying an area of nearly one million square feet next to our Saint-Félicien pulp mill. Using waste heat from the Resolute facility, Serres Toundra has the capacity to product approximately 45 million cucumbers per year.

Some would say this is already an excellent example of a successful secondary supply chain initiative, but we are not stopping here. We have also announced we will integrate a first of its kind enzyme-enabled carbon capture technology on our pulp mill site, which will capture and recycle carbon dioxide emitted by our pulp-making operations and inject it into the greenhouses to optimize crop growth. This technology was developed by CO₂ Solutions, a Quebec City-based technology company.

We are not waiting for others to bring novel technologies and market applications to us. In 2014, following the discovery by FPInnovations of its patented cellulose filaments technology, Resolute created a joint venture with market pulp rival Mercer International dedicated to research and development of cellulose filament applications outside the traditional forest products business. In short, we created a start-up company with one of our biggest competitors. This company is called Performance BioFilaments, and I understand its managing director will appear before this committee later this week.

Through these various initiatives we believe we gained some knowledge of the challenges of optimally using Canada's forest resources in the 21st century. First and foremost, forest fibre cannot be developed in a linear fashion, not unlike petroleum. To extract maximum economic value out of a harvested tree, the resource has to be refined multiple times through multiple processes and into multiple products.

In other words, because of economies of scale and the chemical complexity of forest fibre, we are deeply convinced that the primary supply chain has a role to play in the development of next-generation technologies and non-traditional products. Integration is the best way to extract the most value from each tree.

It is clear to us that the policies and programs of the Government of Canada that would be the most appropriate to support the development of the forest products industry need to focus on the following elements.

First is federal support for venture capital. As you probably know, the investments in forest industry transformation program that provides financial assistance for innovative projects through a rigorous selection process has historically been extremely popular with the industry.

This particular program has, each time, attracted novel projects for which the requests for financing largely exceeded the available funding envelopes. We have no doubt that the new clean growth program put in place by Natural Resources Canada will be as successful. This type of approach not only needs to be pursued by the Government of Canada, but also needs to be broader.

Second, Canada's research and development capacity in this industry must not only be maintained, but also aligned with the interests of both the traditional and non-traditional industries. Partnership funding programs for small, medium-sized and large businesses, as well as research institutes, should be enhanced, not only to support the traditional industry, but also to support all the players in the market.

Finally, all stakeholders involved in forest management and development in Canada need to recognize that it is crucial that public policies seek a healthy balance between preserving the biodiversity of Canada's forests, reducing Canada's environmental footprint, including greenhouse gases, and stimulating the social and economic development of many regions of the country. As an example, trees converted into wood products deliver significant environmental benefits because they continue to sequester carbon dioxide, the most common greenhouse gas. As such, the use of 1 cubic metre of construction lumber removes 0.9 tonne of CO₂ from the atmosphere.

For Resolute Forest Products, the development of forest-fibre based biotechnologies will only be able to thrive if the raw material that is the source of all these advancements is harvested globally in a sustainable way, which is currently the case, at a competitive price, no matter who is doing what in the value chain.

In closing, we would like to thank you for the opportunity to speak with you today. Alain and I would be happy to answer any questions you may have.

[The Chair, Liberal, James Maloney]

Thanks very much.

Mr. Serré, you're going to start us off.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you, Mr. Chair.

I want to thank the witnesses for their presentations and the work they are doing.

We heard witnesses Rick Jeffery and Eric Karsh say that Canada was a global leader in forest industry management. So I really want to thank Resolute Forest Products for its work.

The forest industry has contributed about $23 billion to the national GDP and directly funded some 211,000 jobs across the country.

I want to begin by thanking you very much for the investment you recently made, as announced in Thunder Bay. Your company invested $3.5 million in a $21-million project.

I would like to know what your contribution to that investment is. I would also like to know something else about research and development and innovation, areas in which our government has gotten very involved. I know the people from Domtar said that staff from Natural Resources Canada and the Natural Sciences and Engineering Research Council of Canada, NSERC, were working closely with them in that area.

Could you share your recommendations on this matter? What could the federal government do to continue to improve and develop innovation and investments in research and development? Could this help you increase the number of Canadian jobs?

[Alain Bourdages, Vice-President, Innovation and Energy, Resolute Forest Products]

I will answer the first question.

In the case of TMP-Bio, our investment is $3.5 million, $2 million of which is in capital, strictly for equipment, and then another $500,000 a year for operating support. We are not only there to install equipment, but also to run it, test it and complete the project. The $21 million also includes a large research and development component, partly funded by the Government of Canada, through Natural Resources Canada, and the Government of Ontario.

As a member of FPInnovations, Resolute Forest Products is working on research and development and facilitating the integration in an industrial setting through its Thunder Bay plant. That is part of the learning inherent to project deployment.

We will also support FPInnovations, whose employees will be the ones running the plant. Of course, they are on site at our facilities. So we will collaborate by providing services, including by providing insight into future technological development and by pointing out what pitfalls in terms of marketing must be taken into account for this project.

So we are involved both financially, since we are investing $3.5 million, and operationally, since we are helping lead the research, which will be available for the entire industry through federation members.

[Marc Serré, Liberal, Nickel Belt, ON]

That's excellent. Thank you very much.

Mr. Struthers, you mentioned the work you do as an engineer. The Domtar witness indicated earlier what we've heard about from others in the resource sector, in mining and forestry: skills shortages. When we look at skills development for the workforce for the future, do you have any specific recommendations for the federal government to help the industry out? Do we look at STEM, at women in technology and science, and at increasing and supporting the private sector businesses with regard to the current skills shortages and for jobs in the future?

[Christopher Struthers]

In my business, I'm finding that the availability of skilled engineering, engineers, and technologists is actually quite good right now. It helps that I live in a very attractive location in the South Okanagan, so it's not too hard to attract folks.

There is definitely more of a challenge in the remote areas and the areas further north, which is where a lot of the resources reside. We were speaking earlier about power generation in remote communities. One of the challenges in order to do this sort of thing is to have local people trained to operate and maintain these facilities. Training programs that do outreach and encourage learning and STEM, especially for remote communities and/or first nations communities definitely would be advantageous, so that when these technologies get applied to remote areas it's easier for them to find the skilled labour, technologists, and service people locally instead of having to import them.

[Marc Serré, Liberal, Nickel Belt, ON]

I have two minutes left. That's good.

Forest products account for 7% of Canadian exports. What could we do to help the forest industry increase the exporting of its products to Japan, Europe or China? Do you have any recommendations for the federal government?

In addition, you are working closely with first nations. You are employing first nations members. Do you have any recommendations that would help establish a connection with first nations when it comes to resources and training, in order to enhance and build relationships? Do you have an example of good things you have already accomplished?

[Pascale Lagacé]

I will begin by answering your question about first nations.

In each community, we have close relationships with first nations on site. It is true that training programs can help provide a workforce in remote regions, where things are more difficult. However, those individuals are well-established and well-positioned to want to stay in the regions and contribute. What is needed is support for starting a business for those individuals who can work with us in our forestry operations.

As for exports, perhaps my colleague would like to answer the question.

[Alain Bourdages]

Given Resolute Forest Products' location, exporting to Asia is a bit more difficult for us compared to some of the competition in western Canada. Our export markets are mostly related to pulp and paper, which are more global materials. Supply chains are fairly well established.

I presume that your question has more to do with softwood lumber. That is a more particular issue, given the current circumstances with the U.S. government. For the time being, it is a matter of all levels of government continuing to support the industry to help it overcome those difficulties. That is not specifically within our field of expertise, but I think the assistance we are currently receiving is especially appreciated and effective. I'm not talking about only financial support, but also political support, which is very useful.

[Pascale Lagacé]

I would like to add something about the development of new products, such as biochemical products. It is clear that projects such as TMP-Bio help develop new markets and establish connections with related and different industries with which we usually have less contact. We may be talking about the production of certain kinds of sugars or specialty chemical products, among other things. The creation of connections can facilitate the exporting and development of those new products.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you.

[The Chair, Liberal, James Maloney]

Mr. Falk.

[Ted Falk, Conservative, Provencher, MB]

Thank you, Mr. Chair, and thanks to all of our witnesses for their presentations, which were very interesting and thought-provoking.

Mr. Struthers, I would like to begin with you and ask you a few questions. You talked a bit about some of the biofuel products you create. Are they cost competitive?

[Christopher Struthers]

If you were to fill up your vehicle with 100% biofuel, no. As a one-to-one comparison, they are more expensive than the fuels on the market now. Where they get their value is as a fuel blend.

As I said, the biofuel that's created is a lot cleaner and it's a much higher-grade fuel. Adding it to an existing fuel stock not only improves the grade of the fuel, it makes it more temperature stable, lowers the particulate emission, and obviously lowers the greenhouse gas intensity of the fuel. With more interest in blending fuels with renewable parts—we've already seen this for a number of years in Europe, and a number of provinces already have rules in place for it—and with the clean fuel standard that's coming from the federal government this year, we expect there will be more and more attraction for doing this, especially with carbon taxes and greenhouse gas credits and things like that.

As a one-to-one fuel replacement, it is more expensive, but as a blend it is very attractive and very economical.

[Ted Falk, Conservative, Provencher, MB]

One of the other things you mentioned is that plants that produce this kind of fuel aren't billion-dollar plants, but they're more affordable plants. Do these more affordable plants have the ability to meet the commercial demand that could be there?

[Christopher Struthers]

Yes, absolutely.

One of my clients is in construction now. It's natural gas to liquid, so it doesn't have the bio component, but the client is building a plant just outside of Calgary for 300 barrels a day, turning natural gas into this high-grade, synthetic diesel. They've raised all the financing. It's well under construction, and the numbers look very good. The goal now is to marry this technology with the gasifier technology for wood products and essentially make biodiesel. That's the next step for this particular group.

[Ted Falk, Conservative, Provencher, MB]

What barriers do you foresee to this kind of technology?

[Christopher Struthers]

One is in getting steady feedstocks for the biomass. There are plenty of them around. You've heard from some of the earlier witnesses that there are quite some challenges in getting the different forestry suppliers and the different groups and provincial agencies and whatnot all on-board and on the same page to guarantee a steady supply of cost-effective feedstock. We certainly know the resource is there, but I understand there is a bit of a challenge sometimes in getting a long-term, steady feed.

Otherwise, the economics for this sort of technology are looking quite good.

[Ted Falk, Conservative, Provencher, MB]

Thank you very much.

Ms. Lagacé, you talked a little bit about the $21-million investment in Thunder Bay, for which you're coming up with $3.5 million, so between the provincial and federal governments there is a $16-million investment, roughly. What kind of return on investment can those governments expect?

[Pascale Lagacé]

This is a pilot plant, so it's being built to help develop markets and products so that we can identify which ones are most profitable. For R and D, I guess there is no return. The return comes from development of those full-scale plants later on.

That's why we are deeply involved in making sure that as the research.... A big portion of the research that's done for the R and D is for the pilot plant and optimizing the process so that when you build a full-scale plant you can build it at a cost-competitive price. But there is also a big portion that uses what comes out of that process and further refines or modifies it in order to develop higher-end products where you can make a bigger profit. The intent is that there is a return in jobs, mostly, and also transformation of the industry so that facilities that use.... This technology uses the same type of technology that's used to make newsprint. We know that demand for newsprint is going down, so the intent is to use the assets that are there to manufacture higher-grade products, which will allow these plants to continue operating and save jobs in the area, but also make profitable economic benefits from the area.

[Ted Falk, Conservative, Provencher, MB]

What kinds of products do you envision coming out of this research?

[Pascale Lagacé]

The two base products are lignin and sugar, but the idea is to further refine the sugars into specialized chemicals and to use lignin for a wide range of products, which could be glues for panels or polymers. There is a really large range of biochemicals that can be developed from these products. At this plant there is already another lignin plant that uses lignin for the craft process rather than the mechanical pulping process. Then the idea is to identify the best uses for each of the types of lignin so that this area becomes a centre of excellence for development of by-products from lignin production.