Natural Resources Committee on June 2nd, 2023

[Mark Schaan]

Mr. Chair, I'm not in a position to respond to that question.

[The Chair, Liberal, John Aldag]

Thank you. We're out of time.

We have two five-minute rounds left in this hour. We'll go first to Mr. Dreeshen online, and then Mr. Blois will finish us off.

For the witnesses, that's what you can expect for the remainder of this morning.

Mr. Dreeshen, over to you for your five minutes, please.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Mr. Chair.

I'd like to talk some more with the witness from Natural Resources on some of the discussion points he mentioned.

Mr. Smith, you said that Canada has 9% of the world's forests. You mentioned in your testimony a discussion about climate resilience and third party certification. Could you expand on what that is all about?

I'll ask some questions about these processes, and how companies are involved with forests as far as leases are concerned.

[Gregory Smith]

As I noted, Canada has the largest area of forests in the world where practices are third party independently certified. They may be certified by one or more third party standards, including the Canadian Standards Association, the Sustainable Forestry Initiative and the Forest Stewardship Council.

Approximately 158 million hectares—as I mentioned, about 70%—of Canada's managed Crown forest are certified under one of these certifications. What these certifications do is they provide added assurance that a forest company is operating legally and is compliant with internationally accepted standards for sustainable forest management. All companies operating in Canada must comply with the laws and regulations with respect to the forest sector writ large. This supports Canada's reputation, of course, of being a reliable source of legally and sustainably produced forests.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you.

You mentioned that the provinces manage forestry lands. Can you explain the role NRCan plays in the management of land leases and, more specifically, the pulp and paper industry?

[Gregory Smith]

Yes, absolutely.

The provinces, as you mentioned, hold jurisdiction over the forests. They're the ones that regulate the harvesting and determine which standards are set. They delegate responsibility to private forest companies through licensing and timber supply agreements. These are typically known as tenure agreements. These arrangements grant a licence to harvest. They contribute both to Crown revenues for provinces and to the federal government via corporate income. These companies assume and define responsibilities for their management.

There are a variety of different ways provinces go about determining who gets tenure in these instances. For the sake of time, I won't go into all of them. Each province has its own approach on how to do that.

Your second question was, how does Natural Resources Canada work with the provinces on this? It's through a variety of means.

One, we have a well-established research network that works to research sustainability issues. We work closely with the provinces and territories to ensure that information is shared on best practices, how to update regulations, and the management of Crown timber. We also deliver a number of programs that support transformation in the sector. There's a recent budget, and I could speak more at length on that, as I mentioned, but I will not, for the sake of time.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

That's fine. Thank you very much.

According to Paper Excellence's page on sustainability, the company maintains a chain of custody certification. That includes the Forest Stewardship Council certification. That was discussed earlier.

What are the benefits of this FSC certification? What impact does it have on Canada's pulp and paper industry? What is its reputation in our sustainability?

[Gregory Smith]

There are a number of questions there.

As you rightly noted, the FSC certification, in our understanding, is from the Resolute transaction that 100% of the lands held by Paper Excellence would be third party certified. It's likely noted on the website, as you mentioned. The benefits of this are many.

However, it does indicate, internationally, that these companies are operating in a sustainable way and held to a high standard. They are being third party audited by the certification bodies to ensure they are doing so. This gives the buyers and customers of these companies confidence that they are buying sustainably harvested wood and paper products from sustainably managed forests.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you.

How does the FSC certification compare to other sustainability certifications that are global? You must be able to compare what we do to what is happening in the rest of the world.

[Gregory Smith]

I don't think I'd be able to provide a reliable comparison between different certifications across the world, aside from noting that Canada, as I mentioned, is a world leader in the amount of third party-certified forest we have.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Okay. Thank you.

[The Chair, Liberal, John Aldag]

Thank you.

For the last five minutes, we're going back to Mr. Blois online.

Kody, it's over to you.

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

Thank you, Mr. Chair. My questions are for Mr. Schaan.

In June 2022, there were changes in the order in council for the national security review provisions under the ICA. Can you quickly describe the essence of those changes and what they amounted to?

[Mark Schaan]

Yes. I'll start, and then I'll turn to my colleague.

One of the outcomes we are seeking, obviously, is to ensure that we're remaining relevant to the current circumstances, so from time to time the minister provides increased clarity on what exactly we are aiming to achieve through the national security guidelines. In that respect, in 2022, as you note, we updated those to ensure that very particular sensitive areas and sectors that were likely to engender national security considerations were identified and provided.

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

Thank you.

On the guidelines specifically, are they in the order in council...? Are they regulations, or are they a departmental policy?

[Mark Schaan]

Right now, those are a function of the minister's guidance that he provides to potential investors under his powers under the act.

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

As I listened to Mr. Angus, he was asking really important questions that were very critical of your work, but what I'm trying to figure out as a parliamentarian is whether or not we have to do more to actually provide the guidance.

Mr. Angus was talking, of course, about some of the economic concerns and about where the pulp might be going, but if that's not actually a mandate under your direction and part of what you're being directed to study, I think it's our job as parliamentarians to understand that.

On the guidelines, it doesn't seem as though there's a whole lot about.... There's a lot around supply chains in Canada in a critical minerals sense. There's a lot on national security in terms of assets. There's not a whole lot on broader economic interests, with Russia being the one example where that might have changed.

Is it a fair comment that there's not a whole lot in the security review provision that relates to external exports of Canadian materials elsewhere?

[Mark Schaan]

I would parse that question slightly, Mr. Chair.

I would suggest that there are a number of important factors that relate to the economic makeup of the sector as we think about the net benefit reviews that are conducted under the act.

With respect to the national security provisions of the act, obviously a core consideration is whether or not something is injurious to the national security of Canadians, which requires a significant analysis of the sector but is less specific to the potential benefits to Canadians, which would come under the net benefit review.

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

There's obviously a cultural threshold as part of this policy, whereas the investment or purchasing of cultural assets.... There's a much lower threshold in the economic analysis versus other elements.

Ultimately, I guess that's up to the government, but is it fair to say that that is about trying to protect Canadian cultural businesses? The lower threshold, of course, dictates that there has to be an economic analysis above and beyond the national security element that you've indicated happens in all circumstances.

[Mark Schaan]

As I noted, the threshold for the net benefit is a function of our World Trade Organization commitments and our international trade commitments, which is standard across all of our trading partners. As you noted, the acquisition of cultural assets is subject to a different threshold, which has been negotiated under our trade agreements as a function of the fact that the majority of those enterprises are usually of lower value but are understood to be important from the consideration of net benefit to Canadians.

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

What I'm hearing, then, Mr. Schaan, is that if the Government of Canada or Parliament was seeking to try to create a lower threshold in terms of the actual assets of industries—let's say natural resources or otherwise—that's actually a function of the trade agreements that we currently have. There would have to be amended negotiations of our existing trade obligations to get a lower threshold, making sure that analysis happens for businesses, natural resources or otherwise.

[Mark Schaan]

The net benefit threshold is a function of our World Trade Organization commitments, and it is consistent across our trading partners. Yes, any shift to the net benefit threshold would need to be contemplated in the context of our commitments.

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

Mr. Chair, I have about 45 seconds, so just quickly, Mr. Schaan, are there any exemptions? I looked at the exemptions, and there is a provision around foreign bank acquisition or associated elements.

I'm curious. In whatever time I have left, can you speak to any exemptions that exist under the ICA for filing, and specifically address the foreign bank piece?

[Mark Schaan]

The foreign bank piece—and I'll turn to my colleagues, if they'd like to supplement—is a function of the fact that those are contemplated by our colleagues within the financial sector, who obviously have a different test for prudential and other risk perspectives. They consider those contemplations, which is why they're exempt from this particular filing but are obviously reviewed within the context of our financial institutional constructs.

[The Chair, Liberal, John Aldag]

That takes us to the end of our time. I'd like to thank our witnesses for joining us this morning. It's a very important conversation, and I appreciate, within the constraints that you operate under, what you were able to share with us today.

Mr. Angus, do you have a point of order? I just want to mention to members that we're going in camera next, so all of the members online will have to log out. There's a second link that you need to go to in order to come back in camera.

Before we suspend, if it's a point of order, Mr. Angus, I'll go to you.