Natural Resources Committee on Feb. 5th, 2021

[The Chair, Liberal, James Maloney]

Thank you. Carry on with the vote, please.

[Greg McLean, Conservative, Calgary Centre, AB]

I apologize. If I can interject here for a moment, please, Mr. Chair, with a dilatory motion it looks as if you have to come up to a point where it's being adjourned to a point in time. You just can't adjourn it forever, which is effectively—

[The Chair, Liberal, James Maloney]

It's being adjourned today, Mr. McLean. That's what the motion called for.

[Greg McLean, Conservative, Calgary Centre, AB]

A dilatory motion would be to adjourn it to a point. Are we adjourning this debate until two o'clock today or are we adjourning it until our next meeting? That is the question.

[The Chair, Liberal, James Maloney]

It's adjourned beyond this meeting.

The clerk says we can discuss it afterwards. We're losing time here.

[Greg McLean, Conservative, Calgary Centre, AB]

If it's a dilatory motion, it's going to have to say that it's adjourned to a point in time. What is that point in time?

[Yvonne Jones, Liberal, Labrador, NL]

Mr. Chair, we have a vote on the floor here. Some of us have already voted. We need to carry on with the vote.

[The Chair, Liberal, James Maloney]

I agree. Can we carry on with the vote, please, Madam Clerk?

[Greg McLean, Conservative, Calgary Centre, AB]

Can we ask the clerk? Let's check with the clerk, because if it's a dilatory motion to adjourn the debate, it needs to be adjourned to a specific time. It's not a dilatory motion just to erase debate, which is Mr. May's intent here, frankly, and I—

[Bryan May, Liberal, Cambridge, ON]

I have a point of order, Mr. Chair.

My intention is to get to the witnesses we have scheduled for today.

[Greg McLean, Conservative, Calgary Centre, AB]

Intentions or not, this is a motion on the floor and there is actually debate—

[The Chair, Liberal, James Maloney]

Mr. McLean, there is a motion on the floor that we are voting on. I don't like interrupting anybody any more than anybody else likes being interrupted, but that is the procedure and we are following the process. The clerk has made it very clear that this is the correct way to proceed.

If we could carry on with the vote, Madam Clerk, I would be grateful.

Thank you.

[Greg McLean, Conservative, Calgary Centre, AB]

Let me appeal to the clerk one more time on what a dilatory motion.... It's supposed to include a time to which we adjourn the debate.

Madam Clerk, can you please advise on what this motion has to look like to be a dilatory motion, rather than just erasing the debate?

[The Chair, Liberal, James Maloney]

The question being asked is whether this is a proper motion. It's a yes-or-no question, I believe, at this point.

[The Clerk]

Yes.

[The Chair, Liberal, James Maloney]

Thank you.

Let's carry on with the vote.

(Motion agreed to: yeas 6, nays 5 [See Minutes of Proceedings])

Thank you, Madam Clerk.

Let's get on with the meeting. I will, at long last, introduce our witnesses.

Mr. Orr and Mr. Beck, I will say thank you for coming and for indulging us while we went through a process earlier in the meeting.

Very quickly, you each have five minutes to make your remarks. We will then open the floor to questions after both of you have completed your remarks. You're free to speak and encouraged to speak in either official language. Translation services are available to you.

I will give the floor to Mr. Orr. Would you like to start us off, please?

[Derek Orr, Indigenous Relations, As an Individual]

Hi, everyone. Thank you for today, and thank you, Mr. Chair, for your introduction.

My name is Derek Orr. I have a little bit of background in forestry and economic development. I grew up in Prince George and was able to eventually become the chief of McLeod Lake Indian Band, which was a major player within northeastern B.C. in forestry. We were able to develop a number of companies for economic development and made profits to provide us with revenues for health, education, culture and other things. We were also fairly innovative way before my time. We were able to develop companies within the area of our traditional territory to promote employment and economic recovery.

I was the chief of McLeod Lake Indian Band in 2008, in the downturn. I worked diligently to come out of the economics and provide jobs for our members, our community and even the province of British Columbia. It was a great feat and one that I had a lot of help with, and we were able to develop some projects.

I see change in forestry, and obviously the AAC, the allowable annual cut is shrinking, and less product is going to be available to companies. We've been able to see areas where we could make value-added products. We developed a cant mill that basically took wood waste—lumber or brush piles. We were looking for logs from three to five inches in diameter. We set up a cant mill in B.C. and were able to ship those cants overseas and develop some markets in China. We even went over to China in 2015 to develop a customer base, and we were doing well.

Unfortunately, due to some factors and limited opportunities, we were pushed out a bit because that tree we were looking for kind of went up in price once there was a demand for it, so there are some issues. We also worked with the B.C. government to get the Mackenzie pulp mill back in order. We were able to negotiate a forest licence to cut and were able to get that back in 2010, and employment. We're definitely focused on value added.

I have a number of ideas so that we can start utilizing more of the forest. I think it was in 2019 that the forest sector provided $23.7 billion to Canada's GDP—no small slouch in that. I think it's one of our major sectors, and if we can utilize it even more, I think there's great opportunity to be able to develop some other opportunities.

Some of the challenges we faced were that a couple of the bigger companies have the majority of the shares, so it's hard to break into that. In terms of forest utilization, if we could limit the burning that goes on, releasing carbon monoxide into the atmosphere, maybe through waste management pricing or whatever, I think it would be great. If we're not able to do that going forward, we're all in trouble because if the global warming gets to a certain level, it's no good for any of us.

I think that I provided some information on what the possibilities could be. Basically, I think a bit of tenure reform, some logging practices reform and just a bit of a culture shift within the industry could really help to utilize a lot of what we're wasting in the industry right now.

My friend from Paper Excellence said that we're taking all the steaks and leaving the chicken wings. I thought that was pretty funny. We're not utilizing what we could and then using it for pellets and other such things. I think that's a detriment, especially with the lower AAC.

I won't go on much further than that. I think a focus on waste billing, selective logging and local ownership will all contribute to increasing and helping us get out of this economic challenge that we will have, going forward.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Orr. I appreciate your comments and your patience.

Mr. Beck, the floor is yours for up to five minutes.

[Mike Beck, Operations Manager, Capacity Forest Management Ltd.]

Thank you, Chair and committee members, for this opportunity to speak regarding aspects of Canada's forest economy.

Our company, Capacity Forest Management, has been working with probably 18 to 20 first nation bands across the province of British Columbia, helping with pathway agreements and foundation agreements. We're very proud of the work we have conducted in providing forestry business and revenue-sharing opportunities for first nations within our sustainable forestry industry.

Forestry is an important industry to Canada. It provides sustainable, secure and good-paying jobs to 225,000-plus Canadians in the industry. In addition, it adds another 350,000 jobs created through forestry activities.

A significant part of a forest recovery plan is that government and industry need to involve and collaborate with first nations by providing forestry business opportunities, or forest tenure; business-to-business or joint ventures; and activity-based government stumpage revenue sharing with first nations within their unceded territory.

The importance of involving first nations in all aspects of forestry will provide reconciliation approaches to enhance fibre security for many forest licensees or tenure holders and mills to access timber. Recent historic foundation and pathway agreements signed with first nations—for example, Shíshálh Nation and Lake Babine Nation—are examples of the provincial and federal governments supporting first nations in working towards reconciliation and becoming a key economic component and participant in the forest industry.

Another positive aspect, I have to say, with the Government of Canada is that they have recognized that forestry plays a key part in climate change and have identified that forestry professionals will play a key role, a vital role, in commitments to climate change and in planting two billion trees.

Again, the Government of Canada and the Government of B.C. have taken some great steps to include first nations in the forest recovery strategy through foundation agreements and pathway agreements. These agreements have essentially placed first nations into the reconciliation aspect to be awarded forest tenure volume and forest revenue sharing to build successful forestry businesses. When first nation forestry businesses are involved, they will provide long-term fibre security; launch future first nations forestry businesses and partnerships; and provide forestry revenue sharing with government and industry.

The key requirement for a successful Canadian forestry economic recovery will be to look at the forestry business approaches and to work collaboratively with first nations, which will allow improved access to Canada's forest land base and the resources within first nations unceded territories. Without access from first nations to the forest land base, uncertainty over fibre security and timber supply at mills will impact the forest economy recovery. If there is a lack of fibre access or security, it will reduce future investment, employment, manufactured forest products and exports of forestry products or raw logs.

Again, it will be vital to work collaboratively with first nations by providing these types of activity-based approaches to revenue-sharing agreements or granting rights to forest tenure to secure access to fibre. This would include forms of tenure acquisition mechanisms, with the government granting increased timber supply apportionment to first nations, and both industry and government forming business-to-business or joint venture agreements, which would constitute an aspect of government stumpage revenue sharing.

The creation of business partnerships with first nations will provide assurance that industry and government will adhere to first nations best management and sustainable land practices and policies within their unceded territories. Key social and environmental values that first nations want to protect include their cultural and spiritual features and areas, food sovereignty and water quality, and access to their resources. A collaborative approach to create first nation partnerships and relationship agreements will build trust if government and industry implement and practise first nations sustainable land policies and practices, which will provide easier access and long-term fibre security.

We've seen other issues with regard to the recovery of some of our first nations businesses in B.C. Currently they are stumpage fees, the fee-in-lieu tax on raw log exports, timber supply reductions, a working forest land base and climate change.

Stumpage is a fee that businesses and tenure holders pay when they harvest timber from Crown lands. Stumpage is a payment for the use of public natural resources to fund vital social services and provide government with an avenue for first nation revenue-sharing agreements. Stumpage will need to adapt and respond more quickly to lumber prices, not in quarterly adjustments. Log pricing doesn't respond quickly to stumpage rate spikes. It typically takes six months to adjust and respond, which impacts the bottom line of projects and project start-ups.

Currently, many first nation businesses cannot start up projects because of the high stumpage rates we’re seeing today in B.C. Log prices in the current market are not achieving profits for first nations, and logging costs are also increasing with carbon taxation. In addition, any first nation tenure holder’s projects that are on hold will reduce the movement of logs to mills, which will struggle in turn and create curtailments. That will create a trickle-down effect and impact communities and employment.

There is a need to review pricing formulas, equations and stumpage calculations to be more reactive to the new lumber pricing models, thus lowering stumpage to make logging more viable. If stumpage fees are not reduced, we will see another forestry sector downturn, impacting hundreds of forestry workers, including loggers, road contractors and log haulers, with mills possibly having closures or downtime.

[The Chair, Liberal, James Maloney]

Mr. Beck, I'll have to ask you to wrap up, please, if you would.

[Mike Beck]

Okay.

The fee-in-lieu aspect is another challenge for many first nation companies here that are impacted by the variable rate for lower-valued whitewood—hemlock, balsam and spruce—which is taxed typically at 10% to 35% of their domestic value. The higher the value surrounding the whitewood, the higher the whitewood is taxed. Plus, the fee-in-lieu was set at 10% prior. There are only two mills on the coast cutting hemlock. The new tax structure removes the ability for the tenure holders to increase net revenue by moving whitewood deemed surplus to domestic needs, as per the surplus test, and other markets, such as the U.S. and Asia, that often pay much higher prices.

With the incentive to move surplus volume to other markets, tenure holders are concerned that the domestic market will become flooded, which will quickly drive down pricing and result in tenure holders, first nations included, to either not bring any volume to market or to focus on Douglas fir and cedar stands, which is high-grading the timber profile. Forestry tenure holders are already seeing a negative harvest response from this implementation of the policy. Some coastal logging contractors are beginning to find themselves short of work.

This trend will continue in areas where log exports and domestic sales were balanced prior to the new policies. Currently, first nation—

[The Chair, Liberal, James Maloney]

Mr. Beck, I'll have ask you to wrap up almost immediately, if you can.

[Mike Beck]

Okay.

Fee-in-lieu will impact many of our first nation projects. I'll leave it at that.

[The Chair, Liberal, James Maloney]

Great. Thanks very much. I'm sorry for having to interrupt, but we do have to keep to some semblance of a schedule today.

Mr. Zimmer, I understand you're now going first. You have six minutes.

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

Thank you, Chair.

Hey, Derek. It's good to see you again. I'm in Prince George as we speak.

I have to move my motion today, Mr. Chair, since we didn't have the chance last time. Hopefully, we'll get through this quickly:

That, the Honourable Mary Ng, Minister of Small Business, Export Promotion and International Trade, be invited to appear before the committee as part of its ongoing study on Economic Recovery in the Forestry Sector, no later than February 26, 2021, to provide critical information relating to the recent World Trade Organization ruling, as the government official who appeared on October 30, 2020 was not able to respond to the question [and questions that we had] and suggested that Global Affairs Canada appear and answer the question at a future meeting.

I think, in good faith, that we've already heard that the minister is supposed to be here. I just wanted to put it on the table to ensure that it happens.