Natural Resources Committee on Feb. 1st, 2021

[The Chair, Liberal, James Maloney]

Thank you, Mr. Connors.

What stood out to me was that you worked in Thunder Bay. I was born in Thunder Bay, and many generations ago my uncle worked at Great Lakes Paper and both my brothers at times worked at Great Lakes and Abitibi earlier in their lives.

[Rick Connors]

That's where I started, Great Lakes Paper, as a process engineer. I'm a chemical engineer by profession.

[The Chair, Liberal, James Maloney]

I know it well. Thanks very much.

We'll go to our third and final group. From Unifor, we have Mr. Doherty and Mr. Hollin.

I don't know who's going to start us off.

[Scott Doherty, Executive Assistant to the National President, Unifor]

Thanks, Chair. It's Scott Doherty. I'm the executive assistant to the national president of Unifor.

As you know, Unifor is the largest private sector union in the country, with over 315,000 members. I'm responsible for the forestry sector for our union. I worked at Elk Falls pulp mill as a process engineer, the same as our other witness, in Campbell River for 16 years prior to starting on staff with the former CEP in 2008.

We have almost 22,000 members in the sector, with 250 units spread across 10 provinces. Unifor is well positioned to talk about every aspect of the forest sector. Members of this committee are well versed in the forestry sector, and I know that previous witnesses probably have shared information on the state of Canada's forestry sector and the contributions it makes nationally, regionally and to local economies in terms of the economic production, taxes and so forth.

It's Unifor's position that we will not create an effective COVID recovery plan without also addressing the challenges facing this sector prior to the pandemic, which are, as some have already said, low pulp prices, ever-growing fibre supply issues, obviously the ongoing softwood lumber dispute, volatile unpredictable global trade situations with China and the Trump administration, and obviously natural events such as pine beetle and forest fires.

All these factors have caused serious liquidity issues for many of our employers. Amidst all of these pre-existing challenges, the pandemic struck, worsening some of the problems and creating serious new ones. For example, pulp and paper producers across the country have made capacity adjustments in response to the impact of COVID-19. We've seen the number of layoffs across the country caused by temporary shutdowns or permanent shutdowns of pulp mills. For many of our members, the pandemic has deepened the sense of uncertainty and employment insecurity that they felt prior to 2020.

Unifor, however, is optimistic about the future of Canada's forest industry. We believe there are a number of concrete, pragmatic steps we can take to build a more sustainable, competitive and innovative sector as we plan for our recovery.

First, we believe we need urgent action to help producers weather the COVID storm. In the short term, we need support, and we support the call for producers' financial support and liquidity measures from the federal government, including loan guarantees and other measures. In the mid- and long term, we need to continue to work to build a comprehensive, coordinated and sustainable forest sector at the federal and provincial levels.

We support the call for a focus on new products and emerging markets, with an emphasis on sustainability and renewability for the industry. This must include incentives from government for investment and research. New developments in timber frame construction, along with biofuel development, are just a few areas of great opportunity as we continue to build the capacity to develop personal protective equipment, which is needed more than ever.

Finally, there is also hope that the Biden election will lead to less volatility with the U.S., our biggest trader. Simply put, the time has come for a fair and reasonable solution to the softwood lumber dispute. For years, people have referred to this industry as a sunset industry. Unifor will never agree to such a comment. It's a ridiculous assessment. The industry is a sunrise industry, with enormous opportunity for transformational change and growth. When governments, employers and labour work together, there is opportunity to invest in our future and build a more green, sustainable, inclusive and stable sector.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Doherty.

Mr. Hollin, do you have anything to add?

[Marc Hollin, National Representative, Unifor]

No, those were our opening statements.

[The Chair, Liberal, James Maloney]

Okay, that's perfect. Thank you. We're always grateful when people not only stay within the time limits but come in under them, so that's great. Thank you.

Now we'll open the floor to questions. First up is Mr. Zimmer for six minutes.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Thank you, Mr. Chair.

It's interesting how we have forestry backgrounds. My first real job was working at a pulp mill and in construction here in Taylor, B.C. It's amazing how forestry affects all our lives. My son works as a heavy-duty mechanic for a logging company up in oil and gas central, up here in northern B.C. It's still a very big industry. In fact, it's a lot of our economy and our jobs, the food on our tables and the roofs over our heads.

I just want to ask a question of Rick from the Gitxsan. You're my neighbour, just to the west. We're up in northeastern B.C. I have friends and colleagues up in Fort Nelson, B.C. They just started the new pellet mill out there. I don't know if you know Brian Fehr, but he has just started that operation up again, which we're very glad to see. It makes a huge impact on a community like Fort Nelson.

You mentioned the discount rate for exporting logs. What was that rate? What does that look like? We've seen discount rates for our oil and gas sector. Also, frankly, to the comments from Unifor, the Biden administration cancelling Keystone is not a positive first step by our friends to the south, for a new president to the south of us.

Anyway, can you just speak to that discount rate, please, and give us a framework of how much of an impact that would really have on our industry in Canada?

[Rick Connors]

Certainly. Thank you very much, Mr. Zimmer.

In terms of the blocking and how that works for us here, we have a requisite percentage of our allowable annual cut that we can export. This is not typically felt when we're dealing with the West Frasers or CanFors because we're very co-operative with all sawmills in the region. However, sometimes we come across profiles such that, let's say on a 100,000-cubic metre cut, the export component could potentially be, in our area, at least 45% of export quality. That would be a wonderfully high percentage. I know that sounds a bit crazy, but that's the highest that we ever find in our area as it's a very decadent area for fibre.

The problem is that the export percentage is actually lower. What happens is that the sawmill will then put in an offer. It has to go to bid to get the saw log onto the market. The sawmill will put in a bid, for example, of $65 a cubic metre. Well, in this particular area, we have those big rock structures called mountains. We do a lot of cable yarding. Our cost to bring logs out of the bush is not as simple and as uncomplicated as they are in the interior. There's a coastal rate. However, our appraisal area says that we're interior, which is very unfair.

Our cost to bring that log out of the bush was somewhere over $80 per cubic metre—$83 as a matter of fact—to bring that out of there. Stumpage was another significant factor in that $83. We were forced to actually sell production to that sawmill at $65, at a loss. That sawmill actually has its own licence, and it never utilized its own licence because it knew that it could not bring logs out of the bush at a rate that was conducive to making a profit for the sawmill. So they wait and they block other loggers who are just trying to make a living out there.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

I know the stumpage issue is a big one. Again, I'm from B.C. and we used to see the beetle kill. We were seeing the pine beetle and now it's the spruce beetle. There has to be a way to get that wood down before it becomes unusable. To me, there are some ways that we can do that and reduce stumpage rates.

But let me move on. You represent a very large indigenous community in our province of B.C. I have many indigenous groups in my riding. In terms of the impact, we've already spoken about the impact of the forest industry on some of our personal lives. We see that about 205,000 people, according to Natural Resources Canada, were employed, and we see that about 12,000 jobs were held by indigenous people, representing about 7% of the sector's workforce. Of course, you understand how significant it is to have good jobs in the community and how much that really impacts that community.

In terms of the Gitxsan specifically, you've seen the impacts personally and how it matters to the community. Maybe just speak to the positive aspects of forestry in indigenous communities.

[Rick Connors]

Absolutely, modern forest practices use a feller buncher to harvest trees, as opposed to the traditional chainsaw approach to it. That may reduce the number of people. However, offering these opportunities—and we're about 85% indigenous company; 85% of our employees are indigenous—has allowed them to go back to the bush now.

You cannot believe the amount of forestry equipment that sits waylaid just at the side because Skeena pulp mill closed, and there's no more market for the pulp log up here. When you have a decadent forest of 65% in some areas, it's impossible to go in there and high-grade the forests, and then you're paying for all the silviculture work, and all that has to be burdened into one.

We have to focus on those issues so that we can bring more of the indigenous people into forestry. Quite frankly, the idea and the concept of reconciliation is born in that area because of the fact that they're the stewards of the land. It brings them closer to it, and they really want to participate. They just do not have that financial, structural wherewithal to make it happen.

[The Chair, Liberal, James Maloney]

Thanks, Mr. Connors and Mr. Zimmer. That's unfortunately all the time we have.

Ms. Jones, you are next for six minutes, please.

[Yvonne Jones, Liberal, Labrador, NL]

Thank you very much, Mr. Chair.

I want thank all of our guests today. It's “Good afternoon” where I am, maybe “Good morning” where you guys are. I'm in Labrador, the northeastern section of Atlantic Canada.

Mr. Lahey, I'm going to start my questions with you today, on the research that you've been doing. I know that it's mostly connected to the work you've been doing in Nova Scotia, but we all know that forestry, for the most part, falls under provincial or territorial jurisdiction, and there are certain examples of it that do fall under the federal government and the role that we have to play.

I want to ask you this morning if you could highlight some of the research you've done and outline some of the recommendations that focus more exclusively on federal jurisdiction. Maybe you can make some recommendations in terms of how we should be moving forward as a Parliament in doing some of that work that recognizes more fully the need within the forest sector of Canada.

[Prof. William Lahey]

I have to acknowledge at the beginning that my work was commissioned by a provincial government. It is very much focused on matters within the jurisdiction of the provincial government. The other limitation is that I was not asked to look at forestry policy writ large, but specifically at forestry practices. Even within a provincial scope, my focus was somewhat limited.

A couple of comments come to mind. One of the issues I really stressed in my report was the need for research that was actively commissioned by governments in partnership with industry, if that seemed appropriate. There would be research on the impact of different forestry practices that was specific to forestry conditions in Nova Scotia. There would also be research programs on the alternative to existing forestry practices, to close the gap we currently have—at least in Nova Scotia—between the forestry practices that are perceived to be more cost-effective, more intensive forestry, and the practices that might be considered partial or selective or alternatives to intensive forestry, including clear-cutting, that aren't seen to be viable from an operational and profitability point of view. At least in Nova Scotia, my recommendation to the government is not to deny the existence of this gap, but to actively try to close it, to do more experimentation in different forestry types.

I have two other comments really quickly. In every province in the country, the conservation end of the spectrum is not solely provincial conservation. National parks play a hugely important role in all provinces. They certainly do in Nova Scotia.

The last thing I would comment on—and this is where I stopped when the chairman said to stop—is the concept of resiliency. In an age of increasing climate change, we need resilient forests that can have a better chance of survival in all the various threats that forests face that are accentuated by climate change. Again, I think that's an area of interest, but it also should be of interest to the federal government generally, about how well prepared our forests are across the country to withstand the stresses they are coming under relative to climate change.

[Yvonne Jones, Liberal, Labrador, NL]

Thank you very much for your response and for your insight into that.

Mr. Doherty, regarding Unifor, I know you talked about the crunch that workers are coming under in the forest industry and how they have been impacted by the pandemic. I know you guys have advocated hard for forest workers. I know that as a government we certainly responded through this pandemic in terms of providing for PPE and many other services and resources they needed.

I'm wondering if you could share with the committee some of the best practices that were taken on by the forestry sector to help them avoid falling behind as much as they possibly could. How were you able to continue to meet some of your scheduled work, like that around tree planting, over the last few months?

[The Chair, Liberal, James Maloney]

We're going to have to do this very quickly, too.

[Scott Doherty]

I will try to answer quickly.

Some of the best practices have been doing what we were doing prior to the pandemic, which was finding cost-saving measures with the employers, finding ways to ensure that people got to work. Obviously it was needed. Some of the places shut down for a short period of time. Obviously we had health and safety experts at every one of these mills to make sure the personal protective equipment was in place and people were safe going to work, for sure.

[The Chair, Liberal, James Maloney]

Thanks very much Ms. Jones and witnesses.

Mr. Simard, you are up next for six minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

I'll ask Mr. Connors a quick question.

I would like to know if the export restrictions he was talking about are mainly aimed—at least in Quebec—at commodities, especially the famous two-by-four.

[Rick Connors]

Yes, mainly commodity products, that's correct.

[Mario Simard, Bloc, Jonquière, QC]

This has been pointed out by several stakeholders. Therefore, should a secondary or tertiary processing strategy not be developed in Canada?

You also talked about the low value of the pulp and what we call pulpwood. Sometimes the tops of the trees can't be used, but there is processing that can be done in this area.

It seems to me that the major problem is that we don't have a strategy to support the pulp and paper mills, among others, that will have to go through this transformation. We know that the costs are very high.

In my region, a cellulose pulp project has received federal government support, but many other paper mills could benefit from this type of measure, if a concerted effort were made. If we did that, we might be less dependent on the U.S. market. That's my opinion; you can tell me what you think.

Is the situation the same in British Columbia?

[Rick Connors]

Thank you, Mr. Simard.

Absolutely. On the coast here, we have several projects with the Gitxsan that are focused on trying to support the local industry in terms of the optimization, because we believe in the rising tide approach to this.

When you take a look at pulp specifically, if we can find a better use for pulp than simply burning it up right now because it doesn't make sense to ship it all the way down to a pulp mill somewhere, then we're going to be basically offloading some of the regular costs, so we can afford to provide these sawmills and the reman mills with better uses of the products in terms of a lower-cost supply.

In terms of looking at the lower-end fibre sources as being just dead weights out there, they should be reviewed and respected as value added to the process itself. If we can take care of road-building costs, we can sell that pulp to a low-end producer who might be producing things like torrefied pellets and white pellets.

We're looking right now at a special project where we would take hemlock, which is plentiful in our region, hemlock and balsam, so Hem-Bal, and turn it into a very high-end cedar replacement. We harvest all the good cedar now, whether it be for cedar poles...and it's all sent down to Vancouver. It's not for export, that's for sure. However, if we could take the hemlock—it's a process we've been working on with UBC—and convert that into a value-add, that's tremendous. That helps everybody. It helps the loggers, and those other value-add people.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Connors.

I get the impression that, for people in the industry, the development of these products does not represent any significant competitive advantage. We know that the use of biomass, of the bioproducts, is expensive, but very promising.

My question is for you, Mr. Connors, but also for Mr. Doherty.

If the government agreed to implement a carbon footprint standard, perhaps we could add value to biomass products and develop these markets, which will be essential if we want to develop the forestry sector in secondary and tertiary processing.

Do you support the idea of imposing a carbon footprint standard in federal government public tenders?

[Rick Connors]

Mr. Doherty, would you like me to take a stab at this one initially? Okay, thank you.

I believe products like bioethanol, bio-coal, or bio-anything, whatever you'd like to look at as end products and value-added products out of forestry, are very good ideas. In fact, the biggest barrier to entry on such projects is basically the capex required.

Often it's a “build it and they will come” approach right now, because things like torrefied pellets that have been sitting out there for 10 or 15 years.... I've visited every torrefied wannabe across the planet, from Austria, Switzerland, up in Finland, Germany, and they're much more advanced there. However, that was the mother of necessity. Their power costs are extremely high over there.

Over here, in what I'll call “God's country”, where our power prices are so low, we don't have that pressure. Canada lags behind these types of initiatives. We don't put the money into the places that would be really good—for instance, into a bioplant that would take the waste streams of forestry, which are typically burnt up right now either in a forest fire or just simply in a burn pile. We convert that to value-added product on an ongoing, long-term basis.

I absolutely agree, Mr. Doherty.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Connors.

Do you have something to add quickly, Mr. Doherty? Otherwise, we're going to have to move on.