Natural Resources Committee on May 30th, 2023

[The Chair, Liberal, John Aldag]

Thank you so much for your comments.

I don't know if that was your full opening statement, but as I say, we have circulated it in both official languages to the committee.

Next, we have, with the Fédération de l'industrie manufacturière, Louis Bégin, president, and Dominic Demers, labour relations consultant.

I'll turn it over to the Fédération representatives for their opening five-minute statement, please.

[Louis Bégin, President, Fédération de l'industrie manufacturière]

First of all, I'd like to thank the Committee for having us.

First I'd like to specify that, in some respects, we see something positive in this venture: it is a pulp and paper company that has acquired Resolute Forest Products. Let's not forget, however, that Resolute Forest Products belonged to an investment holding company, which could at any time sell the company off in pieces or break it up, with no real follow-up plan.

The lack of transparency of the plan, which has already been mentioned, is an aspect that concerns us. We'd like to have a bit more detail, and to know what objectives Paper Excellence has for Resolute Forest Products, which is part of a range of operations in Quebec. It starts with the forest and includes sawmills, paper mills and cardboard production. Paper Excellence doesn't have this model anywhere else in the world. We'd like to know where the company stands regarding the reality of Resolute Forest Products in Canada and Quebec.

The company has entered our forestry industry at a pivotal time. We are currently seeking a kind of balance for all the challenges we have to overcome, whether it be the lumber industry, industrial diversification strategies, trade conflicts with the United States, measures to protect biodiversity, or relations with first nations. We are not hearing anything about these things. We'd like to know where they fit into the company's business plan. That is what workers in Quebec are extremely concerned about in the wake of this acquisition.

I'll now hand it over to Mr. Vaillancourt.

[Gilles Vaillancourt, Union Representative, Fédération de l'industrie manufacturière]

Good day.

We also have some concerns about obligations being fulfilled towards the retired employees of Resolute Forest Products. Nearly 4,000 former employees of Resolute Forest Products are currently members of a defined benefit pension plan. Although that fund is no longer taking on new members since it was replaced by a target benefit plan, its sustainability must remain a priority. In the past, we've witnessed transfer-of-responsibility strategies following similar acquisition processes in the forestry sector. We believe that Paper Excellence should formally commit to respecting the obligations arising from this plan and refrain from any type of maneuver likely to reduce the scope of its obligations.

The plan is currently 88% funded and has a solvency ratio of 67%. Ending the plan would have disastrous consequences for members. Transparency with regard to a business plan and the development of the forestry sector is also important. Given its dominant position in the Quebec forest industry and its tangible impact on independent complementary chains, we believe that Paper Excellence must demonstrate more transparency with the relevant authorities about its short-, medium- and long-term intentions.

Workers are very worried. There have been several production shutdowns. Come July, we will have been closed for a total of five weeks since the beginning of the year in Kénogami. There is also talk of a ceiling on kraft pulp exports. The Asian market's demand for quality fibre is high and on the rise. The challenges posed by the loss of access to the resource in certain regions, like the western provinces, where there is a decline in forestry potential, are prompting a shift in investment and a hearty appetite for reliable supply.

In this respect, the forests of eastern Canada are a prime resource. If Paper Excellence were to decide to maximize kraft pulp exports to Asian markets, we believe the results would not be advantageous to Quebec's forest communities or to the processing capabilities of the Canadian economy as a whole. We believe that these exchanges are necessary in order to limit the export capacity of such a major player.

Resolute Forest Products has set up a very interesting and promising plan in our region of Kénogami to produce cellulose pulp. Will we still have enough kraft pulp to produce it, or will kraft pulp be exported? We have a lot of concerns.

[The Chair, Liberal, John Aldag]

Thank you.

I realized that I hadn't welcomed Mr. Gilles Vaillancourt, who just spoke. I understand that Mr. Vaillancourt is a union rep with the federation.

Thank you for your opening statements.

Last, we'll go to Greenpeace representative, Shane Moffatt.

It's over to you, Mr. Moffatt. You will have five minutes for your opening statement.

[Shane Moffatt, Head of Nature and Food Campaign, Greenpeace Canada]

Good afternoon.

Thank you, Mr. Chair, for the opportunity to speak today.

My comments are informed by an investigation into Paper Excellence, which Greenpeace Canada and our partners released in October and which is available online.

Our investigation into Paper Excellence's corporate structure uncovered a network of holding companies registered in offshore jurisdictions characterized by high levels of secrecy. Other than its Domtar holdings, its Canadian mills are primarily owned by Paper Excellence Canada Holdings Corporation, incorporated in Canada in 2010. The corporation is itself owned by Paper Excellence B.V., registered in the Netherlands. The owner of Paper Excellence B.V. is Fortune Everrich, registered in Malaysia. Fortune Everrich is owned by yet another Malaysian company, Capital Assets Holdings, registered in an offshore financial centre. At the end of this rabbit hole is Elite Shine Investments Limited, registered in the British Virgin Islands, which is Paper Excellence Canada Holdings Corporation's ultimate owner. Domtar is now owned by holding companies in the Netherlands and Hong Kong.

Paper Excellence represents itself as a Canadian company and denies being a subsidiary of Asia Pulp & Paper or Sinar Mas. However, our investigation revealed family ties, overlapping management and lobbyist filings, indicating that Sinar Mas, in fact, controls Paper Excellence. APP and Paper Excellence can thus be considered sister companies under Sinar Mas. In B.C., lobbyist Moe Sihota registered for Paper Excellence in 2020. In his public filing, he disclosed Sinar Mas as an affiliate with “a direct interest in the outcome of the lobbying”. After Paper Excellence bought the Meadow Lake mill in Saskatchewan, it wrote at least six letters to the province on letterhead stating it was “A Division of Sinarmas Group”.

Most significantly, Paper Excellence maintains it is solely owned by Jackson Wijaya, the son of Sinar Mas and APP boss Teguh Wijaya. Who exactly is Jackson Wijaya? Is he an owner we never see who lives in Shanghai or Jakarta, or is “Jackson” a code word for the financial interests of a family that owns a global logging empire? Paper Excellence's own SEC filings suggest it's the latter:

“Jackson Wijaya” means (a) Jackson Wijaya, (b) family members of Jackson Wijaya, (c) trusts, partnerships or limited liability companies for the benefit of any of the individuals identified in the foregoing clause (a) or (b)—

It continues.

What exactly is Asia Pulp & Paper's track record?

In Indonesia, APP and its suppliers have deforested over two million hectares of rainforest, including Sumatran tiger and orangutan habitat. Many of its suppliers have conflicts with indigenous communities over land use. Its plantations, which drain carbon-rich peatlands, have been linked to catastrophic fires and massive greenhouse gas emissions.

In Canada, the government says Paper Excellence will comply with federal and provincial laws. However, in Ontario, the logging industry is exempt from the Endangered Species Act, so that won't do much good. British Columbia still hasn't passed endangered species legislation, while Quebec drags its heels on protections for woodland caribou. A recent peer-reviewed study of shortcomings in federal law to protect biodiversity concluded that “biodiversity loss within Canada...suggest[s]...transformative change is needed.” Thanks to these weak laws, which the government says Paper Excellence will comply with, forests are already in crisis across the country, with collapsing caribou populations, growing emissions and historic protests. Paper Excellence might market itself as a saviour, but I see a vulture picking struggling forests clean to feed a global empire for the benefit of very few.

The corporate firewalls between Paper Excellence entities present an enormous obstacle to the Canadian public in holding it accountable for its actions, environmental impacts and social commitments. Instead of meekly accepting Paper Excellence's assurances, this calls for coordinated action led by the federal government, focusing on two key areas: first, much greater transparency in the logging industry so we all know exactly who is logging, how it's being done and who is profiting; and, second, much more effective forest regulations to ensure wildlife is being protected, indigenous rights are respected and local communities are benefiting.

With Paper Excellence in town, these measures are more urgent than ever.

Thank you.

[The Chair, Liberal, John Aldag]

Thank you.

With that, we have about 15 minutes. We'll go through an abbreviated first round of questions. I'll do three minutes each, and then we will canvass the group following the meeting to see whether we are able to bring them back. This is the second time this group here has been scheduled, so I thank them so much for their flexibility. We'll at least get in quick three-minute interactions.

First up on this side, I have Mr. Hoback.

Mr. Hoback, the floor is yours for three minutes.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair. Three minutes isn't enough to talk about all the things we want to talk about here.

I'll start with you, Professor Leuprecht.

You make some accusations I'm concerned about, and it's with regard to the process that was used when Resolute was purchased by Paper Excellence and when Domtar was purchased by Paper Excellence.

Was there not proper consultation? Was there not a proper process put in place to review those acquisitions? If there wasn't, what should have been added to the process that would have given it a more thorough review? This was signed off by the minister, so it did go right to the top end of the Liberal government before it was approved. What was missing?

[Dr. Christian Leuprecht]

My concern is that we didn't sufficiently investigate the rather opaque financial and ownership structures that have currently been laid out. These are not subject to full disclosure under the current Canadian legislation in the way they would be in the United States, which provides less opportunity for Canadian authorities to flag potential suspect issues.

[Randy Hoback, Conservative, Prince Albert, SK]

Fair enough but the exchange in the U.S.... There's a competition bureau in the U.S., which did go through the same process when Domtar was purchased. The U.S. is a lot more hawkish with regard to foreign ownership than any other country, I think, in the world. If no flags were raised in the U.S., why would we be suspicious of flags being raised here in Canada? What's the difference in the U.S. process that is being ignored by the Liberal government here in Canada?

[Dr. Christian Leuprecht]

I'm particularly concerned about ensuring we have a level playing field in Canada when it comes to foreign direct investment. My concern is that the Canadian process may not be sufficiently robust and adequate to flag from the outset potential issues with regard to a level playing field for all investors.

[Randy Hoback, Conservative, Prince Albert, SK]

You don't necessarily have an issue with Paper Excellence. You have an issue with the process that was required, or used, in the approval of the sale of Resolute to Paper Excellence. Is that fair to say?

[Dr. Christian Leuprecht]

That is correct. That is my only area of expertise here, since I'm not an expert on the forestry industry. I'm on expert on financial crime, and I have significant expertise in financial crime. I do have concerns both about the process and the structures in place.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you.

I'm going to pass it over to Mr. Vidal.

[Gary Vidal, Conservative, Desnethé—Missinippi—Churchill River, SK]

Thank you, Mr. Hoback.

Mr. Nighbor, I believe you were here in the first hour and heard the conversation, so I'm going to really shorten my preamble here.

Can you speak a bit to the regulatory process in Canada that provides the checks and balances around the protection of the timber supply? You heard me talk about forest management licences, agreements, permits and whatever. I'm just concerned about this claim that there are 22 million hectares of timber under the control of, I believe, the provincial regulatory bodies.

Could you maybe speak to that on a broader scale than just Saskatchewan, please?

[Derek Nighbor]

Yes. It's important, because it also sets Canada apart globally in terms of the nature of our forests. About 94% of commercial forestry in Canada is done on public or provincial Crown land. You have a bit of private forestry, of course, on the west coast, the Maritimes and small woodlots across the country, but it's primarily on Crown land.

Under provincial government purview, depending on the province, the planning cycle can be anywhere from 100 to 200 years with an interim 10-year plan, and then annual plans that are submitted. They each undergo indigenous and non-indigenous community consultation. You need to worry about every mammal, bird and fish. You need to worry about every body of water.

[The Chair, Liberal, John Aldag]

I'm sorry, but we're out of time. Can you please wrap up?

[Derek Nighbor]

The point is that there are many steps. I could bury you with the regulatory environment across the country, but it's very robust.

[The Chair, Liberal, John Aldag]

Thank you.

We're going to go now to Mr. Blois for three minutes.

[Kody Blois, Liberal, Kings—Hants, NS]

I'm going to put my questions to FPAC. Certainly, we've litigated and we've raised a number of questions about Paper Excellence, but I want to go a bit broader, because we have the opportunity to hear from you. Most people have seen the headlines and the impact of what's going on in my home province right now in terms of forest fires. We've seen that out west as well. We're frankly seeing it across the country.

Can you give this committee a perspective about the impact on the feedstock? You mentioned that a lot of Crown land is obviously where forestry actually happens. There is some private, but how is that impacting the feedstock for mills?

[Derek Nighbor]

First of all, downtime to keep people safe and to make sure people are getting paid, that's the number one priority. Number two, many people don't realize our forestry workers are often on the front line with local first responders, digging trenches and making firebreaks. We're going to know in terms of the age of trees how they have been affected by the fires. Are these younger trees, or are these older forests?

One of the ongoing challenges in Canada is the dead wood that is still in the bush and becomes kindling. Those assessments will be better known over the next six to eight weeks, if we get a reprieve in some of these spots. This is definitely far too early in the year to have Canadians sleeping in hockey arenas.

[Kody Blois, Liberal, Kings—Hants, NS]

No, it's obviously terrible.

On the dead wood piece in terms of some of the impacts, once a fire goes through, are there any products that are recoverable? I'm sitting here as a member who doesn't have a whole lot of context on that. How do you salvage some of the biomass that might still be...? What products would that go into?

[Derek Nighbor]

Depending on how badly burned it is, we have to be careful at our sawmills that some of the wood that's really dry and damaged doesn't become a fire hazard in the mills. Dealing with that type of wood is really tough for the sawmills, but it really depends on the quality of the remaining wood. Can that be used for pellets? Can it be used for pulp and paper? How else can it be salvaged?

[Kody Blois, Liberal, Kings—Hants, NS]

Can I ask about forestry management writ large? I'm a member of Parliament from Nova Scotia, and we've been impacted by hurricane-related weather events. These then create situations where there's a knock-on....

Mr. Sorbara, I have the floor, so if you could just shut your mouth for a few minutes....

Mr. Nighbor, in terms of the impact on forestry management in the forestry sector, to avoid the idea of forest fires—I know we can't avoid them directly—forestry management must play a little bit into that. Is there something the government can do to work with the private sector and harvesters to sustainably manage the forest and, at the same time, prevent some of the impacts of forest fires generally?

[The Chair, Liberal, John Aldag]

Could you answer within 15 seconds, please?

[Derek Nighbor]

We have the national adaptation strategy and the Canadian wildfire strategy. There are a number of tools, but more active management such as thinning is absolutely really critical, and we can reap the benefits of some low-grade wood to bake low-carbon things as well.