Natural Resources Committee on Nov. 16th, 2020

[Tina Rasmussen]

At NorSask we've been very tenacious and managed to stay afloat. It is our main focus and our largest employer in northern Saskatchewan. I don't know how many of you have visited northern Saskatchewan, but we're very remote and isolated and very sparsely populated. The forest industry creates an opportunity where the people live. The trees grow where we live. They don't grow in the prairies of southern Saskatchewan; they grow up in northern Saskatchewan where we live. It's about taking advantage of a natural resource that grows in our community.

The opportunity that has been created by NorSask Forest Products is that first nations have influence. It is not non-aboriginals or multinationals or companies from southern Saskatchewan or Alberta or B.C. that are coming in and providing harvesting or providing trucking. It is an opportunity for us to create these opportunities in our own backyard based on our own natural resources.

I don't think there is going to be a big move away from forestry. If anything, in the case of the bioenergy centre, we're looking for ways to create more synergies with the forestry sector.

[The Chair, Liberal, James Maloney]

Thanks, Ms. Rasmussen.

Mr. Lefebvre, we'll turn it over to you for six minutes.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you, Mr. Chair. Thank you to all the panellists for coming today.

I also have questions for Ms. Rasmussen, but I'll let my colleagues ask those.

Mr. Roberts, you mentioned a few things about the potential, and what we need to do as we go forward. You talked about two things: a flexible regulation and the solid wood sector. Let me talk about the first one.

You talked about compliance and credit trading, but you also mentioned the clean fuel standards we have in Canada. From your perspective, as we move forward with regulation.... You've obviously done a lot of studies internationally as well. You've worked with New Zealand. I'm assuming that you've done a lot of comparative analysis of what is going on in the world. Why do you think it is important that Canada continues down this path with the clean fuel standards? And what are the opportunities for the bioeconomy because of these regulations?

[Don Roberts]

That's a good question.

What is the good news? We're not in this alone. The global forest sector is undergoing some real challenges. Right now, particularly in the temperate climates, whether in northern Europe, Canada, or Russia, one of our challenges is that there are some structural changes occurring. The paper and pulp industry—the paper industry in particular—is going soft. There is nothing we can do about it; it's technologically driven. That is the primary use of the lower quality biomass that we produce. The good stuff we can put into lumber, and if we can get it to the U.S. market, that's great.

But we need to get a way to get value out of the lower quality biomass. That's why our focus—at least a lot of our emphasis, a lot of people are focusing on this—is on what you can do to create value out of the low-quality stuff. A lot of it is going into energy. We're hearing this in Meadow Lake. That's electrons, electricity. That's good in some areas, but unfortunately it's also relatively low-valued energy. It doesn't create a lot of jobs or value or revenue. But, it's good in some situations. We need to create other ways to do it.

Our challenge is that in the whole energy and chemical space, we're competing with very low-cost fossil fuels. That's just the way the market is, and it's going to stay that way, in our view. We need a way to say, how do you then close that gap and put a value on carbon? That's really the issue. How do you put a value on carbon?

We talk about carbon prices. Yes, that's one way, but in reality, everywhere in the world there is a political limit on what you can on an economy-wide carbon price. Fifty bucks? I'm not sure. The reality is that it's not strong enough. What we're finding is that by putting in these flexible regulations, with which you can target big-emitting sectors, and then putting in these trading systems, you can really send a strong enough price signal to get steel in the ground here. That's what we have to do, get steel in the ground.

I gave the example of a joint venture that Canfor is looking at with their Arbios joint venture in Prince George. That would not be occurring in Canada, period, if it were not for the B.C. low-carbon fuel standard.

[Paul Lefebvre, Liberal, Sudbury, ON]

Basically, these are creating business opportunities for the private sector as well.

[Don Roberts]

Absolutely, they are, and it's a way to diversify what we're doing with our God-given advantage with a lot of biomass.

There was a theme that came up in all three presentations, and that was the softwood lumber agreement. I tied in to it as well.

To expand this, the key is to put in the value of carbon in our buildings. Right now we don't recognize it, but by looking at expanding this concept to the built environment, we really could expand well beyond the residential sector and get a good alternative in Canada, because as I said before, regardless of whether we like it, we have had the softwood lumber agreement under both Liberal and Conservative governments in Canada and Democrats and Republicans in the States. This ain't going away. We have to find a way to look at alternatives.

[Paul Lefebvre, Liberal, Sudbury, ON]

Agreed.

Mr. Bromley, you've talked generally about the value-added products we're seeing now and their importance. I think that's what Mr. Roberts was also mentioning.

Some people will say that value-added products are going away from our traditional sector and will ask whether we are going to lose jobs from this change. I was pleased to hear and want to hear more of your perspective on the potential for jobs to be created by these value-added products—the solid wood and possibly the biomass and bioenergy. What would these mean for your members and for potential jobs?

[Jeff Bromley]

In terms of finalizing the softwood lumber agreement—and to address the comments of my counterpart Mr. Roberts, you're right, it's not going away—it's to the point that there are pundits and commentators who now, I believe accurately, characterize the billions in dollars of duties as a dividend for those southern producers who have so much influence in Washington.

I take affront at their taking revenue from our country and our industry and classifying it as a dividend.

That aside, and to your question, the solid wood sector is the basis. It is not going away. Has it eroded somewhat? Yes. Does it evolve? It does, obviously.

That solid wood sector base needs to be there, however; they need to have that base whereby 65% to 68% of our products go into the U.S. This needs to happen, or else we don't have the residual products that the whole industry relies upon.

To your point about the next generation of value-added products, the cross-laminated timber or CLT and mass timber constitute a massive market. We have members in Penticton in a company called Structurlam, which employs almost 300 members—I think it's 275 now—in Penticton and is still looking for more workers, because the product is labour-intensive, but the demand for it is strong.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Bromley. I'm going to have to interrupt you and stop you there, unfortunately.

Ms. Michaud, you are next, for six minutes.

[Kristina Michaud, Bloc, Avignon—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chair.

I'm going to address you, too, Mr. Bromley. You mentioned that the last few years have been quite turbulent for workers in the industry and that there have been several job losses. I also know that you met with my colleague Mr. Simard about the awareness campaign you're currently conducting, particularly on several claims related to employment insurance.

In this regard, what do you think the federal government should do to ensure better working conditions for employees in the industry?

[Jeff Bromley]

One thing that is about as predictable as the weather is the lumber industry. It is very cyclical, very “peaks and valleys”. That's just the unfortunate nature of the beast. We have layoffs and we have closures, but the employment insurance system is important for the base support of workers, which the employers and the workers all pay into. It is important that there not be barriers when workers need this support most. Any benefits that are negotiated or provided shouldn't be barriers to access to EI.

I believe the federal government is on the right track with the measures it has instituted on a temporary basis, but as I said in my opening remarks, making access to EI permanent when people are in fact laid off and/or suffer a closure is paramount.

In terms of what the federal government should do to continue to help, I think that all the aspects—making sure there is a fair trade environment, making sure that there is a competitive tax environment, making sure there is support for workers—all those things are paramount to ensure that the industry is vibrant and that it thrives in the future.

It's going to take some work: all the things we've talked about today concerning other products from the forest, and what we've talked about in B.C., whereby we can get more value out of the timber in the forest so that nothing is left behind and so that everything is extracted and used for different products. I think those kinds of programs are important to make sure that the industry thrives.

[Kristina Michaud, Bloc, Avignon—La Mitis—Matane—Matapédia, QC]

Thank you.

Support to the industry can also be financial. From 2017 to 2020, the federal government invested $24 billion in the hydrocarbon sector, while for the same period, Quebec's share, with its sustainable forest management strategy, was only $70 million, 75% of which was in the form of loans.

What can the federal government do to support industry in the energy transition? Among other things, it could provide loans, loan guarantees and support for research and development. There's an excellent research sector in Quebec, and it could be put to good use for the forest industry.

What can or should the federal government do in terms of investment?

[Jeff Bromley]

I think that's a good segue to the topic that we've been leading. There is that value, in terms of those tariffs that are out there.... We sincerely believe that at some point there's going to be a deal. There's going to be a measure of those duties that they've paid. My counterpart, Ms. Rasmussen, mentioned that NorSask Forest Products, a relatively small company, has paid a monumental amount of money, $14 million, that could go back into investment in their communities. It could go back to the workers. It could go back to making the company a more competitive operation.

With that amount of money, that capital that's out there, if we could have the federal government play a role in terms of ensuring that smaller operations have access.... Indeed, you'd have to be fair and offer it to all operations, but the bigger players have to be restricted in what they invest in. I don't think they should be able to take advantage of federal government programs to further invest in the U.S. south, let's say, as they did last time, after the beginning of the 2006-07 softwood agreement. They got the money back and they then invested abroad into other markets. I don't think that benefits Canadian workers or communities in any way, shape or form.

I think a robust investment or loans program by the federal government to the industry, based on those duties, would go a long way to helping, especially these smaller players. As much as we talk about the CanFors and the West Frasers, and the Resolutes, the bigger players in the industry, there still are the so-called mom-and-pop industries, the smaller players that employ 30, 40, 80 workers at good-paying jobs.

Those smaller industries need our support and need the federal government's support. I think this addition would go a long way in helping that.

[The Chair, Liberal, James Maloney]

You have 30 seconds.

[Kristina Michaud, Bloc, Avignon—La Mitis—Matane—Matapédia, QC]

Slightly less mention is made of by-products, in other words, secondary and tertiary processing products in the sector.

Could these products play a role in the economic recovery of the forest industry? Post-pandemic economic recovery is being talked about a lot these days. The industry could play a big role in that. Could secondary and tertiary processors do well?

[Jeff Bromley]

I agree. I don't think that any restriction.... The problem we'll find, though, will be fibre availability and then making the best use of that fibre. It's a good point.

[The Chair, Liberal, James Maloney]

All right. We'll stop there.

Mr. Bachrach, we'll go over to you, for six minutes.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

I'll perhaps pick up where my colleague just left off, on the topic of value added.

I'll ask Mr. Bromley this question. You mentioned cross-laminated timbers. That's a product I have some knowledge about.

I'm wondering, in looking at other jurisdictions in the world that are leading in the development and manufacturing of those kinds of value-added products, are there any particular jurisdictions you look to for policy ideas or incentives that we should be incorporating here in Canada?

[Jeff Bromley]

I don't know that I look to any particular jurisdictions. I know they do some good stuff in Europe. I still believe firmly that Canada is the leader or is certainly one of the leaders in value-added product manufacturing, specifically on the mass timber and CLT front.

I truly believe that if the timber side of the equation wasn't so restricted or so tightened in terms of supplies, to try and take a piece of that supply part of the equation that isn't occupied by the solid wood sector is difficult. The bigger players, to my knowledge, aren't as involved in the CLT portion as of yet, and they haven't jumped wholeheartedly into it because the timber supply situation is so tight. That is a dynamic that needs to be...through regulation, through government incentives. I know that a lot of the jurisdictions have different controls or a different way they control the land base in terms of tenure and access to the forest. You have to enable supply, to give them the ability to look into these products such as CLT.

I think where the federal government plays a strong role, in conjunction with the provincial government, is in trying measure out whether there's an ability for the re-allocation of tenure to these companies that are innovative and have the ability to provide these mass timber products that are value added. They provide more value to our sector, provide more jobs, and obviously sink more carbon. We can use the CLT; we know there are building codes that are now up to 12 storeys and higher. There's a real demand for this product that we can take advantage of through proper regulation.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thanks, Mr. Bromley.

My next question is for Mr. Roberts.

Mr. Roberts, you talked about carbon sequestration through the use of wood as a construction product. I know that in British Columbia, in particular, there have been “wood first” policies for a number of years now. I wonder if you can speak to the efficacy of those policies. Have we seen a really measurable increase in the use of wood as a building product in the construction sector, and in what magnitude?

[Don Roberts]

In terms of direction, it's the right direction. It has been effective. We've seen a number of good examples. I would say that Canada has been second in the field there. This was really developed out of Scandinavia initially, and Stora Enso, the Swedish company, is the biggest in the world in this. The “wood first” policy has been good.

Let me say something controversial here. Let's focus on what we care about. What we care about is reducing carbon and getting economic activity. It's worthwhile to set a target and then let the private sector figure out how to do that.

A “wood first” policy says that we have to use wood. Well, tell that to the steel and concrete folks. They also have ways to be innovative here; for example, you can create concrete by storing CO2 in it.

As the people who are looking at true innovation are saying, let's widen the door, set a target—we want to reduce carbon intensity—and then go at it, folks. I think the CLT is a great alternative, but you'll also see other people try to use other products and other innovations as well. So we can get a race to the top here in terms of what we really want. I think a flexible regulation is more effective, economy-wide, than just a single “wood first” policy.

That probably sounds like blasphemy to the forest sector, which I work in, but I'm just pointing to what we care about and the end result.

It has been effective. We are seeing it, especially in the construction happening in Sweden and Finland right now. I've mentioned the work we're doing with the Government of New Zealand. This is going to be one of their focal points. Put a value on stored carbon in construction. That's their target.

The good news is that there are also other things we can do in this whole construction area. For example, with wood insulation, we're seeing some really interesting technologies out of Germany, the Dieffenbacher and Simpelkamp technologies, which you can use for the lower quality wood. That's key to getting good demand for our low-quality wood, which still comes out of our sawmills. Fifty percent of your saw logs typically go to lumber. We have to find a home for the other 50%—it has some value—and that's a challenge when you don't have a strong new paper or pulp industry. This is where some of these new value-added products are going to come in.

[The Chair, Liberal, James Maloney]

Thanks, Mr. Bachrach. I'm going to have to stop you there.

We're moving into the five-minute round. We have time for two more. The Conservatives are next.

Ms. Harder, you have five minutes.

[Rachael Thomas, Conservative, Lethbridge, AB]

Thank you, Chair.

My question is for MLTC.

You talked a lot about the benefit of forestry in particular, as well as other industries, for indigenous communities. About 6% of participation is by indigenous folks, which is very cool. You talked about investments being made in health care, in housing, and in infrastructure, which is huge for indigenous communities. When I read through your website, it looks as though you folks are doing some tremendous work in terms of the benefits that are being added.

Now, my question is this. The imposition of a clean-fuel standard is going to result in a significant cut to profits. Of course, some of that expense can be passed down to the consumer, but I would imagine that as a producer you're going to have to take on some of that cost. What impact is that going to have on the benefits, then, being offered to indigenous communities?

[Tina Rasmussen]

In the same way as the tariff, it's going to have a direct impact on the communities. It's going to mean that much less money going directly back to our stakeholders, to our shareholders, to our member communities. We're making every effort we can to look at all potential new ideas, new options, and new ways in which we might create opportunity to diversify and create things that might reduce that impact on us.

I think somebody else mentioned it as well. Somebody mentioned concrete. With the new facility we're building for the bioenergy centre, it's important for us as aboriginal people to move the tree from the forest directly through to the end of its life and to leave no waste. For us, the bioenergy centre means all of that waste that's currently just being burned and expelled into the air as smoke and ash will now go through a bioenergy facility.

Even more than that, we're investigating, with the concrete industry, opportunities to create another by-product in terms of the fly ash that comes out of that bioenergy facility.

All of those things are going to be created in a renewable manner with a renewable fuel, so that's going to help reduce the effect on us. At MLTC we're looking at every opportunity there is to move into the bioenergy or renewable-energy markets. As I said before, it's difficult, though, when you are one of one, and it's very much an area where we need government support, especially as indigenous people when we're really starting to move into economic development, coming into our own in some communities. We're definitely in need of government support in those areas.

[Rachael Thomas, Conservative, Lethbridge, AB]

Very good.

Perhaps you could comment further on the impact that foreign investment or foreign purchases are having on the industry. Would you have a comment to make with regard to that?