Evidence of meeting #82 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 bioeconomy.
A recording is available from Parliament.
Liberal
The Chair Liberal James Maloney
Good morning, everybody. We're going to get started. We're running a little late.
Thank you for joining us. We have three witnesses this morning. By video conference we have Antoine Charbonneau from CelluForce.
From BioApplied we have Rod Badcock, and back by popular demand, from Cobden Strategies, we have Catherine Cobden.
Why don't we start with the veteran, Ms. Cobden, since know how things work around here.
Catherine Cobden President, Cobden Strategies
Good morning.
Thank you very much.
I'm honoured to be back. Thank you very much for requesting a return visit so we can deepen our discussion on an issue I care about very deeply.
As I mentioned to you the last time I was here, my name is Catherine Cobden. I'm the president of a small boutique consulting company called Cobden Strategies, and in addition to a number of things, I do work with innovative forest product companies as well as other sectors that are all exploring the use of forest fibre in new bioproducts and processes.
I was born in rural Ontario, in a pulp mill town just down the road from your riding, Mr. Serré. I became a chemical engineer, and I've worked in various communities across the country who rely almost entirely on the forest industry. I was also the executive vice-president of the Forest Products Association of Canada where I led studies on bioproduct creation and supply chain development for the industry.
The vitality and viability of the forest industry in the long term is a true passion.
I believe I was asked back to talk a bit more about some tangible examples of how forest biomass can and is being used in innovative ways. I can tell you that the opportunities are quite endless.
From ice cream to plastics, from perfumes to car parts, wood fibre-derived products are making their way into many consumer products already. To give you a deeper portrait of the degree of activity happening in Canada in the bioeconomy space, I have worked with the assistance of NRCan to share with you a map, which is in front of you. This shows you the developments that are happening coast to coast across the country. These are significant developments.
When I share this with the committee electronically, you will find that each of the 27 projects is hot-linked to a two-pager dans les deux langues that describes the project in more detail, providing facts and figures that I think are very relevant, such as how many jobs were created, how much investment was leveraged, and those sorts of things. I encourage you to take a look at that.
I'd like to reinforce, however, that this map is only reflective of the projects that have been funded by the IFIT program, that is, the investments in forest industry transformation program. I'm excited to tell you that there are many more, both within and outside the forest sector.
You asked for some explicit examples, and you will find plenty. But to help, I thought I would dive a little bit into some of these examples. Some of these will be on the map and some of these will not. Some exciting participants in the bioeconomy are here with me today—CelluForce, for example—and I look forward to hearing about their latest developments. But the folks you've been meeting are not alone. There is lots going on. So when you hear about cellulose filaments later this morning, we will tell you that we have a lot of development going on in this country. In Canada we have the world's first cellulose filament demonstration and commercialization plant at Trois-Rivières, Quebec. Cellulose filaments are a revolutionary and unique bioproduct. They can be incorporated into a variety of products to make them stronger, more flexible and resilient, lighter, and more economical. They also happen to be chemical free and biodegradable.
Lignin is another area where things are happening. I'm sure you've had witnesses in here talking about the lignin opportunity. West Fraser, for example, is home to another first in Canada at its mill in Hinton, Alberta, where they're recovering lignin from pulp operations, becoming part of that next generation of renewable biochemicals. Lignin is natural, it's renewable, and it's a green alternative that can be used in plastics, dispersants, and polymers, and even as new resins in our exciting engineered wood products.
Speaking of engineered wood products, we talked a lot about tall wood frame buildings the last time I was here. There's Structurlam in B.C.; there's Nordic Structures in Quebec, whose hybrid glulam trusses were just used in the new arena for the Buffalo Sabres; and StructureCraft is building a new facility in the Fraser Valley of British Columbia. You all know that the tall wood market is developing, and that's a very exciting thing to keep an eye on.
Over a week ago, FPlnnovations and Resolute announced a new pilot project in Thunder Bay to find ways to produce and commercialize green biochemicals from wood. I think you heard from them earlier this week, and that's a really important acceleration of the bioeconomy in northern Ontario.
There's the power generated from biomass—carbon neutral green electricity produced from the residuals of our operations from coast to coast. There are 40 mills in Canada that are doing this green energy generation. They use it to support their own operations, and some of them even use it to contribute green power back to their grids.
Woodland Biofuels is another example. You'll find them on your map. They're producing ethanol from woody biomass. You also heard from Domtar earlier this week on NCC and some opportunities they're producing outside of the IFIT program.
The examples I've just touched on are all within the forest industry, but I want to move a little beyond that to assure you that all sorts of Canadian industries are exploring the tremendous potential of what I like to call “the miracle of biomass”. Research, demonstration, and development projects are either being undertaken or are in development in a number of key areas of the Canadian economy. It's happening in energy production—in large-scale power production at OPG and Capital Power, for example, right down to small-scale energy production in indigenous communities. It's being looked at in steel manufacturing, not as a fuel but as a sophisticated bioreactant to support their production of steel and reduce their carbon footprint. The cement industry, the aviation sector, and the natural gas sector are all looking at the use of biomass.
Clearly, exciting things are happening. The forest industry is reinventing itself, and other sectors are taking this agenda very seriously as well, and discovering for themselves the benefits of a bioeconomy. Canada is making leading-edge advances, but of course there's always a “but”, which is that there is robust global competition. We cannot drop the ball.
Europe continues to be a leader in this space. In 2012 the European Commission adopted a strategy called “Innovating for Sustainable Growth: A Bioeconomy for Europe”. EU figures show that the bioeconomy—what is that, five years later?—now has a turnover of over 2 trillion euros each year and employs more than 17 million people. Individual countries such as Sweden, Finland, Germany, etc., have also adopted their own detailed bioeconomy strategies.
I believe that with our abundant renewable resource—350 million hectares of forests—our strong global reputation, our green credentials in sustainable forest management, and our effectiveness as a global exporting nation, we have the bioeconomy as an opportunity to create jobs and bring growth and expansion of trade to our country.
Please remember our last discussion on how government can help and how we can work together: we can spur further demonstration and technology advancement, we can change building codes, we can ensure comprehensive quantification of sustainable fibre supply, we can bring in smart incentives to help aging pulp mills to retool, and we can bring the Canadian Council of Forest Ministers' bioeconomy vision and framework to life.
Thank you very much for inviting me back. I look forward to questions.
Liberal
Rod Badcock Partner, BioApplied
Excellent. Good morning, everyone.
Thank you for this opportunity to offer our thoughts on the Canadian forest industry and bioeconomy. I was explaining to Richard that it's my first time here, and it's quite an honour, if a bit of a daunting one, so thank you.
Liberal
Partner, BioApplied
Let me start by telling you a bit about BioApplied. We're a small consulting firm. Catherine said “boutique”, and I think that's an excellent way to describe us as well. We were formed in 2013 and our objective is supporting innovation in renewable resource sectors to help expand the bioeconomy. While we focus on a range of sectors, including agriculture and oceans, I would say forestry is in our background and our DNA.
Our head office is located in Nova Scotia, which is where I'm based, and my business partner, Greg Maloney, is located in Montreal. We have clients in several provinces, including on both coasts, so I like to say we are literally coast to coast. But I have to be fair and say we may have skipped a few provinces in between, but we hope to correct that soon.
We offer services in two primary areas. The first is that we support clients who are feedstock suppliers. These are the grassroots businesses, particularly in the logging sector, that are responsible for providing fibre to the forest products manufacturing industry. We help these clients in a number of ways, including introducing new technology into their business, providing training on state-of-the-art practices, and so on. Ultimately, our mission in that space is to help these businesses improve their productivity and health so they can be a source of high-quality, secure, and affordable feedstock for the growing bioeconomy.
Our other focus area is that we help develop markets for our clients who are producing new and novel products derived from renewable resources. We call these biomaterials. We do this by helping them assess and prioritize target markets and by engaging with the value chain players in those markets to build demand and manage what is ultimately a complex product development process. I'm sure Antoine will describe that a little later.
Ultimately, we see great promise in the bioeconomy. Research and Markets, a research organization, projects about 10% growth in biorefinery products in such things as low-carbon fuels, biochemicals, and biomaterials, some of the things that Catherine mentioned earlier.
Drawing on our own experience, we can attest that there's indeed a growing commercial interest among global players to integrate renewable materials into their products. I would say that we've seen a shift happen. This has moved from a green marketing initiative to a business imperative. These companies have begun to realize that if they want to have business sustainability, then their raw materials and processing inputs need to be sustainable as well, and that an overreliance on raw materials from fossil fuels puts them at risk. That's a major shift.
Within that context, I'd like to discuss three major points: first of all, the unique bioeconomy opportunity presented by the Canadian forest industry; the importance of public support for projects that are in commercialization stages; and the importance of collaboration among the value chain in new product development.
Let me start with the bioeconomy opportunity. Catherine referenced the Canadian Council of Forest Ministers' forest bioeconomy framework. We were very pleased to see that released last year, and we think that is a great first step in creating a unified national approach to establishing the bioeconomy and, importantly, Canada as the place to be.
In a similar vein, on a much smaller scale, we've been working on a project in Nova Scotia via an organization called the Nova Scotia Innovation Hub. That organization is a public-private partnership that is set up to attract bioresource business opportunities to the province. Through that project, we've learned a few key things.
First of all, each province has an abundance of forest-origin feedstock available. Catherine mentioned this in her discussion. We had to analyze that in Nova Scotia because we had to compare ourselves to the jurisdictions in Canada that we'd ultimately be competing with. What we learned is that as a nation we're under-harvesting Canada's forests by about 33%. When you look at that and put it into context, you see that's almost 80 million cubic metres per year that we are not harvesting, that we could harvest and still have a sustainable harvest level. Said another way, we could log another 80 million cubic metres of wood in this country and still never run out of wood fibre. To put that in perspective, that is the size of every provincial forest industry east of Alberta combined. Take all of the wood harvested in every province east of Alberta, add it all up, and it still doesn't equal 80 million cubic metres. That's quite an opportunity.
A second learning we've had is that there are a lot of entrepreneurs out there, around the world, with good ideas. We don't need to create all these ideas within our own province or our own country. From the range of biomaterials that Catherine touched on, there is a lot of expertise is being developed in that area.
However, because of the growing interest in the bioeconomy and that shift I described earlier, we're seeing that there is a lot of competition for these businesses as well. Countries are competing to attract these opportunities, and there are a number of competitive factors, what we call winning conditions. Just to put this in perspective, I saw that Malaysia has a bioeconomy goal to create 69,000 jobs from their abundant biomass. That's a significant goal, and they're a fierce competitor.
What are the winning conditions? We need secure, affordable feedstock. We need manufacturing partners with brownfield sites that are good collocation opportunities for these business. They need access to markets. They need access to capital. They need support of government policy, and they need skilled human resources. What I love about this country is that we have all of these—we really do. Don't get me wrong, there are gaps and there is always room to improve, but Canada is in the game, and I think we should be promoting that message aggressively around the world.
From there, I want to move on and talk about the very important support that public funds can play in supporting commercialization. It's very challenging to finance a first plant. Antoine can speak to his experience with CelluForce, but let me give you an example of one of our clients we're dealing with in Nova Scotia. They've done a remarkable job. They're in the renewable fuel space. At this point, they've secured through agreements all of the feedstock they need to fuel their first plant. They've secured a significant market offtake agreement from a major energy company. They have technology that's been proven on a semi-commercial scale with an insurance policy that backs its production on a commercial scale. Despite this, financing is a struggle. Despite having all the pieces in place, it's still seen as a risky new-to-world project. Programs like SDTC and IFIT, which Catherine mentioned, and the clean growth program and others are excellent examples of funding programs that we have in Canada that support these bioeconomy projects. I want to thank and applaud the federal government for supporting them and encourage you to continue to support those programs.
It's also important that capital is patient. Development time frames for new applications, particularly in the biomaterials sector, are long. For example, development of a new tire by Michelin, a major company in Nova Scotia, takes seven-plus years. A lot of safety factors go into building a new tire. Pharmaceutical products can take up to 15 years. It takes a long time to develop a new product. Accelerating them is of course critical, and a good management team can help with this but it still requires time and effort. Having patient capital around these businesses is key.
That leads me to my final comments about value chain collaboration. Through our experience we've learned it is impossible to successfully develop a new product in isolation. Each player in the value chain always validates the need and efficacy of any new product; therefore, their input and guidance is critical. Let me give you a quick example because we live this. On behalf of one of our clients we were working with a major adhesives company. We connected them with a Canadian university that was doing research in this area. Through those discussions we learned two important things. First of all, the Canadian university's use of a biomaterial in the adhesive formulation had created a set of properties that this company considered to be the holy grail of what they needed to do to improve product performance. We were very impressed with what had been achieved. More importantly, we also learned that the base formulation, the base adhesive that the university was running their trials on was no longer industrially relevant. They didn't use it anymore. Without that information, it's lost, it would have been a waste of public funds. With that information that project now has a chance to succeed. There's no substitute for that feedback.
I see I'm running short of time.
I think we have an excellent opportunity in the country to develop that kind of collaboration systematically and at scale. I want to refer to the biodesign cluster, you may be familiar with those. It was a group of organizations that was led by FPAC, FPInnovations, Genome Canada, and—I'm forgetting somebody—BIC.
That was an organization with the goal of bringing together value chain players. In my notes you'll see a list of the players they had engaged. There were over 70 of them. They had $200 million in projects identified. Unfortunately, their application to the ISED supercluster program was not successful, but I think there's still interest and a great opportunity there. I think it's something we should see.
With that, I would like to thank you for your time. My apologies if I'm a little bit over the time. Thank you again for a great honour.
Liberal
The Chair Liberal James Maloney
I'm a little more lenient because your partner is named Maloney. That's all.
Mr. Charbonneau, it's over to you.
Antoine Charbonneau Vice-President, Business Development, CelluForce Inc.
Thank you, Mr. Chair. Thank you for the opportunity to testify before the panel.
I will start by giving an overview of CelluForce and our product, cellulose nanocrystals. I will also offer some comments regarding the challenges in commercializing and producing new and advanced bioproducts. I will conclude with remarks about the role of the federal government in supporting new biomaterial companies, thus developing the Canadian bioeconomy.
I'll start with some words about CelluForce. We are the world leader in the production of cellulose nanocrystals, also called CNC, a high-value-added material that comes from wood. CNC is actually what gives wood its strength. It is stronger than both kevlar and carbon fibre. It is also a functional material due to its charges on the surface. Our technology is based on research that started in the late 1990s at FPInnovations.
Our head office is in Montreal, and our demonstration plant is in Windsor, Quebec. The company was founded in 2011, with Domtar and FPInnovations as the initial shareholders. That year, we also started the construction of our demonstration plant, which was completed in 2012.
The technology attracted foreign investment. In 2015, Houston-based Schlumberger became a shareholder in order to jointly develop CNC applications in oil well services. Similarly, Fibria, the Brazilian eucalyptus pulp producer, also joined our shareholders and became our distributor in Latin America in 2016.
The year 2017 was the first year we had commercial sales, and we are aggressively developing applications for continued commercial success.
I will now offer some comments regarding commercializing and producing an advanced bioproduct.
First, we recognize that we are in a privileged situation. Not many biomaterial start-ups have the benefit of having a demonstration plant that can produce industrial quantities of material. This has proven to be invaluable in the development of customer applications. We can thank the foresight of our founding shareholders, Domtar and FPInnovations, as well as the financing from government institutions to FPInnovations for the fundamental research necessary to develop our technology.
Indeed, the investment in a demonstration plant is an important step in de-risking a production process. The process is capital intensive, and industrials as well as venture capitalists are quite reluctant to invest. The demonstration plant is often the first step in process development, and most improvements are also very capital intensive.
Another point I want to highlight is that the commercialization cycle for new material is quite long. This echoes what Rod talked about. Often industrials as well as funding agencies don't expect the process to take so many years. If you take PVC, for example—polyvinyl chloride—the material was developed in the early 1950s. It wasn't until the mid 1960s that it began to be widely adopted and significant revenue streams generated. We are living this challenge on a day-to-day basis and put significant energy to shorten the adoption cycle of CNC.
A significant amount of research and development as well as customer support and interactions are necessary to drive applications to a commercial status. One of the difficulties we face here in Canada is that there is very good academic and technical support for fundamental research but not for application development. We often need to deal with American or European institutions for this type of work. For example, the use of CNC in bioplastics and biomaterials is underdeveloped in Canada. We are currently engaging with institutions in the U.S. and Europe for this activity.
I will now comment on the role of the federal government in supporting new materials companies and developing the Canadian bioeconomy. One key concept I wish to bring to the committee's attention is the concept of helping in the process of de-risking. This is where, in my opinion, the federal government can have the greatest impact. This applies to research and development, production process development, application development, and commercialization. I will give you some examples of where there is some support.
Funding for institutions such as FPInnovations does indeed de-risk research and development. Regarding application development, the federal government has an important role to play by supporting programs such as Sustainable Development Technology Canada, SDTC. As a matter of fact, CelluForce participated in an STDC-funded project with Schlumberger in 2015, which led to commercial product launches in 2017. This accelerated the application to development time, but it still took two years. Additional funding to other programs and institutions specifically for the development of customer applications would also be very beneficial.
Other examples of de-risking are programs such as the investments in forest industry transformation, or IFIT, program. This helps companies such as CelluForce develop their production process and cross the valley of death.
My final example of de-risking involves supporting commercialization initiatives by funding organizations such as NanoCanada. CelluForce has a product that is both a biomaterial and a nanomaterial, and NanoCanada has been instrumental in supporting CelluForce in our international commercialization efforts by offering shared booth space in international nanotechnology conferences and exhibitions. Not only are the logistics taken care of by NanoCanada, but they also closed the loop with Canadian embassies and trade commissioners. Continued funding to NanoCanada will greatly help CelluForce, and I would also recommend a similar approach for bioeconomy companies.
To conclude, I strongly believe that CelluForce is on its road to success and will contribute to the economy of Canada; namely, by creating high-paying manufacturing jobs. However, we're still facing many challenges. Continued support from the federal government in de-risking the activities that are inherent to biomaterial companies will greatly contribute to our success.
Thank you.
Liberal
The Chair Liberal James Maloney
Thank you, Mr. Charbonneau.
Mr. Hébert, do you want to start us off?
Liberal
Richard Hébert Liberal Lac-Saint-Jean, QC
Oh, it's me?
Thank you, Mr. Chair.
I also thank all of the speakers for being here, and for their innovative ideas.
My question is addressed to you, Mr. Badcock.
Your firm finds industrial partners and third parties in the supply chains of the companies it works for. Could you give us some conclusive examples of cases where your company was able to improve environmental performance and productivity in connection with secondary supply chain products?
Partner, BioApplied
That's a great question.
I think my best answer to that is the following. Of course we work with a number of companies that are in the biomaterial space, and we help them in engaging with their markets and customers that play in those markets. That's an important piece of the innovation cycle.
I think your question may have been better answered by the work that we do in the forest fibre supply chain. There are a couple of projects we've done there—well, there are many projects we've done there. I'll give you a couple of examples.
One of them is working with logging contractors in Nova Scotia. We help a large number of them integrate a technology that was built by FPInnovations called FPDat. It may sound trivial, but this is a technology that helps monitor the productivity of logging equipment.
Working with these logging contractors, we helped them develop that technology into their equipment, and then we worked with them to help analyze the efficiency of their equipment. On that basis, they made business decisions to change. When we look back—because we have the benchmark and we're now able to see their improvement—those who actively use the data to drive their business are 10% more productive than those who do not. That's one example.
I'll also say that in a similar space working in the fibre supply chain—and again, it may sound trivial—we helped train and recruit new operators to the business and match them with logging contractors. We were able to find people who our logging contractors agreed to employ, and then we provided them training through an organization located in New Brunswick that is a world expert in this space. It's a company called Forest Liaison. As a result, we helped solve a labour shortage problem for the logging sector, and those students who graduated and who are now working with the participating logging contractors are incredibly productive. Training in the sector really helps.
Mr. Hébert, does that help?
Liberal
Richard Hébert Liberal Lac-Saint-Jean, QC
Yes.
I have another question, please.
In your opinion, what are the obstacles to innovation in the Canadian forestry sector?
What are the industry challenges, but also what are the forces in the country that could further the emergence and especially the consolidation of the secondary supply chain in our forestry sector?
Finally, how could the federal government encourage innovation in this sector? Our government can indeed be a key actor in the changes in our economy's primary sector, but—my Conservative colleagues will be delighted—in other ways than through government subsidies.
Partner, BioApplied
That's a really hard question.
If I think about what the roadblocks are, and I look back into the forest fibre supply chain, particularly with the logging sector, I don't think we have focused on improving productivity as much as we can. I think FPInnovations are very good at this; they spend a lot of time in that space.
One of the gaps we try to close as a business is done by taking the ideas and innovations that are developed by others like FPInnovations, and working with the logging sector on the ground to help introduce those innovations into their businesses. It is not a simple problem, there is no question about that. Logging contractors, as I'm sure you know, are independent businesses. They are fiercely independent and sometimes resistant to change. So creating an openness for that change is important.
If I could have a couple of suggestions, one is that encouraging the types of outreach and technology transfer from organizations like FPInnovations to the on-the-ground supply chain is really important.
The second thing that I see is this. It's funny that you mention this because we've just done a project where we've met with a number of players in the logging sector to understand where they see their needs, and we asked them to rank in business metrics what was most important to them. At this point the one that stands out is human resources. They see a lack of human resources available to them. It is challenging to find skilled operators and because the pool is small, the operators often jump around. I'm sure this is nothing new; every sector faces this. But investing in attracting, recruiting, and screening people to the business so we can find good matches with the logging sector, I think, is a wise thing to do. I also think that providing them with state-of-the-art training is a wise investment to make.
How does that tie into the larger bioeconomy? By improving the health of our logging sector we can help improve the security and, most importantly, the cost of our feedstock. It's one of the places where we have a gap as a country. When you look at Malaysia and compare us to them, they have very inexpensive feedstock. Closer to home, the southern U.S. has very inexpensive feedstock, compared to Canada.
President, Cobden Strategies
My experience is with the steel sector, where we're trying to create new supply chains to an existing industry that needs fibre. The steel industry tends to be in southern and northern Ontario, so we're looking at the fibre basket in northern Ontario and how we can get it to the steel plants economically.
One of the key barriers—and you might have mentioned it, but just to double down on it—is the quantification in terms of the metrics that matter to these countries. In other words, economic delivery. How much is it, where is it, how much is there, and is it affordable to get it to gate? Where do you do the conversions; how do you take it from the logging companies? They're dispersed and there are many of them. How do you take them to a set location? Where should that be located, and then create the conversion to ship it all the way to Hamilton?
This is a fundamental gap that needs to be addressed. We're making progress but we're not sufficiently there yet.
Conservative
Jamie Schmale Conservative Haliburton—Kawartha Lakes—Brock, ON
Thank you very much, Chair.
Thank you, everyone, for being here today. Thank you again, Ms. Cobden. It's great to see you again.
Just to clarify, Monsieur Hébert, unless I heard this incorrectly through the translation, no, government programs aren't what we're all about. Competition spurs innovation, not applications to government to decide who will win, who will lose, who will succeed, and who will fade away. Private sector investment is where we like to see it.
At the last meeting we heard that Domtar, I believe, got $18 million in taxpayer dollars. It was a grant. I'm a Conservative and of Dutch background so I thought I was going to hyperventilate. I would prefer more private sector investment or, as we heard last time, maybe a tax credit to give companies more freedom to invest their dollars wisely and pick which projects have the best chance of succeeding.
I'll start with you, Mr. Badcock. I'm very sorry.
Conservative
Jamie Schmale Conservative Haliburton—Kawartha Lakes—Brock, ON
I'm splitting my time with Mr. Falk too. I'll ease in.
You said that one of your clients had applied for an application and it was denied. Can you briefly give us an idea of what that was for and what they were looking for?