Natural Resources Committee on Oct. 30th, 2020

[The Chair, Liberal, James Maloney]

I call the meeting to order.

I thank everybody for logging on and making themselves available on a Friday afternoon, particularly for our first meeting in this session on the recovery of the forestry sector.

We have two officials from the Department of Natural Resources. Beth MacNeil is the assistant deputy minister, Canadian Forest Service; and Jeff Waring is the director general of trade, economics and industry branch in the Canadian Forest Service.

I recognize, Mr. Waring, that you have been here before. Ms. MacNeil, this may be the first time that I, at least, have encountered you at the committee.

Thank you both very much for taking the time to join us. We have received your brief in advance, for which we are grateful.

I don't need to explain the process to either of you, I am assuming, so I will turn the floor over to you and we can get under way.

Thanks very much.

[Beth MacNeil, Assistant Deputy Minister, Canadian Forest Service, Department of Natural Resources]

Thank you, Mr. Chair, and yes, we have met before at this committee. It's a privilege to be here today. Thank you for inviting me back to provide you with an update on Canada's forest sector.

At my appearance last March, I described the challenges facing our forest sector, including the impacts of wildfires and pests on our timber supply, the softwood lumber dispute with the U.S. and declining demand for printing and writing paper as the world digitizes. I highlighted innovation and the transformation in the sector, and how it is primed to be a leader in the emerging circular bioeconomy and a pivotal provider of nature-based climate solutions to advance Canada's climate change objectives.

All of these things remain true today; however, the world has greatly changed since March. COVID-19 has had and continues to have a significant impact on the forest sector. Although it was deemed essential by governments as it provides consumer goods that are critical to Canadians, including toilet paper, hygiene products, building materials and personal protective equipment, it was still hit by unprecedented demand and price declines. These factors, combined with liquidity constraints and health and safety concerns, led to over 130 mill closures and curtailments across the country, affecting more than 19,000 employees.

In response, the Government of Canada launched a series of business and worker support measures benefiting the forest sector. In particular, many firms and associations reported being supported by the Canada emergency wage subsidy and the work-sharing measures. In addition, the government is providing up to $30 million to small and medium-sized enterprises, in partnership with the provinces, to defray the costs of implementing new health and safety measures resulting from COVID. This support will preserve jobs, keep workers and communities safe and maintain the tree-planting infrastructure critical to our sustainable forest-management regime and climate goals, including planting two billion trees.

Today the sector is recovering, but unevenly. Manufacturers of wood products, packaging and hygiene products are doing well, supported by resilient consumer demand and strong housing and home improvement markets. However, the pandemic has intensified digitization and the decline in demand for printing and writing papers. As a result, traditional paper mills continue to struggle, with some remaining closed while putting investments to diversify to other market areas on hold.

Despite the pandemic, the Canadian forest sector remains key to helping Canada achieve its climate change objectives and a green and inclusive economic recovery. In support of the competitiveness of the sector, we launched several forest sector programs between April and July of this year, targeting research and development, innovation deployment, market and product diversification and increased economic opportunities for indigenous peoples.

To update you on our progress, our investments in forest industry transformation program, known as IFIT, received 70 proposals from across Canada in response to the recent call for proposals, in total seeking $500 million in support from the program, with potential to leverage three times that amount. Similarly, our indigenous forestry initiative program received a record 112 proposals, seeking $74.5 million in support. Both programs are finalizing the proposal evaluations as we speak.

Furthermore, our partnership with Canada's premier forest research organization, FPInnovations, has allowed them to rapidly refocus their staff on the most immediate need of the industry—that is, research on the potential to produce appropriate filtration media from wood fibre, with the end goal of producing sustainably sourced, wood-based biodegradable face masks for general use. Through our partnership, FPInnovations is now accelerating their work to develop these biodegradable face masks.

This record level of oversubscription to our forest sector programming, as well as the ability of an organization like FPInnovations to meet urgent needs for PPE, demonstrates both the eagerness and the ability of the sector to be a key player in meeting the demands of domestic and global markets during the most critical of times.

In addition, I would like to highlight that for a country like Canada, there is no solution to climate change without forests. Healthy, resilient forests are a nature-based solution to a changing climate.

The government is committed to planting an incremental 2 billion trees over the next 10 years, an increase in forest cover twice the size of Prince Edward Island. We continue to engage with stakeholders to operationalize this commitment.

In the near term, the forest sector will continue to deal with the uncertainties and challenges caused by COVID. However, the pandemic has not changed the fundamental importance and potential of the sector to Canada's green, inclusive economic recovery. Rather, it has reinforced its essential role.

Thank you very much.

[The Chair, Liberal, James Maloney]

Thank you, Ms. MacNeil. I appreciate that very much.

Mr. Waring, do you have additional comments you would like to make? No? Okay.

I'm going to open the meeting up to questions, first from the Conservative Party. I'm not sure if that's you, Mr. McLean, or Mr. Zimmer.

It is Mr. Zimmer. Mr. Zimmer, you have six minutes.

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

Is Greg on yet? He had a challenge to log on to the meeting. I'll go ahead if he's not on yet.

[The Chair, Liberal, James Maloney]

That's fine.

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

Is he on, Chair, or is he still...?

[The Chair, Liberal, James Maloney]

I don't see him.

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

I know that there were log-in challenges there.

I want to thank the representatives for their comments. Indeed, being from northern British Columbia, I see how essentially an economic recovery will rely on the resource sector, especially forestry in British Columbia. The question I have for you, though, is based on the WTO ruling that happened this August. It was against the U.S. It was a unanimous decision and basically said that what the U.S. said wasn't the case.

They ruled in Canada's favour unanimously. Then we saw an appeal to that decision on September 28, 2020. I just wanted to know about an update. A lot of us here in northern B.C. have been watching this roller coaster ride of the tariffs that are very unfair towards Canadian producers. It's an impediment of some 20% or 22% to our competitiveness with our neighbours to the south.

If you could, update us on that to let people know where that's at. When is that appeal going to go through and take its course? That's just for some information for all of us.

[Beth MacNeil]

Thank you, Mr. Chair, for that question. I will, though, have to defer to my colleagues at Global Affairs Canada to appear and answer that question at a future meeting. They're the government officials responsible for the trade disputes.

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

Okay. That's unfortunate.

You talked about the sector doing well in certain areas, especially on the paper side, with all the masks that are being required now. Some of the benefit has been to that part of the sector, but that paper side is struggling. As I've seen in Mackenzie, paper mills have closed. My dad worked on a paper mill some 20 years ago, and that particular paper mill has been shuttered, based on the difficult place for paper in the global market.

Some of it is related to access to timber. We're told that timber is becoming more and more scarce, but I guess I have a question for you in terms of a strategy. In driving through the Pine Pass when I go from Fort St. John to Prince George, I see that in that area we have a whole bunch of what I call redwood, the wood that has been killed by the pine beetle, but now we see a whole new wave of yellow wood, and that's the spruce beetle. It's not just a few trees here and there. It's pervasive, as I'm sure you know, but there doesn't seem to be a strategy for how to get that wood down.

The reason I ask is that we've seen the opportunity. The wood is there. We should be getting it down. We see what the Americans are doing to the south of us, where they're incentivizing the cleaning up of parklands by getting out this timber that will soon be dead and will soon be a huge volume of firewood that's at risk of catching fire, and we could be watching even more of our forests burning than we've seen in the past.

What is the national strategy? I understand that this is a provincial file in a lot of ways, but is there a national strategy on how to deal with this particular wood and use it for its benefits, so that it can be used in a positive way rather than just leaving it to eventually be a forest fire?

[Beth MacNeil]

There are a few things.

First, with regard to the access to fibre, you're right that there has been a cumulative effect. It's been the mountain pine beetle. It's been the increased frequency and magnitude of forest fires in B.C. Now we see the emergence of the spruce beetle. When I speak to Diane Nicholls, the chief forester for the B.C. government, she tells me that there is a large amount of forest fibre still remaining, much of it on the forest floor. B.C. has started to implement some policy changes and regulatory reform to use that fibre. The mountain pine beetle was before my time, but to my understanding, there were increased efforts to get that wood down while there was still some value to the fibre. Diane Nicholls may be a witness before this committee, so I'd ask her specifically about that.

Certainly in our federal programming, as I mentioned in my opening remarks, in particular in the investments in forest industry transformation, or IFIT, we are looking at proposals now. We are trying to direct those programs to the bioeconomy and to use all forms of fibre as quickly as possible. It's not just for two-by-fours; it's higher-value product and biomaterials. That's what the federal government is doing.

We also have a national pest program. We're providing the science, the research and the monitoring for many of these pests across Canada, in particular the mountain pine beetle, the spruce budworm in the east, and the emerald ash borer.

[The Chair, Liberal, James Maloney]

You have about 20 seconds left, Mr. Zimmer.

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

Okay.

Thank you for that. I look forward to some comments from Global Affairs about the WTO stuff, but thanks again for your time today.

[The Chair, Liberal, James Maloney]

Thanks, Mr. Zimmer.

Ms. Jones, we will go over to you for six minutes.

[Yvonne Jones, Liberal, Labrador, NL]

Thank you, Mr. Chair.

Thank you for your presentation today. I'm glad you guys could join us.

Since the COVID-19 pandemic, I guess there have been a lot of changes in the industry sectors across the country. Much of it has been negative, unfortunately, especially in the natural resource sectors, with the reduced demand and the price volatility of some resources.

Could you describe what impact the COVID-19 pandemic has had on the workers and the companies in the Canadian forestry industry?

[Beth MacNeil]

I would say it has been quite widespread, but actually we've seen a shift since the beginning of COVID to now. I'll give you a couple of examples.

First, as I mentioned, it has impacted in some form or another, in either permanent closures or production curtailments, 130 mills across Canada, in all areas of Canada, affecting 19,700 employees.

We have three subsectors in forestry: solid wood products, forest operations and pulp and paper mills. What we saw in the beginning with the subsector of solid wood products, lumber in particular, was that this was in the high $200s per thousand board feet. It actually recovered and hit a record high a few weeks ago of approximately $1,000. While it has declined—I think this week's rate was around $560—we saw tremendous recovery in solid wood products and forest operations.

Where I'm most concerned is on the paper side. I think the industry remains in trouble, and I don't see conditions improving. With all of us working at home and the increase in digitalization, that part of the pulp and paper subsector is really struggling right now.

[Yvonne Jones, Liberal, Labrador, NL]

Thank you.

Can you tell me what impacts there have been on supply chains and the demand for forest products? I know you talked about solid wood products and record levels of increase in those commodities, but is the market fairly stable in terms of supply chains and the demand for product?

[Beth MacNeil]

As one of the committee members just mentioned, fibre has been an issue on the west coast, but it was pre-COVID as well. With regard to supply chains, as folks know, early in the pandemic, toilet paper was in high demand and it was hard to find, but we were reassured when we spoke to the CEOs across the country that there was plenty and that the supply chain was not going to be affected.

When it comes to solid wood products, with many people working from home, we did see an increase in home renovations and home improvements. We think that this trend will continue. I see an improvement in the supply of materials for that area. There was quite a pinch point about four weeks ago, where it was difficult to get materials, but that seems to be easing.

[Yvonne Jones, Liberal, Labrador, NL]

That's great. Thank you.

Can you speak to us for a few minutes today about some of the new programs or strategies that are currently ongoing within Natural Resources Canada that will help improve competitiveness and the overall health of Canada's forest sector as we go forward over the next year, and your—

[The Chair, Liberal, James Maloney]

You have about a minute and a half, to be precise.

[Beth MacNeil]

Thank you, Mr. Chair.

In terms of supporting the competitiveness of the forest sector, in budget 2019 the government announced $251 million for our forest sector competitiveness programs. They were launched this summer. We're reviewing right now the proposals and the expressions of interest for our forest sector industry transformation program, the expanding market opportunities program for overseas markets, and the indigenous forestry initiative.

Another area that I mentioned in my opening remarks was innovation programming, through which we are helping to accelerate the production of filtration media through the work of FPInnovations.

Thank you.

[The Chair, Liberal, James Maloney]

Ms. Jones, you have about 20 seconds left if you want to use it.

[Yvonne Jones, Liberal, Labrador, NL]

Thank you, Mr. Chair. I'm good.

Thank you very much for your responses.

[The Chair, Liberal, James Maloney]

Thank you.

Mr. Simard, you're up.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

Thank you for your presentation, Ms. MacNeil.

My first question is rather short. The government's forest strategy covered 2017 to 2020. I'm not sure whether you have with you the figures for the 2017-20 funding committed under the strategy.