Evidence of meeting #13 for Natural Resources in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was products.
A video is available from Parliament.
Conservative
Mike Dawson Conservative Miramichi—Grand Lake, NB
Mr. Skiffington, thank you for being here today.
Even with the provincial and federal support you received, how long can Kap Paper realistically continue to operate under the current market and tariff conditions?
Chief Executive Officer, Kap Paper Inc.
Our current support will take us to the end of calendar year 2025 in terms of opex support. We are in discussions with both governments right now to extend that well into 2026.
Conservative
Mike Dawson Conservative Miramichi—Grand Lake, NB
Would you describe the recent support as a true stabilization plan or a short-term lifeline?
Chief Executive Officer, Kap Paper Inc.
It's a short-term lifeline. It's a short-term mechanism to keep us operating as we develop the stabilizing plan or the future plan. It's a step.
Conservative
Mike Dawson Conservative Miramichi—Grand Lake, NB
In your own internal planning, roughly how many years of runway does the support buy you?
Chief Executive Officer, Kap Paper Inc.
It doesn't buy us years. It buys us months.
Conservative
Mike Dawson Conservative Miramichi—Grand Lake, NB
What early warning signs should we watch for that the mill is moving from being challenged to becoming unsustainable?
Chief Executive Officer, Kap Paper Inc.
It's a very good question. Thank you.
The first sign would be both the provincial and federal governments announcing the next stage of opex support. That next set of announcements will include much more clarity on what we're doing in terms of scope and timelines to pivot to longer-term viability.
Conservative
Mike Dawson Conservative Miramichi—Grand Lake, NB
Are the current support measures, loans, guarantees and programs feasible for you in the long term, or do they simply push the decisions a bit further down the road?
Chief Executive Officer, Kap Paper Inc.
It's a bit of both. They buy us time, but the basis for the loans is that there is a realistic, achievable solution. If it was simply to buy us time, then two things would happen: We wouldn't engage in those loans, and neither would the two governments.
Conservative
Mike Dawson Conservative Miramichi—Grand Lake, NB
What would the framework look like for a mill like yours to be sustainable?
Chief Executive Officer, Kap Paper Inc.
It circles back to the repositioning from making traditional pulp and paper products to making products that create and generate higher value in growth markets.
Conservative
Mike Dawson Conservative Miramichi—Grand Lake, NB
My colleague mentioned earlier having no trade agreements. If we stay in an environment of having no trade deal with recurring duty cycles, what do the next five to 10 years look like for Kap Paper?
Chief Executive Officer, Kap Paper Inc.
In terms of Kap Paper's business, we're at risk of not having fibre coming from softwood lumber mills, because those softwood lumber mills are fundamentally at risk of not operating. Even though we're not directly under any tariff or duty regime, we could be at risk of losing our raw material supply.
Conservative
Mike Dawson Conservative Miramichi—Grand Lake, NB
Approximately what share of your production ends up in the U.S. market, directly or indirectly?
Chief Executive Officer, Kap Paper Inc.
It's about 30%, or a bit less—25% to 30%. We make only two products—paper and book grade products. Both of those are going into the U.S. market. Very small amounts are going into Canada. The rest is going to exports.
Conservative
Mike Dawson Conservative Miramichi—Grand Lake, NB
You mentioned 300 jobs. How many direct jobs at the mill and how many indirect jobs in Kapuskasing and in the region depend on Kap Paper staying open?
Chief Executive Officer, Kap Paper Inc.
There are 600 direct jobs associated with our sawmills and Kap Paper, and there are 1,900 indirect jobs.
These are not our numbers. These are provincial multiplier numbers.
Liberal
Liberal
John-Paul Danko Liberal Hamilton West—Ancaster—Dundas, ON
Thank you, Chair.
I have a couple of questions on using forestry residuals as a sustainable fuel source, which you spoke about earlier. Today, in question period, the Prime Minister reiterated Canada's commitment to the Paris accord, which is a goal of net zero carbon by the second half of this century. Most governments—provincial, municipal, indigenous—have set a net-zero carbon goal by 2050, including the City of Hamilton, where I'm a former city councillor.
The Province of Ontario eliminated coal-fired power in Ontario over 10 years ago, which has meant a drastic improvement in air quality in Ontario and a significant reduction in carbon. However, this week we saw that the Conservative-led government of the Province of Saskatchewan is now committing to burning coal to produce electricity up to 2050 and beyond, which is right out of Donald Trump's playbook and is one of the most short-sighted, irresponsible, negligent and environmentally and economically regressive decisions ever.
We were just in the port of Saguenay. A significant part of their business is exporting wood pellets to the U.K., specifically for the reason of replacing coal as a fuel source in electricity generation.
My question for you is this: Could forestry residuals from Ontario, Alberta, B.C. and across Canada be used to replace coal as a fuel source in Saskatchewan and jurisdictions around the world?
Chief Executive Officer, Kap Paper Inc.
Yes, absolutely. There are a number of different ways that the forestry sector could participate in energy substitution. The most direct and fastest way is through the generation of electricity by biomass-fuelled cogeneration facilities. We currently have four in Ontario now, in the forestry sector. Expanding the volume of biomass that we're converting to electricity doesn't generally get fuel to Saskatchewan, but it's a way of creating energy. Again, instead of biomass going into the atmosphere, we burn it. We still have an emission, but we've created electricity that's offset another emission somewhere else. That's a very direct way.
Another method is pellets. Pellets have their limitations. We have a pellet facility in Thunder Bay that is supplying pellets to the Atikokan OPG power plant. They do have limitations in terms of economic competition, so they can really work only if there's a subsidization process, so that the pellet can then be used to offset, say, coal or natural gas, because it can't compete directly economically.
There are technologies that are in place now and growing to create, basically, a substitute diesel product out of biomass. It is called pyrolysis, and that is emerging and growing, and there's also, interestingly enough, a sustainable aviation fuel that is getting more and more attention.
There are different opportunities out there, and all will need support.
Liberal
John-Paul Danko Liberal Hamilton West—Ancaster—Dundas, ON
Thank you.
I have a follow-up question on sustainability. You spoke about the forestry sector as being a sustainable industry. I take it that you're talking about environmental sustainability as well as economic sustainability. I want to give you an opportunity to expand on the environmental sustainability of the forestry sector and how that fits into Canada's goals of net zero carbon by 2050.
Chief Executive Officer, Kap Paper Inc.
Sure. On both economic and environmental biodiversity altogether, we in Ontario manage the forest in a fashion that—I don't want to say mimics; that's a bad word—replicates the natural regeneration process, and the difference is that it doesn't burn. We step in on behalf of Mother Nature and regrow mixed forests, and then we harvest them, and then we regrow them, and the direct impact is less carbon going into the atmosphere.
Liberal
The Chair Liberal Terry Duguid
Thank you.
Mr. Simard, you may go ahead. You have two and a half minutes.
Bloc
Mario Simard Bloc Jonquière, QC
Thank you, Mr. Chair.
I want to follow up on what Mr. Danko said to you earlier, about wood pellets being manufactured in the Saguenay region and exported to Europe. The reason the company can export them to Europe is that Europe incentivizes that production. Businesses are encouraged to use that type of energy over fossil fuels.
What is astonishing is that we are moving in the opposite direction. The government has been dithering on the clean fuel regulations. Tax credits had been made available for clean technologies, but I saw that a cogeneration plant in my region, in Saint‑Félicien, was having trouble getting the tax credit. A cogeneration plant that produces electricity using bark is having trouble accessing that support.
We know that producing energy through cogeneration and energy from biomass costs more than producing fossil fuel energy.
Without an incentive, would it be hard to develop a market for such biomass products?
Please be clear and tell the committee what you think.