Natural Resources Committee on Nov. 23rd, 2020

[Ken Kalesnikoff]

I'm not a conspiracy theorist, but I've heard enough stories about how some of the big funds out of the U.S. spend money on promoting...and when their legal challenges are made, if you track it back.... I heard a very interesting speaker last year or the year before talk about how you can connect those dots back to the Rockefeller Foundation, for example.

The U.S. is very protectionist that way. The softwood lumber situation is just ridiculous; it will never stop. I know you guys were talking about the WTO and all of that. We could spend an hour on that subject.

The U.S. drives that bus. It is the U.S. coalition that makes it happen. There is no way we're going to do anything with them. Until the U.S. government itself pushes back on them, they're driving the bus. A lot of influence comes from the U.S. into our forestry politics.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

There was one other thing you mentioned in your opening statement that caught my ear. It was that when you guys introduced some value-added production back in 2000, the Chinese marketplace took it away from you in many ways.

Have there been other areas beyond what you mentioned in which this has been an issue, in which other countries have undercut what you were trying to do and have forced you out of that particular part of the market?

[Ken Kalesnikoff]

Definitely there have been. We talk about B.C. being a high-cost producer. That's real. It makes it very difficult for us to compete. We've had to shut our reman facility down over the last six months because of the softwood lumber agreement. We can't afford to put a 20% tax on a product worth $1,500 per thousand.... It blows it out of the water. People will switch to vinyl siding; they will not use wood siding.

In other parts of the country, with the ability of the Chinese to take on various products that we were making, at the rates they are able to pay their people and just with the cost of everything they're so much cheaper than we are.

We're actually battling even against the Europeans right now, because they've lowered the price.... They've had bugs and windstorms, and the fibre they're dealing with now, we're hearing, is in the $45 to $50 per cubic metre range. We're paying $100 to $120 a metre right now for timber, so we're at a major disadvantage.

[The Chair, Liberal, James Maloney]

Thank you very much, Mr. Patzer.

We will go over to Mr. Sidhu for five minutes.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

My question is for Mr. Verreault. We've heard about the suite of forestry programs and funding opportunities offered by Natural Resources Canada: the expanding market opportunities program, the forest innovation program, the indigenous forestry initiative and the investments in forest industry transformation.

How have you interacted with these programs and what feedback can you share about them, Mr. Verreault?

[Frédéric Verreault]

Thank you, Mr. Simard.

Natural Resources Canada does indeed play an active role in supporting the development of this emerging sector.

In this case, since the beginning of this meeting, people have been talking a great deal about the investments in the forest industry transformation program, or IFIT. The IFIT program has never been tailored to our needs because of its administrative delays and the step-by-step system that takes months. The market can change between the time we submit a project for analysis and the time we get a response. The IFIT program has too many long steps involving all sectors across the country, and no clear vision. With regard to Natural Resources Canada, of course, the amounts that IFIT can provide are much lower for large-scale industrial projects.

In contrast, around 2015, Natural Resources Canada played a pioneering role in the construction of medium- and high-rise solid wood buildings. An example is the Origine project, a 13-storey solid wood condo that we built in Quebec City. Natural Resources Canada had a program to support the technology demonstration and showcase component. That kind of highly targeted, highly effective support made a difference.

Today, we have delivered tens of millions of dollars' worth of solid wood structures for medium- and high-rise buildings, all as a result of the $1.1 million in initial financing. It was a small amount at the time, but it made a big difference.

All indigenous projects are relevant. We're involved as partners in one indigenous project, but these are smaller initiatives compared to the potential market that could exist. I can tell you that the most efficient and cost-effective way for Natural Resources Canada to support innovation is through its ongoing financial support to FPInnovations. FPInnovations can rely on stable funding from Natural Resources Canada.

FPInnovations is a bit like penicillin, a drug that can help many patients with many symptoms. FPInnovations is recognized for its innovation across the industry, whether it be in building codes and standards, process development, productivity gains, environmental footprint reduction and all related logistics, biofuels or construction. In any event, FPInnovations is like penicillin, which helps us all on many fronts. So, obviously, that is an indication of what may be relevant.

[Maninder Sidhu, Liberal, Brampton East, ON]

Thank you, Mr. Verreault.

You mentioned the code. In 2015, the National Building Code was updated to allow for the construction of wood-framed buildings of up to six storeys. Since then, you have noticed a corresponding increase in market demand.

Have you noticed that increased demand?

[Frédéric Verreault]

Actually, demand is still growing at a fairly sluggish rate. The critical factor is with the National Building Code; it is not so much the demand for growth as the removal of a hurdle with respect to solid wood construction. The 6, 8, 10 or 12-storey solid wood projects we have done have been for private developers, who make business decisions based on sound technical and financial answers.

In addition to the boldness they must show, those who choose to build better in the 21st century face the red tape that comes with a prescriptive building code, rather than a code based on a philosophy of achieving objectives. That puts all materials on an equal footing in achieving the objectives, where the shift has been under way since 2015.

It is one thing to allow it, it's another to say that you can build with wood, steel, concrete or aluminum and that the important thing is to achieve objectives of fire and earthquake safety.

This evolution in philosophy is the most legitimate and the fairest way to go for all materials, but it's also the most efficient way for a developer who, by choosing wood, would have no additional expenses to add to the project.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Sidhu. That's all your time for now.

We'll go to Mr. Simard for two and a half minutes, please.

[Mario Simard, Bloc, Jonquière, QC]

I have a quick question, Mr. Verreault.

To your knowledge, in the softwood lumber dispute with the United States, are the value-added products you make subject to the 20% tariff?

[Frédéric Verreault]

There is no tax, for the simple reason that a solid wood beam, column or panel, once it has cleared US customs and been delivered on US soil, cannot be broken down to its 2 x 4 lumber form and sold as such to compete with US producers.

[Mario Simard, Bloc, Jonquière, QC]

Okay.

With the arrival of Mr. Biden, the United States will likely sign back on to the Paris Accord and possibly change its GHG policies. Do you see a business opportunity there for yourself, knowing that things are going to change? What are the barriers to exporting your value-added products?

[Frédéric Verreault]

Our main export challenge is logistics, including rail transportation for custom-made products to be delivered to the United States. This would be an avenue to explore.

During the Trump administration, we did our first federal government infrastructure project where, for the first time, either in Canada or the United States, a federal government client asked us for environmental labelling of our product, so that they could choose solid wood. We did that project less than four years ago. It was intended for the US Department of Defense in Alabama, which was already turning to Nordic Structures and Chantiers Chibougamau due to the environmental footprint factor.

We are carrying out projects at several major publicly funded universities in the United States, since the inclinations are already there. We will obviously be able to build on that with the Biden administration. Let's start thinking today about logistics that are consistent in terms of greenhouse gas emissions, while at the same time being competitive.

[Mario Simard, Bloc, Jonquière, QC]

Do I have a little bit of time left, Mr. Chair?

[The Chair, Liberal, James Maloney]

Unfortunately, no. You were right on time.

[Mario Simard, Bloc, Jonquière, QC]

I will have a question about that later.

[The Chair, Liberal, James Maloney]

Mr. Cannings, we'll go to you for two and a half minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I'd like to ask Mr. Fehr a question. I was interested to hear that you're in Whitefish, Montana, where you said you had a CLT plant. Mr. Kalesnikoff mentioned in passing that he could have opened his mass timber plant across the border. Vaagen, who has a dimensional lumber mill in Midway in my riding also has a CLT plant in Colville where their family is based.

I'm wondering if you could expand on what the American market for mass timber is, what the fibre supply is like and how competition across the border with Canadian companies, like Chantiers Chibougamau and Structurlam, can shape our markets.

There are all sorts of things going on there, but if you could expand on that in a couple of minutes.

[Brian Fehr]

I actually have two facilities in America, one in Dothan, Alabama, and one in Whitefish, Montana. I bought them both out of bankruptcy. The only thing I heard from Ken and from Nordic is that for me, Canada is doing a lot better in CLT than America is. There's more cross-laminated timber produced in Canada than there is in America right now. I happened to just find an opportunity down there to buy some going-bankrupt type facilities.

I would proudly be in British Columbia if I hadn't found those. I actually have a working visa in America and work both sides of the border all the time. I see all of the good and bad of both sides.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

To expand on that, with the new mills or plants coming on, like Katerra in Spokane as well, how is the competition for fibre supply for use in CLT and glulam shaping those markets?

This could maybe go later to Ken and others in Canada.

[Brian Fehr]

It's very expensive in Montana. There is lots of ability in southern yellow pine, although the recognition in southern yellow pine isn't there in the building codes yet.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

How am I doing for time, Mr. Chair?

[The Chair, Liberal, James Maloney]

You're right on time. Thank you.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thanks. I'll try to come back to everybody later.

[The Chair, Liberal, James Maloney]

Mr. McLean, it's over to you for five minutes.