Evidence of meeting #17 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 market.
A recording is available from Parliament.
Bloc
Mario Simard Bloc Jonquière, QC
Thank you very much, Mr. Chair.
Gentlemen, I'm going to take a few seconds to make sure you can hear me. Have you selected the right channel, and can you hear the interpretation? You can nod your head.
Mr. Chair, I see that Mr. Luckert can't hear the interpretation.
Liberal
Bloc
Mario Simard Bloc Jonquière, QC
Thank you very much.
Mr. Power, I really liked your opening remarks. I want to come back to them to clarify something, since they're going to appear in the report. If I understand you correctly, we can work on diversification, which will help your company or your industry, but you don't think that we can replace the American market. I want to make that clear; a number of witnesses came and said the same thing.
Am I putting words in your mouth or is that what you mean to say? The U.S. market can't be replaced.
Managing Director, PowerWood Corporation
No, you're certainly not putting words in my mouth. I would agree with that statement.
I'm sure that some sectors and some businesses can do away with the American market.
My business focuses on architecturally specified wood products. Just the logistical realities of trying to ship those overseas are very difficult. We talk to an architect or a specifier on Monday, and the following week we deliver them the product they need. I can't do that in Europe.
Bloc
Mario Simard Bloc Jonquière, QC
Absolutely.
In other words, we have to work on expanding into new markets and you'll be a little more resilient in the future. However, that's not the key to solving the problem for industry players by and large. At least, that's my understanding. This implies that government action should focus on negotiating an agreement with the Americans. I don't want to play partisan politics, but the Prime Minister recently said once again that he was working on steel, aluminum and energy. However, the softwood lumber issue was being somewhat overlooked.
I understand that you want an agreement that lets you keep access to the American market. A proposal on that has been in the works for some time now, and I'd like to hear your opinion of it. Do you support the idea of the government buying up 50% of countervailing and anti-dumping duties at the end of each month? That would ease the pressure on your cash flow. I know that this is being done already: Big hedge funds are buying up the countervailing and anti-dumping duties of certain companies for speculative purposes. They've practically turned them into a commercial commodity.
Would you approve if the government had a program that allowed that?
Managing Director, PowerWood Corporation
I think, ultimately, what you're talking about is reducing our costs through a policy mechanism. That's one of the things I'm trying to hammer home here: Our costs are exceptionally high. We pay 45% at the border. If we were to pay 22.5%, yes, I would absolutely welcome that.
I'm not a policy expert. I don't know what that does to negotiations, but if you're telling me that I could, during my transaction, reduce my transaction cost by 50% at the border, where do I sign, sir?
Bloc
Mario Simard Bloc Jonquière, QC
Yes, that's it, but you explained more candidly and directly what I was trying to say.
Earlier, you spoke of an idea that I don't think we've ever considered. People may have thought about it, but we've never considered it in committee. As part of an agreement, we could study different products so that the pricing system applied varies by species or product.
There's a possibility that some wood species and some products are being dumped in the United States, but I've never heard from a witness that we should be thinking in terms of specific products during negotiations. We know that Americans don't have lumber, structural lumber, that compares to what Canada produces. The reason why they can turn up their noses at our forest industry is because their mortgage rates are sky high and construction is virtually at a standstill.
I think it would be good to talk more about the point you raised. Could you go over that in a bit more detail?
Managing Director, PowerWood Corporation
Sure.
I used the term “whack-a-mole” earlier, and that would always be the concern I'd have—this species or that product or that product. It becomes very difficult for people in policy to do that.
In the last softwood lumber agreement, we actually had a mechanism that did just what we're talking about here. It was a first-mill requirement. You only paid your tariff or your duty—export tax, I think, at the time—on the portion that you paid the mill. If you're a value-added producer, whatever you paid that mill, that's what you paid.
There was also, I would call it, a speed bump over the print price of the commodity product. You didn't pay any further export tax. That would be a perfect solution for a company like ours. We're selling into the United States products that are, in some cases, $10,000 per thousand board feet, so we're paying duties on that $10,000. It's a massive amount, but the duties are based on products that sell for $500, $600 or $700. If the duties were cut off at $600 or $700, then so many of the products that add value wouldn't be as impacted, and the value-added behaviour and activity wouldn't be penalized.
The problem we have now is that it's ad valorem, because it's just a tax at the border. When I pay my BC Hydro, when I pay my workers, when I pay my property taxes, I am then paying duty on all those to add value. We have no subsidy. Our value-added producers are not subsidized. At the forestry level, it's beyond my scope. I don't believe there's a subsidy there either. It's just a very different mechanism.
Liberal
The Chair Liberal Terry Duguid
Thank you to you both.
We are going to our second round. We are going to start with Ms. Konanz for five minutes.
Conservative
Helena Konanz Conservative Similkameen—South Okanagan—West Kootenay, BC
Thank you, Chair.
It's a really interesting subject, especially for where I live in southern B.C., Similkameen—South Okanagan—West Kootenay. We have towns that are being decimated by the current situation. I have had many meetings, round tables and town hall meetings with affected workers and the owners or CAOs. I think we need to look at the human aspect of what's happening right now. There are a lot of decisions being made from cities that don't understand what's happening in these small towns.
My first question is for Dr. Luckert.
You're teaching your students about forestry, which is the future of that....
Dr. Luckert, can you hear me?
Professor Emeritus, Forest Economics and Policy, University of Alberta
I can.
Conservative
Helena Konanz Conservative Similkameen—South Okanagan—West Kootenay, BC
Yes.
It's the future of the industry. I just wondered if you are teaching them the cultural effects of what's happening in these small towns that are having to close and the families that are being decimated and having to split up. How are you presenting this to your students?
Give a quick answer, because I know you could probably teach a class on this. Tell me what you're teaching your students about what is happening on the ground to these families that are not able to put food on the table.
Professor Emeritus, Forest Economics and Policy, University of Alberta
You're right. That could be the scope of many lectures, but, in a nutshell, community stability and community welfare are part of the sustainable forest management paradigm, which the forest industry has been trying to move towards for more than a decade now, away from sustained yield. Culturally and socially, those are considered to be part of sustainable forest management. The difficulty we face there is how to integrate that into the incentive frameworks.
Conservative
Helena Konanz Conservative Similkameen—South Okanagan—West Kootenay, BC
I'll interrupt you. I'm sorry about this, but I just want to interrupt because I don't have a lot of time.
Do you think your students understand what's happening to these families? You'd have to say that it's been a lost decade here, with the Liberal government's policies on forest products and so little advocacy. Now we're hitting the brink of that disaster.
Do you think your students understand what's happening in these small towns?
Professor Emeritus, Forest Economics and Policy, University of Alberta
They understand that there are big concerns over community stability and over the perpetuation of those communities. As a forest policy person, I have to deal with both sides of this. They also understand that it sometimes requires subsidies and that there are some political decisions that are tough about whether or not you should keep open a mill that doesn't necessarily make it on its own. There are some serious trade-offs to be considered.
Conservative
Helena Konanz Conservative Similkameen—South Okanagan—West Kootenay, BC
There's a lot involved, for sure. Thank you.
My next question is for Mr. Bromley.
I'm hearing across B.C. from the workers and from the mill owners, CEOs and managers that they've had to cut back on their shifts. For example, in my riding, Grand Forks closed their mill or shut it down. Now they're down to one shift. The people who live there are very scared and are looking at their options, which means possibly leaving the town but hopefully not.
What discussions has the United Steelworkers had with the Government of Canada about threats of future job losses in the sector?
Chair, Wood Council, United Steelworkers
In the last week, we've had meetings with various MPs in terms of the impact and the job loss. In your example in Grand Forks, it's one of our mills. It's an Interfor mill that was down for a couple of months. Thankfully, they recently announced that they were bringing back one shift with about half of the workforce coming back. We were in the midst of trying to negotiate transfer agreements so that some of those folks, those members, those workers, could commute and work over in Castlegar at the sister mill of Interfor there. Nonetheless, we didn't have to because they came back, but I think that's temporary.
What we've been talking to the federal government about is that we are hitting a crisis mode here in terms of the manufacturing part of things. The levers of loan guarantees and stuff that I mentioned previously around the announced programs by the federal government are really good; however, I don't know if they go far enough.
I think there is an immediate need for expanded EI access so that these folks don't miss mortgage payments or car payments or, as you put it, miss putting food on their tables. I think it's going to get worse before it gets better.
Liberal
The Chair Liberal Terry Duguid
Thank you.
Colleagues, we have Mr. Guay for five minutes and Monsieur Simard for two and a half minutes. Then, because we're going a little over time—we had a couple of interruptions, as you know—I'm going to give Mr. Rowe and Mr. Danko a couple of minutes each, which will probably be time for a question and a response, and then we will end the meeting.
Mr. Guay, you have five minutes.
Liberal
Claude Guay Liberal LaSalle—Émard—Verdun, QC
Thank you, Mr. Chair.
I want to thank the witnesses for taking the time to be with us today.
Mr. Power, this is just a comment. I really like your idea of traceability and making it affordable for all, depending on the size of the company. I would invite you, if you want, to submit your proposal to the committee. That would be much appreciated.
I have a question for Dr. Luckert.
In terms of forest management practices, which I'm sure are also part of your curriculum, I have a couple of questions. How can the federal government assist? Also, more specifically on the mulching, what do you think about that? Is that a good practice?
Professor Emeritus, Forest Economics and Policy, University of Alberta
On the role of the federal government and forest management practices, that is going to be a tough one because, as you're probably aware, the provincial governments are in control of almost all of the regulations and the rights and responsibilities associated with forest management. The only place I can see where there's a clear government responsibility has to do with helping to assign carbon values and how those will be integrated into the policy, because that has some clear federal connections.
Working with the provinces on how carbon would be integrated into forest management is a big consideration. It's something that does not happen right now for the most part, which might trickle in through some other policies, but understanding exactly how to get carbon into forest management is not something that.... We know something about the flows, but we don't know how to make incentives for tenure holders to do that.
Liberal
Claude Guay Liberal LaSalle—Émard—Verdun, QC
Thank you.
I guess it's sort of related. If I may ask you a question about biomass, there are some estimates out there that biomass production should triple by 2030 compared with 2021 levels. How do you think the country is positioned to meet this demand and participate in this source of energy? What risk might there be for us?
Professor Emeritus, Forest Economics and Policy, University of Alberta
When you talk about biomass, I assume you're talking about it as an input for biofuels. Is that correct?
Professor Emeritus, Forest Economics and Policy, University of Alberta
That is a million-dollar question with respect to the potential future role of forests. We've done quite a bit of work on this. It starts out from a very good footing in that, right now, a lot of slash is burnt and released into the atmosphere, and forest companies actually have to pay to do that. Not only are we not capturing the potential value there, but it's actually costing the forest industry money to do that.
The problem is that the technology to turn that into cellulosic ethanol is still very expensive. There are some tough decisions to be made about what types of incentives to put in place if you want to start an infant industry in that direction. There are some tough decisions about whether or not that's a good bet for the government—some people have been talking about winners and losers—but it is an area where there is a lot of forest biomass out there, which, right now, sits on the ground. It sometimes contributes to wildfire, and it sometimes contributes to, of course, woody debris and the ecosystem functions of the forest.
There are a lot of decisions there about carbon flows, what the best use of that is and what the technology might be to do that. Right now, I would say it's way too expensive, but figuring that out as technology improves will be important.