Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 4 - Evidence - Meeting of May 26, 2009


OTTAWA, Tuesday, May 26, 2009

The Standing Senate Committee on Agriculture and Forestry met this day at 5:05 p.m. to study on the current state and future of Canada's forest sector.

Senator Percy Mockler (Chair) in the chair.

[Translation]

The Chair: I welcome you all to this meeting of the Standing Senate Committee on Agriculture and Forestry.

[English]

I am Senator Percy Mockler from New Brunswick, chair of the committee. I wish to begin by asking members of the committee who are here today to introduce themselves. I would ask the deputy chair to introduce herself.

Senator Fairbairn: Senator Joyce Fairbairn, Lethbridge, Alberta.

Senator Callbeck: Senator Catherine Callbeck, Prince Edward Island. I am not a committee member.

Senator Fairbairn: You used to be.

Senator Baker: Senator George Baker, Newfoundland and Labrador.

[Translation]

Senator Rivard: Senator Michel Rivard, from Quebec.

[English]

Senator Housakos: Senator Leo Housakos, from Montreal, Quebec.

Senator Eaton: Senator Nicole Eaton, from Ontario.

Senator Carstairs: Senator Sharon Carstairs, from Manitoba. I am replacing Senator Cordy from Nova Scotia.

Senator Meighen: Senator Michael Meighen, from Ontario. I am replacing Senator Duffy.

[Translation]

The Chair: Thank you very much. Today is the committee's eighth meeting for its study of the current state and future of Canada's forest sector.

[English]

I wish to thank the witnesses who are appearing today for accepting our invitation on behalf of the committee. We decided at the outset that this committee would invite all stakeholders of the forest industry. You are very important stakeholders.

We have with us today Tom Beckley, University of New Brunswick, Faculty of Forestry and Environmental Management, Don Floyd, Chair, Canadian Institute for Forest Policy and Communications, University of New Brunswick, and Jeremy Williams, Forestry consultant, Registered Professional Forester in Ontario.

I would invite you to make your presentations, following which there will be a question and answer period. Since we agreed that presentations would be made in alphabetical order by name, I would invite Mr. Beckley to please commence.

Tom Beckley, University of New Brunswick, Faculty of Forestry and Environmental Management, as an individual: I am very excited to present testimony to the honourable members of the committee this evening. For approximately 16 years, I have worked in various facets of the forest sector in Canada — as a federal employee with the Canadian Forest Service in Alberta, as a research assistant at the University of Alberta and now as professor at the University of New Brunswick.

I have worked in the west and in the east, and I have conducted research in eight provinces and one territory. Therefore, I have a fair amount of experience with the scope of forestry across the country.

My training is as a sociologist, not as a forester. That means my research and expertise is focused on the human dimensions of forest management, including some policy aspects. Forest-dependent communities have been a particular interest of mine as well as social values that Canadians hold with their forests and how our relationship with our forests is evolving.

I should like to answer all the questions that were posed, but I wish to start with the observation that I think the scope of the questions is too narrow. In essence, that has been a problem with forest management in this country as long as I have been a student in it. The questions always seem to be about the competitiveness of the industry, not the extent or the degree to which we should have such an industry, or at what cost, or what realistic alternatives might be. It is also important to grapple with these larger questions. Currently, there is much evidence that the general public is not satisfied with the status quo, that they are not supportive of the forest industry and that they do not agree with the way provincial governments have tended to view forests as a cash cow rather than a treasured source of environmental quality.

I believe the main cause of the existing crisis is the fact that we have not adapted quickly to the new economic realities of the global economy. This industry in Canada was born under a colonial model, and we have maintained that colonial model, first as a colony of Britain and more recently as an economic colony to the United States. By "colonial model," I mean that we ship a vast majority of our products, which are relatively low value, either raw or lightly processed, to a single customer or single country. I believe we have been lazy about that. We have not invested in research and development to the degree that other countries have, and we have lived off the largess of abundant natural resources and relatively low population density. We have not tried very hard to diversify out of our low-value, commodity-based products. We simply have not set our sights very high.

Now, due to technological advances and the development of new fibre sources in other regions of the world, particularly the global south, our industry and the communities that depend upon it are in trouble. Other nations have taken a different approach. Finland and Sweden, and I visited both recently, have worked their way up the value chain. They are diversified. They are forest dependent, but they create high-value products and services related to forestry that they sell all around the world. Taiwan is a different example. Since World War II, it exploited its natural resource base and reinvested that capital in manufacturing sectors. Its GDP from agriculture and forestry declined from 32 per cent to 2 per cent from the end of World War II to the beginning of the 21st century. People there are well off, but they no longer depend upon the fickle commodity markets for their economic well-being.

As for the federal government's role in the crisis, I believe there are two major points. One has to do with the institutional relationships between the main public-sector forestry institutions, and the second has to do with the federal government's role in relief and retraining as we make an orderly and planned retreat from some of the most remote and desperate single forestry industry towns. First, I would like to speak briefly about the institutional relations.

I have worked for the federal government in the Canadian Forest Service, so I know its mandate well. I have also studied and experienced the tenuous relations between federal and provincial forestry departments, and now I am in a university setting.

My sociological analysis of the public institution side of the forest sector in Canada is as follows. There are three major institutional players: faculties of forestry at the universities and the federal and provincial government departments. There are three elements: wealth, status and power. These are things sociologists tend to study. In my experience, the university faculties of forestry have had the status. Universities seem to be the most desired and prestigious place for forestry professionals to work. The provincial governments, with the mandate to manage Crown land, have the power. They decide what happens on the ground. The federal government has had the wealth, essentially the best facilities, the most money for research and, in the era of federal-provincial agreements in the 1990s, the funding to drive some policies in particular directions.

This division of wealth, status and power across these three different institutions is interesting because everybody seems to be a bit jealous of what the others have. This jealousy triangle, for lack of a better term, has made collaboration extremely difficult. There is a lot of competition and backbiting between these three groups.

Collaboration is exactly what we need to move forward with a common agenda, and I think the federal government could play an important role here. The common agenda should entail quickly cutting our losses regarding the existing industry and reinvesting in new products and new opportunities. We need to rebrand forestry in Canada. This process of cutting our losses will be painful and will not occur without significant social dislocation.

A wide swath of remote northern communities, particularly across the boreal belt in the centre of the country, will not be viable communities moving forward. Not all of them will survive, and those that do reinvent themselves will likely do so on some sort of reduced scale. The days of hundreds or even thousands of well-paying union paid jobs in the Far North are over in the forest sector. The federal government has a role to step in to retrain people — the announcements made yesterday are a good step forward in that regard — and also provide some financial relief for people whose entire asset bases are tied up in homes and businesses in these communities, where, if they do go down, they may soon be worthless.

There are some lessons. We had a very similar experience in the mining sector a few decades ago. We do have experience in how to help manage that transition and help ease that pain.

As for the vision for the long-term positioning and competitiveness of the forest industry, and more broadly the forest sector in Canada, we need to take a completely different approach here. We are currently competing largely with developing nations with lower production costs and more lax environmental regulations in order to supply fibre to developed nations that, in turn, make value-added products.

When I worked in Alberta, they had just opened two large mills there to make pulp to ship to Japan, where value- added paper is made. In New Brunswick, we have a similar situation. One of our major companies is from India, and we are shipping out pulp again. In the past, Canada has been branded as rapacious exploiters of the forest by outsiders. The "Brazil of the North" campaign against B.C. in the 1990s comes to mind. We need to rebrand Canada as a green forest-products producer. We cannot do this just as a marketing ploy. We need to be the most environmentally conscious forest managers in the world.

Companies are getting on board with forest certification, and this should be encouraged, but we also need to invest in new products and technologies and work our way up the value-added end of the production chain. There is a lot of talk about a biofuel revolution. Everyone is anticipating in that, but, in my view, it is a bit of a race to the bottom. It may be a necessary piece of the future of forestry, but I do not believe it should be the centrepiece. We need to set our sights higher and figure out how to produce more value out of smaller volumes of wood, as well as more value from the whole forest, not just from the fibre it contains. Doing this will leave more forests available for all the other values — such as ecological services and habitat — that people continually tell us are more important to them than growing fibre for industry. I have been involved in some survey research that has basically demonstrated this.

The forest industry continues to lobby for bailouts, cheaper energy rates, cheaper stumpage prices and labour concessions in order to stay competitive. These are short-term, stopgap measures and a desperate attempt to prop up the status quo. They do not offer long-term solutions. We have a distinct lack of vision in terms of products, our potential markets and how we use our forests to generate value in the future. For example, I believe the value of forests in regulating water quality and water supply may far outstrip its value for fibre in the future.

The federal government could help supply that needed vision. It could also fund a process whereby existing industry and emerging industries, forest certification bodies, universities and provincial government employees are all brought together to forge a common agenda and to engage in some strategic thinking about transitioning our sector out of this colonial, commodity-based thinking. That is one specific recommendation.

Other potential roles and recommendations for the federal government are to retrain forest workers, particularly millworkers, who have some of the best technical and mechanical skills in our workforce, to work outside the forest sector. Even when things come back around, there will be more capacity but fewer jobs.

There is a responsibility perhaps to ease the transition for residents of forest-dependent communities, but not just forest-sector workers. They often get most of the focus and program money, but teachers and small business owners and insurance agents in places like Kapuskasing, Ontario, or Mackenzie, B.C., or Dalhousie, New Brunswick, are likely more vulnerable actually than the forest-sector workers there.

The federal government should look at the investment in the economic transition strategies of countries that have diversified within the forest sector, such as Sweden or Finland, and moved up the value chain, or who, like Taiwan, have invested and moved out of the forest sector into manufacturing of other products.

Finally, I believe that the federal government could foster better collaboration between the competing federal, provincial and university institutional players by making funding available for collaborative research projects that focus on what the next forest economy will look like rather than propping up the existing forest economy.

I appreciate the opportunity to present these perspectives to the committee, and I would be happy to elaborate on any of these points or answer any questions when the time comes.

Don Floyd, Chair, Canadian Institute for Forest Policy and Communications, University of New Brunswick, Faculty of Forestry and Environmental Management, as an individual: Mr. Chairman, senators, thank you for the opportunity to appear before the committee today. My name is Don Floyd. I am a professor of forest policy and chair of the Canadian Institute for Forest Policy and Communications at University of New Brunswick.

Canada's forests will continue to increase in value as sustainability becomes an imperative. The long-term outlook for Canada's forests and forest economy is therefore strong, but navigating the shoals of the short to medium term will require coordinated policy choices and targeted investments.

The most serious challenges confronting the Canadian forest sector are driven by global forces. They include global climate change, the globalization of the forest industry and a global financial recession. Within the context of the federal government's role in forest policy, there are important steps that can be taken to address these issues.

Perhaps, above all else, we need to find ways to diversify the products and services that we derive from the forest. The more valuable our forests become, the more likely we are to invest in their protection, conservation and management.

It is entirely possible that the value of the water, the carbon-neutral energy and the other bioproducts that are produced from Canada's forests now equal or exceed the value of the fibre. The problem is obviously that we do not have markets for all of those things. If you think for a minute about what it would take to replace the drinking water that comes from Canada's forests, I think you can make a good argument that the value of the water may be as high as or higher than the value of all the pulp, paper and lumber we produce.

This committee has already heard testimony that outlines the fundamental issues surrounding the globalization of the forest-products industry. Mr. Lazar was here and you have heard from others. Mr. Farrell, from CFS, did a good job of presenting the broad picture.

The long-term outlook for the Canadian newsprint industry is not strong. My children and my students do not read newspapers that are printed on newsprint, and your kids probably do not either. Ask any of your clerks who are in their 20s or 30s here when the last time was that they bought a newspaper. We know, especially by what has happened to Bowater as a newsprint producer, that things are serious in the newsprint business.

Putting that aside, if you look at the FAO, the United Nations' Food and Agriculture Organization that does the global statistics, they say the demand for wood and paper is increasing across the globe. That demand is greatest in the developing economies of South America and South Asia.

The problem is it is now possible to build a large, efficient pulp mill in Argentina or Uruguay, and then plant a forest next to that new mill and have a cheaper source of fibre and more profit for the global companies that operate those facilities. We cannot match that in Canada, largely because of the nature of the climate we work in.

The global financial recession is largely tied to housing bubbles in the United States and Europe. We just looked at the data for U.S. annual housing starts. It surprised me. I thought it was down about one third but it is less than one quarter of what it was in 2006.

We have historically, at least in the Maritimes and Atlantic Canada, exported 90 per cent of our lumber into the U.S. market. When the U.S. market pulls back that way, the only thing that can happen is that we lose our market. Mr. Beckley made the point earlier about diversification of markets, and clearly that has happened to us here.

That change is cyclical — the change in the newsprint business is probably secular — which means that housing will come back at some point. The problem lies in the fact that, when it comes back, the technology for stick-built housing that we have typically seen, where people take two-by-fours and two-by-sixes to build single-family houses, will change. It will be replaced by panelized construction, laminated veneer lumber and all kinds of new products and technologies. When that transition comes, it is important for us as Canadians to have positioned ourselves as masters of that technology so we are not simply trying to export two-by-fours and two-by-sixes again.

What is the upshot for all these global drivers? The first point I wish to make is that commodity producers like sawmills survive by being the lowest-cost producer. It is hard to distinguish between two-by-fours. The way to do that is to ensure that you are the lowest-cost producer.

The other way sawmills ensure that they are the lowest cost-producer is to reduce their labour costs. What these mills will continue to do is to substitute high-tech equipment and capital for labour. The upshot of that, as Mr. Beckley mentioned already, is that the jobs will not come back. Forestry will not be the engine of rural development that it has historically been in Canada. Things have changed. I do not think it is realistic to think that, five or ten years from now, you will see those high-paying jobs come back in the mill towns.

Having said that, paradoxically, the second point I would make is that the forest itself will continue to grow in value. We have already seen that in Canada, where we have private forest lands, and in the United States. The amount of money that timber-investment companies are willing to pay for forested land has increased dramatically in the last five to ten years.

There is a reason for that. It is not the fibre; it is all of the other values associated with the forests. Part of it is real estate value. Part of it is the fact that you may be able to do carbon-neutral forestry there. You may have carbon credits that come online at some point. It may be because those forests are the best source of high-quality drinking water or for irrigation in the western states.

Agriculture, as we know it in North America, would be impossible without irrigation. In California and in Alberta, it is a fact. The most valuable thing we produce from our forests in the Rocky Mountains is the water resource.

What is the appropriate federal role? In the medium to long term, growing jobs and growing value in the forest sector depends on growing forest science and technology. The federal government has increased funding for research through FPInnovations — and we think that is a good thing. What the federal government has not done is looked at the rest of the research chain.

FPInnovations works from the point where the tree is harvested to when it is processed and made into different products. The work that needs to be done in terms of research for forest management gets done at CFS or in the university systems. When we are thinking about insect and disease control, we are thinking about how to manage for biodiversity, for watershed quality and protection. Those are all functions that mostly get done either at CFS or in the university system.

In Atlantic Canada, as I said, this is done mostly through CFS and the university. In our region, CFS has lost scientist positions. It is actually down positions from where it was five to ten years ago. Several federal-funding initiatives — for example, the Sustainable Forest Management Program and a CFS/NSERC program — have expired without renewal.

In addition to funding traditional research programs — and I think this is an interesting idea, something we have been talking a lot about in New Brunswick lately — is the idea of establishing a federal-, provincial- and industry supported network of forest research and technology development clusters.

The success of combining research centres with innovative businesses is well established. If you look at what has happened at Waterloo, people recognize that that has been a very successful model. We would like to do that with forestry, and with forest science and technology.

A national network of forest research centres that combine all aspects of forestry, from on-the-ground management to nanoproducts, would increase Canada's chances to reclaim its reputation as the global leader in innovative forest research and technology.

Although education is not a traditional role for the federal government, we are facing important shortages of forest scientists, forest managers and highly skilled forest technicians. We understand that the future of forest science and management is critical for sustainability, but it is very difficult right now for parents and students to see life beyond the obituaries that they hear on the news.

As our forests grow in value, the demand for skilled natural-resource managers will also grow. Canada — and not just Canada, but the developing world as well — will need men and women who understand ecological processes, can predict the effects of manipulating natural resources and can communicate their passion for stewardship with an increasingly concerned public. Most of the major undergraduate natural-resource management programs in North America are experiencing decreasing enrolments — that is especially true in forest management — and I think we need a coordinated federal and provincial initiative to reverse that trend.

Finally, one of the most impressive features of Canadian forest policy is that it had established a mechanism for civic dialogue among all Canadians through the National Forest Strategy Coalition and the National Forest Strategy process.

Canada's forest strategy for 2008 and beyond de-emphasized the role of the coalition. One effect of this change is the loss of a continuing forum where all Canadians can come together to promote sustainable forest management. Although a coalition of citizen groups may not be the most efficient way to deliver measurable results, it is important that we encourage civic engagement and democratic processes as part of our commitment to sustainable forest management.

Thank you for the opportunity to be here today. I am grateful for your interest in forests and our rural communities. I would be pleased to answer your questions or assist you in any way that I can.

The Chair: Thank you. Mr. Williams, please proceed.

Jeremy Williams, Forestry Consultant, Registered Professional Forester in Ontario, as an individual: Honourable senators, I am honoured to have been asked to present my opinions on how the Canadian forest industry got to the state it is, on some of the measures that will be required to regenerate the sector and to put it on a stronger and more sustainable footing going forward.

The industry, as many of you know, has long been a mainstay in Canada. We are known as hewers of wood and drawers of water. The industry has been good to us over the years. It remained generally healthy through the 1970s, but clouds began to form on the horizon in the 1980s. The 1980s began with a severe recession that was characterized by very high interest rates, the culmination of a decade of increasing inflation. High interest rates are never good for a capital-intensive industry.

Also at this time, the push to include more recycled content in paper necessitated a round of investment in de-inking facilities. This tended to tilt the balance of power in favour of mills closer to urban centres and closer to supply sources of old newspaper and other recycled content.

The demand in North America for paper began to level off at the same time. During this period, the rate of return on capital investment was near zero or negative in most years. Many of the tenure arrangements that forest licensees had prevented them from rationalizing production. It is a terrible thing when the only mill in town closes and provincial governments put a lot of pressure on the sector to avoid making this happen, but this only forestalled the inevitable. Tenure also provided no incentive to invest in the forest other than what was needed to meet regulatory requirements. Therefore, there was underinvestment in both the mills and in the forests.

As my two colleagues have mentioned, emerging competitors in Latin America, Australia and Asia began to come forward. Investments there earned a higher rate of return and attracted much of the global capital that went to the forest sector. Our response in Canada was to try to reduce costs, to merge within Canada and to move to value-added products.

However, we made very little investment in any of the emerging supply areas and we remained critically dependent on exports to the U.S. Countervailing action against softwood lumber began to gain traction during the 1980s and it became effective in sapping the vitality of the Canadian sector.

The industry began to develop a very poor public image as it denied the negative environmental impacts of its activities. I remember visiting Carmanah Valley shortly after it had been set aside. You had to drive to it through miles of clear-cut. You could see the roads that the timber company had cut into the reserve as it raced against the B.C. government to cut as much timber as it could before the government protected it.

Activities like this made a terrible impression with people. Although the industry has improved dramatically in terms of its practice, its negative image is retained by most people.

By the 1990s, the industry was facing a lot of challenges. It was a high-cost, low-return industry. It was highly regulated. It was heavily dependent on U.S. markets where it was facing increasingly effective trade action. The demand for its paper products was shrinking. It was facing a resource of declining quality and increasing cost. It had a negative public image and was being overtaken by competitors.

Neither industry nor government had an effective response to this situation. During the beginning of this decade, the boom in U.S. housing and the low Canadian dollar helped paper over these weaknesses. However, when these factors reversed, the weaknesses were exposed and the result has been a systemic industry failure.

Why did industry not act more determinately when it had more options? In the 1970s, and even the 1980s, it had the capital, leadership and technological prowess to go forward and provide a stronger foundation for itself, but it did not do this. Part of the reason is that many of the CEOs and the boards were comfortable in Canada. They had a domestically oriented perspective and they were reluctant to go outside of the country.

In retrospect, it appears that their assessment of risk and reward of various investment alternatives was flawed because they were heavily dependent on Canada and on the U.S. market. There was also some complacency because the industry had been dominant for so long and they had it so good that they did not see that things had fundamentally changed.

The question is whether Canada can once again support a viable forest industry going forward. I believe it can because Canada still has a number of competitive advantages. Rebuilding will take time because it took a long time to get to this situation.

The federal government has an important role in this. Probably the major contribution the federal government can make is to provide leadership. There are many stakeholders involved that have not cooperated particularly well historically. The government needs to take a leadership role in helping to develop a vision on where the sector can go in the future and to ensure that the actions required to get there are put in place and implemented.

Some areas where I think the federal government can provide leadership specifically include trade and market access. It is essential for the industry to get out from underneath the U.S. countervail restrictions. It is time to re- examine the conventional wisdom that we cannot have a market in Canada for standing timber. Since chips and logs are shipped hundreds of kilometres to different mills, it seems implausible to me that we cannot have a market for standing timber in at least most of the country. If we could establish that, it would diffuse a lot of the U.S. complaint.

There is also a need to diversify our markets. While the U.S. will always be a critical market, we should not be as heavily reliant on it. The federal government can assist through negotiation of trade agreements, by helping to eliminate unnecessary phytosanitary barriers or helping the industry surmount them where they are legitimate and by supporting international standards that play to Canada's strengths.

Canada has very little illegal harvesting, whereas in the eastern part of Russia, anywhere from one third to two thirds of the harvest is illegal. Large amounts of the harvest in parts of Asia and Africa are illegal as well. For example, an international standard that would mitigate against the export of illegally harvested wood would be good for the globe and the Canadian forest sector.

The federal government also can play a critical role in supporting productivity. Avrim Lazar of the Forest Products Association of Canada has probably spoken to you much more authoritatively about these issues than I can.

There is a role for the government to help foster Aboriginal entrepreneurship. The Aboriginal people and the communities want to participate. There are a lot of barriers to their participation. However, they live in or near the forests. They have always been there and it makes strategic sense that they should be more heavily involved in the sector than they are now.

Finally, the federal government can also play a leadership role in its support of emerging technologies and dealing with emerging issues. Again, there is a role for leadership within the federal government because many of the emerging issues or challenges facing the industry involve inputs from a number of different departments. It is important to coordinate the responses of different departments within the government and partnerships with other stakeholders. Helping to build the national knowledge infrastructure related to forestry would also be helpful.

I will give you the example of the National Forest Inventory, or NFI. I just finished doing an NFI business case for the CFS, and even though the first measurement has been completed and the inventory is viewed as a necessary thing, the governments still have not provided secure funding for this, and the program seems to be in continual jeopardy.

There is also a role for the government to play in supporting research and development for new products. As both of my colleagues have indicated, the portfolio of products that the forest sector of the future will likely produce will be quite different and much broader than the current portfolio. It will include biofuels and chemicals, and there will also be a role for increased energy efficiency within the sector, and, again, more R&D would be useful.

Another part of the portfolio will be carbon credits and possibly biodiversity credits and water credits. Carbon is particularly important because North America is on the verge of moving into a new phase in the development of a carbon market. In Canada, we have missed an opportunity to take more of a leadership role in terms of developing an offset system and expertise related to carbon management. The federal government could provide a strong signal that it recognizes the issue and is supportive of it by committing to become carbon neutral over a certain time period. The federal government could also change its procurement policy to favour the procurement of certified paper and forest products, for example, and that would also support the efforts of many of the Canadian companies and companies in other parts of world that are environmentally progressive and manage forests at a very high standard.

I would close by emphasizing that I believe it is important for there to be a coherent strategy. A series of piecemeal measures will not be effective in reversing the situation. The federal government has a very good opportunity to play a leadership role here in helping to restore the sector and regenerate it to whatever it will be in the future.

The Chair: Thank you, Mr. Williams.

Senator Baker: I welcome the guests here. I notice that each one of you has a PhD after your name, so I will address you each as "Dr." I have specific questions for each one of you, so perhaps I will can the questions together and let each of you answer the question, if you so wish.

Each one of the witnesses has a high profile in regard to the forest industry and its activities — Dr. Beckley, from the point of view of the community forest, Dr. Williams from the model forest, and Dr. Floyd for being critical of the government for not putting enough money into research and saying that the money that was being directed toward the companies would be perhaps better spent. To use his words, "A better long-term investment may be applied research and technology transferred to promote the new ideas, processes and products necessary to secure the long-term sustainability of the forest sector." I have three simple questions.

First, Dr. Beckley, on the community forest idea and public participation, what are your thoughts now after going through the entire process of public hearings and so on concerning this matter?

Dr. Williams, what are your conclusions after being involved with model forests in other parts of world and in Russia specifically?

Dr. Floyd, I was interested in the speech that you gave wherein you mentioned that, in Nova Scotia, there is actually a pellet operation that exports wood to the European Union for electrical purposes. I am also interested in your ideas on green electricity and why you advocate putting vast resources specifically into the University of New Brunswick.

Mr. Beckley: I appreciate the question. It was something that I did want to speak to. I have been an advocate of the idea of experimenting with community forests for about a decade in New Brunswick, in particular, and that is about how long I have lived there. The provincial government has been extremely reluctant to engage. We did a pilot project about 10 years ago, where it was sort of a different idea of a community forest, but we were suggesting that we take some scattered parcels of Crown land and put them in the hands of small private contractors, thinking they might be able to combine them with private land and operate them more efficiently. Through the royal secretariat, we were able to obtain funding for a feasibility study, and we had a second year of funding to implement the program. We went to the provincial government, who had been a partner, to ask if we could have 6,000 hectares of Crown land to run a pilot program. They said, "No, thank you." I had to basically send the money back to the federal government, which is the only time I have ever done that after getting a research grant.

There is a tremendous opportunity right now in New Brunswick. We conducted a public survey in 2007 that showed that there is tremendous support for the idea of experimenting with new tenures. One of the questions that we asked on that survey was something we called the plan B question. What if some of these large licensees basically folded their tents and walked away and we are left with a large Crown licence that we are able to reallocate? Who would the public like to see take over management of those? They listed local communities, local watershed associations, local forestry contractors, people who have some capacity and expertise to do it. Big industry was well down the list.

The provincial government has come back. Right now, Licence 5, which used to be a Weyerhaeuser licence, is being run on an interim basis by the Department of Natural Resources until they can find another large industrial licensee to take it over. People in that community would love to take over management. They cannot do it entirely alone. They need government support to help them do that. There is a tremendous public will to try to do some experimentation with different tenure and management regimes. These local communities are not so wedded to the past models of what the products have been and who the customers have been, so they might be much more nimble in order to take advantage of some of the opportunities to generate wealth and value from our forests that are not from these traditional modes.

There is a big barrier in convincing the provincial government departments, who basically have the say-so on Crown land, and getting them to buy into any kind of experimentation. I have always recommended that this be done with all sorts of oversight in an adaptive management framework, adhering to all the existing environmental rules. They have it in their mind that it is just giving over land in a fee simple manner, so it becomes like a community woodlot with the same rights that a private woodlot owner has, as opposed to having just as much control and oversight by government that the current Crown land management does.

I have made the point that, in New Brunswick, we have three large licensees now. They have a tremendous amount of political clout. If that same land base were divided into 50 community forests, DNR would be back in the position of really being able to steer the ship. For whatever reason, there is tremendous reluctance to engage in the concept. Quebec has done much more. It is too bad that Luc Bouthillier is not here to speak to that as well, because I am sure he would.

Mr. Williams: There are three main points. One is that the Russian forest sector is experiencing many of the same problems as the Canadian one. There are lots of opportunities to cooperate and collaborate with the Russians on a whole range of different forestry-related aspects, ranging from science to industrial development perhaps. That is one thing. There are a lot of commonalities, and Canadians are well received in Russia, which leads me to further think that there should be more opportunities for collaboration.

I feel there are also very good market opportunities there. Our planning software that has been developed in Canada should be used in Russia, but it is not. It is a lack of a spark or lack of an opportunity to make an inroad that prevents that from being so.

Another thought is that because the boreal forest in Russia is similar to the boreal forest in Canada, it would seem to me that that would be one logical area for many of the forest companies in Canada to be active in. The Scandinavians are very active in western Russia. There are obviously cultural differences, but in terms of the actual resource and the issues associated with that, there are probably fewer differences in the Russian boreal than any other forest types in the world where Canadians could invest. That is another point.

The final point is one of the reasons I am involved with the Komi model forest is that it has been very successful. One of the reasons I ascribe to that is that it has very strong support from the state forestry department and the state government in general.

When I think of the Canadian model forest program, one of the unfortunate things was that, with the exception of perhaps Alberta, New Brunswick, Newfoundland and Manitoba, the provincial governments did not take advantage of the opportunity to the extent they should have to participate and to look at different ways of doing things. It is an unfortunate example of the tendency that my colleagues have referred to, where there is not always a lot of cooperation between the federal and provincial governments. Unfortunately, that was the case in some of the model forests.

Senator Baker: Mr. Floyd, why should everything be done at the University of New Brunswick?

Mr. Floyd: There are some things that we are very good at doing, but I would not say we should do everything.

The point I want to make about research is that I really am supportive of what this government has done with regard to FPInnovations. FPInnovations plays an important role here. They are doing outstanding research.

As most of you probably know, they are split into three or four different divisions. One deals with the engineering of harvesting and roads and transport and equipment. The second part of it looks at the pulp and paper industry, and the third part looks at the lumber side. The focus there is always on what we do after we have harvested the fibre.

The point I want to make here is that the research we need to do about how we control insects and diseases, how we manage for biodiversity and water resources, does not get done within FPInnovations, but within the Canadian Forest Service or in the university system. We have had good support, for example, from the Sustainable Forest Management Network. There was also a combined CFS/NSERC program that existed for several years.

The difficulty there is that those programs come and go, so there is not the same consistent funding formula for the research that gets done on the forest management side of things as there is on the forest product side of things. It is not that it all should be done at UNB, but I think we can make a pretty good argument that we need a more stable and consistent funding stream for the forest management part of the research question, not just for the forest products part.

The second question you asked was about green energy, specifically about pellets. In Eastern Canada, where we have a significant amount of private forest land, one of our major problems is a lack of markets for those private woodlot owners, especially for low-grade material such as low-grade hardwoods. That is very useful in terms of the pellet market.

In New Brunswick, to this point, the provincial government has really discouraged pellet production. Nova Scotia has been a little more supportive of it. Basically, what we are doing is that there are firms in New Brunswick and Nova Scotia that are producing pellets and bulk shipping them out of Halifax to Rotterdam. Because the Europeans have adopted green energy policies that regard this as green energy and that give them green energy credits for it, they are able to make a significant amount of money doing that.

Senator Eaton: I wish to follow up on Senator Baker's questioning and one of Mr. Beckley's comments. We had witnesses last week from Quebec and Lakehead University who were talking about community-based lots and the community running those lots and what they could get out of the forests. It was an excellent presentation; it was interesting to see the agreement coming from two different places.

Something that came up last week — and I do not know whether it was Mr. Williams or Mr. Floyd that brought this up — was Aboriginals and the forests. We have had several presentations. One of the points they make — and I think this applies to all three of you, being university gentlemen — is there does not seem to be much of a bridge in universities between the way the Aboriginals or First Nations see the forests and the way we have traditionally seen the forests.

There are very few programs. Do you have thoughts on how to pull them in and encourage them and help them a little bit?

Mr. Beckley: Mr. Floyd and I are on a PhD committee of an Aboriginal person who works for CFS. He is all about that traditional knowledge and trying to integrate traditional knowledge into current forest management.

We have had a variety of recruitment efforts to try to recruit First Nations people into our faculty of forestry. I totally agree with Mr. Williams. Particularly when I was with CFS and working in the West, I did a lot of work in Aboriginal communities and it seemed like that sort of federal-provincial divide was so dysfunctional to the Aboriginal communities. They are surrounded by this forest resource that has the potential to create wealth for them — even as participants, just as labourers in that economy — and yet for cultural and jurisdictional reasons, where the province has responsibility for land management and the federal government has responsibility for the welfare of Aboriginal people, that bridge was not made.

There are significant hurdles in also bridging that gap between the standard average education for Aboriginal people at perhaps grade 8 or 9 and the leap from there all the way to succeeding, particularly in forest management, in a math/ science-based type of degree program. Maybe there are some interim measures to try to help people upgrade their skills. Also, at the technical school level, community college and forest technicians programs, there may be more possibility for success there in getting an Aboriginal workforce.

Senator Eaton: Yes, because we were discussing the point that you do not want to create a parallel system. You want to try to find a bridge or an outreach program of some kind that could bring in and encourage First Nations, either at the college level or technical level or whatever.

Mr. Beckley: There is a bit of reluctance, too, on the part of some Aboriginal people, because of the industrial mindset and the industrial dominance and the degree to which that does not entirely square with their vision of the forest and how to live with it. That has also been a barrier to attracting Aboriginal people into those types of programs. Perhaps we need more friendliness to a broader perspective, whether it is a wider variety of products, including ecological services and habitat and so forth, rather than just saying, "You are an Aboriginal person; help us get the wood out."

Senator Eaton: When you talk about community-based programs, you talk about things like wild blueberries, mushrooms and medicinal products. If pulp and paper is on a downward curve, should we be thinking about a different mix of trees when we reforest and are we reforesting enough?

Mr. Williams: One of the fundamental rules is that you plant species that are suited to the site.

Senator Eaton: Yes, obviously.

Mr. Williams: Bearing that in mind, I do not think we should be changing the mix particularly because I think that many of the forest companies now manage with a fairly natural paradigm. They at least try to regenerate the type of stand that was there. If what they cut was something off-site or degraded due to past harvest practices, they try to put back what should be there or what is appropriate.

The management approach possibly should be changing. We have been going further afield for timber where there are sites close to mills that are very productive in many cases that have not been managed well. They have a kind of jungle growing on them. This is as a result possibly of being cut several times during the past 50 or 60 years. What is there is not really merchantable. However, it is expensive to remove what is there and replace it with a proper forest. Therefore, those sites do not get managed or harvested. Instead, you have companies going 300 or 400 kilometres farther north to cut timber, often of small sizes and very high cost.

Senator Eaton: Leaving the mess?

Mr. Williams: Yes. I alluded to that when I mentioned that the investment in the forests was not substantial and that the tenure arrangements did not provide incentive for companies to invest in the forests. The location of investments is one area that could be reviewed and changed.

Both climate change and carbon affect things dramatically as well. Harvesting on spruce bogs that contain vast amounts of carbon and yield very little timber should be a thing of the past. I do not think the value is there anymore.

To come back to your previous question about a program geared toward Aboriginal people and formal education, I would also like to see a mentoring program of some sort. I have seen examples where laid off forestry company executives work for Aboriginal bands. They have been able to accomplish a great deal. It helps the whole community. If a system were put in place such as CUSO working with Aboriginal communities, that could be effective.

Senator Eaton: Could you educate me: When you talk about tenure-limited firms, is that the number of years a firm has cutting rights?

Mr. Williams: It is that, but it is also the terms of the licence it has more broadly.

Senator Eaton: Is there an average length of licence?

Mr. Williams: There are different types of licences. The larger licences generally are 20 to 25 years in Canada. Many of them are reviewed every five to ten years; if the licensee has met the conditions of licence, the licence is renewed to its original length.

Senator Eaton: Are licences automatically renewed?

Mr. Williams: Yes, that is right.

Senator Meighen: Gentlemen, one of my frustrations in life is that I always wanted to be a forestry engineer graduate from the University of New Brunswick. Among many other things, I was not successful in that.

Mr. Floyd: We are looking for students. We would be happy to recruit you.

Senator Meighen: I will need a double major.

This question pertains to the whole country — however, I asked the question in British Columbia a number of years ago and was told that clear-cutting had significant advantages in terms of forest regeneration. Do any of you feel that argument holds water?

Mr. Floyd: Yes, absolutely. It is very appropriate in some circumstances.

Senator Meighen: Could you describe some of those circumstances?

Mr. Floyd: Different species have different requirements in how they regenerate. If you have a tree species like the Douglas fir on the West Coast that regenerates well in bright sunlight, but not particularly well in dense shade, one objective you have is to open up the stand to get the regeneration underneath it.

We do a lot in the Maritimes. We do less clear-cutting that we used to do, but we still do a fair amount of clear- cutting and replanting as our dominant silviculture model. It obviously has economic benefits, but ecological costs as well.

It is very difficult to say that it is never right or that it is always wrong. It depends on the site and the species that you are working with.

Senator Meighen: Where are we across the country generally in terms of sensitive regulation to permit clear-cutting where it would be advantageous and to prohibit it where it would not?

Mr. Floyd: That obviously varies from province to province, in terms of each province's regulatory standards. My impression is that Canada generally has very high standards in terms of harvesting, protection and regeneration. We do a good job for the most part. That is not to say that people do not like clear-cuts, because many do not.

Mr. Beckley: That is one of the things that came through clearly in our survey research. People are very against clear-cutting. Getting by and getting support for the forestry industry in general, it will be incumbent on the industry to try harder and to do a better job in a sense.

We flew over other Maine this morning and it is absolutely visible that they are doing much less clear-cutting and that their forestry sector is well-positioned. In examples from Scandinavia, the largest clear-cut opening allowed in Finland is four hectares. It is at least 10-times that in most jurisdictions in Canada. Scandinavia is competitive and competing in similar markets to us and doing quite well. It is possible to do it.

The overall theme of some of my comments is that we have done things the cheap and easy way, without a lot of vision or applying ourselves too hard. This is another example where it could be done with a little more intelligence, foresight and planning. We could still have a high-value forest products industry and less clear-cutting.

The leading edge of this is through forest certification. I am not sure the regulatory approach is the best stick, as opposed to the carrot, but I think we could do with less regulation.

Mr. Williams: Many of the provinces have merchantability requirements that require companies to harvest everything except their residual trees. Provincial regulations force clear-cutting in many situations.

Senator Meighen: Many people have private woodlots in the Maritimes. Are programs available to teach people how to selectively harvest from their woodlot and how to manage their woodlot? Are those programs readily available to people, to your knowledge?

Mr. Floyd: For example, Nova Scotia does a much better job of outreach to its private woodlot owners than New Brunswick does. New Brunswick made the decision several years ago effectively to eliminate its outreach and extension program, which I think was a serious mistake.

Having said that, the University of New Brunswick certainly teaches our students about managing smaller parcels, uneven age management and alternative management techniques. The Nova Scotia Department of Natural Resources extension program is successful. Some of the model forests have done well with that outreach effort.

If you were to ask me about a priority for private woodlots in New Brunswick, I would say we need to do a much better job of outreach and technical support for woodlot owners.

Senator Meighen: From my personal observation in Charlotte County, every tree standing was a potential victim when the American housing market was going well; everything was being cut.

Finally, what is the prognosis for wood housing construction in Asia? We have put a lot of effort into that over the years, explaining how it is advantageous for many reasons, including earthquake zones and whatnot. I do not get the feeling that we have made serious penetration in that market.

Mr. Floyd: I read the transcripts of your questions of Mr. Farrell, and I am sure he knows a great deal more about this than I do. That is a difficult question in terms of building standards, which vary not just from country to country but, as you know, from province to province, and, in the U.S., from county to county. It is a tough question. I cannot really say that we have made as much headway as we would like to. We think there is some potential there. We have shown real growth in terms of green building and green building standards and beginning to use more wood products in light commercial structures here in Canada as well as in the U.S. There is a good story to be told there.

Senator Fairbairn: Mr. Williams, near the end of your comments, you mentioned mentoring programs to the Aboriginal communities and how we should be trying to pull them in. It is an important issue. Could you go a little deeper on that and let us know exactly what you are thinking and where in Canada that would find the most collective? If anyone else has comments on this, I would be glad to hear them as well.

Mr. Williams: Senator Fairbairn, I have seen it work very effectively with a small native community just outside of White River in Ontario. They hired someone who was laid off from AbitibiBowater, and he has helped them develop a forest strategy, which is something they had been trying to develop for some time. He has the ability to help them develop a strategy. He knows the sector and the policies. He knows how to get things done.

It strikes me that a number of such people are available, probably more day by day. Perhaps there could be a program where they could somehow act like CUSO volunteers and work with communities for a given period of time to help them develop an understanding of what opportunities there might be in the forest sector, not just in terms of timber harvesting but in other areas as well, and help them put in place a plan to begin to achieve that and perhaps work with them to implement the plan. That could be very useful. It is not a substitute for higher education, but it would be an additional component that could very well complement such measures.

Senator Fairbairn: As you may know, I am from southwestern Alberta, very close to the Aboriginal people, the mountains, forests and all the flat land as well. I would be interested in anyone else's thoughts.

Mr. Beckley: One of the first projects I had with Canadian Forest Service was looking at two communities in Northwest Territories, Fort Laird and Nahanni Butte. There was a very active bush culture there, and the territorial government was interested in developing a forest industry, but they wanted to assess how the forest was being used first. We did what is called a traditional land use and occupancy study and determined that about one third of the local economy was still based on the bush, such as trapping, firewood and medicines. It seemed to me that there was an excellent opportunity to create a small-scale forest economy that complemented and valued the bush lifestyle that people still enjoyed and wanted to continue to be part of the culture. I could envision a mill that would not run all the time but that would run when the price is right, maybe selling a specialty project of green certified wood to rich people in California, to get the maximum dollar for a smaller amount of fibre. It could be seasonally complemented, and they could work in town in the mill at those times that they were not out in the bush living on the land. I was right out of grad school and quite idealistic and naive about how the world worked.

The typical approach, and what was eventually done, was to go out and measure how much wood was there and to try to build a mill that could handle exactly that amount of wood and develop that side of the resource without any thought to what the community impacts would be and how it may not be compatible with an existing forest use. There is very low-population density there, and the forest was beautiful, or what I saw of it. It was not until I got up in a plane that I realized that the forest only existed in the river valleys. That was the transportation corridor for community residents. It was where any tourism happened, and it was where all the big timber was. Even though it seemed like there was a lot of forest to go around, that really was not the case. Any significant amount of harvesting would have had a dramatic impact on that.

To try to tailor the forest industry or a product-based forest economy in an Aboriginal context, you may need a different model that is sensitive to other Aboriginal values for forest that exist there.

Mr. Floyd: There is a National Aboriginal Forestry Association. You might want to invite them as a witness. CFS also has an Aboriginal forestry program as well. There are difficulties in terms of formal higher education and the recruiting question that Senator Eaton asked. Some programs in the United States have been very successful in working with First Nations Americans. Northern Arizona University and University of Montana have been particularly successful, but both of them have invested a long time and established strong relationships with the tribes. It has taken them 20 or 25 years to yield the benefits from that. It is something I would like to see us do at UNB, and I think some of the other universities would be interested in it as well. It is a long-term program.

Senator Fairbairn: Thank you very much. In Alberta and British Columbia, where we have the trees and different tribes of people, it strikes me as an opportunity, if done properly, that could open a door on some of the difficulties that are always at play there.

Senator Carstairs: I represent Manitoba, but I was actually born and raised in Halifax. I went to Dalhousie at a time when we thought the University of New Brunswick was a forestry school and nothing else.

Having said that, I think there is a real disconnect between governments and people in terms of the respect that the people of Canada have for their forests and for their trees. That came home to me in spades after visiting Halifax shortly after Juan. I grew up almost on top of Point Pleasant Park, so it was difficult to see Point Pleasant Park after the devastation and loss of trees. More important, though, in talking to Haligonians about how they felt about that park, they felt their city had been totally devastated because of what had happened in the park.

The same thing happened in Vancouver when you had the terrible storms in Stanley Park, and the ice storms in Quebec and in Ottawa. Canadians value the forests, but I am not sure that governments value the forests for anything except their economic wealth, as they see it, not for the kinds of things you were addressing earlier, which is the watershed issues, the environmental issues, the basic connect between a Canadian and a tree. We are tree huggers, even if we are not great environmentalists; we are, for the most part, tree huggers in that we love our trees.

That leads me to my question, which is with respect to Aboriginal people. I come from a province where there are large numbers of Aboriginal people. We have had a number of successful pulp mills, Pine Falls, for example, which employed very few Aboriginal people. We had a major pulp mill in The Pas, Manitoba, in which their major residents were Aboriginal people but where very few of them were employed.

How many Aboriginal people can you tell me, Mr. Floyd, are attending forestry at the University of New Brunswick or other forestry schools across this country?

Mr. Floyd: Very few.

Senator Carstairs: Are there any particular scholarships or initiatives by the federal government to encourage Aboriginal people to come to forestry schools?

Mr. Floyd: Yes, there are. I have never had difficulty finding scholarship money for Aboriginal people.

Senator Carstairs: What is the problem, then?

Mr. Floyd: Your question would be better answered by an Aboriginal person, but since you asked me, I will give you my view. I think there is a cultural divide.

In my experience, going back to my own undergraduate experience, it was very difficult for native people to leave their communities, to come to university, to a different culture where they were often isolated, and to succeed at university according to our vision of what success is. As a result of that, I knew several students when I started out in northern California who came to Humboldt State where I was and left the program before they graduated.

We still see a fair amount of attrition. I do not have the data on that from UNB, and I am still fairly new there, but that is my impression of what is happening.

Senator Carstairs: I think that was true. That was even true at the high school level, where I taught. We would get them into grade 10 but not through to grade 12. We are seeing some differences and changes. They are now graduating from law schools, medical schools and nursing schools, but not forestry schools.

Mr. Floyd: I am reluctant to say I can think of two or three folks who have. We had a wonderful student two years ago who graduated and is now working for CFS in Fredericton. I met a couple of gentlemen, when I was working on the National Forest Strategy, from British Columbia who are Aboriginal people employed by their own bands as professional foresters. It is not that it does not happen, but it does not happen often enough.

Senator Carstairs: There are, I think, federal-provincial relations problems in many areas of the Canadian economy. What are the real problems between the provincial and the federal governments with respect to getting them to work together — whether it is on a model forest or whether it is a small development program that perhaps is an Aboriginal development program? Where is the breakdown?

Is it a power struggle only, where the provinces are saying, "This is my bailiwick; go away, we do not want you here"? Is it a funding issue? Or is it a dictatorial attitude on the part of the federal government, saying that if we are going to give you dollars, we will also tell you how to run your program?

Mr. Floyd: I have just become a permanent resident. I am grateful for the opportunity to be able to live here and work here, and I am really enjoying what I have learned in the last few years. My reading of Canadian history suggests that this goes back to Confederation. It has always been a power struggle between the provincial governments and the federal government as to which rights and responsibilities will be distributed to which places. I do not think that has changed any.

Senator Carstairs: It has not changed any, but I think we have to make it change. What I am looking for is this: Where are some of those problems and how can they be resolved?

Mr. Floyd: I think there are a lot of opportunities for joint provincial-federal initiatives. I mentioned this research cluster idea, for example. That is one. The Canadian Council of Forestry Ministers works reasonably well together — although there are still turf wars there from time to time. We have good examples in the Canadian Council of Environmental Ministers.

We have established mechanisms for those broad, upper-level dialogues. Where we break down, obviously, is when we start talking about particular programs — which government will put what amount of funding into which areas and how we will share that. Obviously, any time you talk about budget, that will be an issue.

For the most part, for the federal government and the provincial governments, at least at the highest level, everyone is on board in terms of the goals for forest sustainability and the forest industry, but we break down when we get to individual program levels and who is responsible for which funding commitments.

Mr. Williams: I would generally agree with what Mr. Floyd has said. Somehow, it is an inability to see the larger picture and the larger benefits from cooperation.

I was having lunch with a former CFS director and we were talking about the National Forest Inventory. He told me that provincial deputy ministers told people that when they walked into a federal-provincial meeting they do not bring any money with them, that they try to bring some back with them — that is the name of the game.

The case of the inventory is a very good example because we need a national inventory for a lot of reasons, not just to tell us how much timber is there. It helps us with our carbon accounting; it helps us gain access to markets; it benefits us nationally, as well as benefiting the provinces. Nevertheless, there is an inability to find a funding solution that would put it on a secure long-term funding basis. It is not a lot of money, but it is a lack of leadership and a lack of ability to see the broader picture and participate in it.

Senator Carstairs: A lack of political will.

Mr. Williams: Yes.

Mr. Beckley: I came to Canada and the Canadian Forest Service in the early 1990s when the federal-provincial agreements in forestry were still in existence. They were phasing out at that point, but they seemed to be an effective partnership. Maybe it was because the dollar amounts were fairly high and there was enough for the federal side to say they want this to happen and the provincial side to say they want that to happen and a lot went on.

With respect to Mr. Williams' observations about the Model Forest Program, I was involved in the one in Alberta and a bit in the ones in Manitoba and New Brunswick as well. For whatever reason, the provincial governments did not seem to want to play.

I think a lot of good research happened and a lot of good programs were developed, but oftentimes, when it came to implementation, particularly in areas where Crown land was at play, the research did not get implemented on the ground. There was reluctance there.

Mr. Williams' description at the director level is very much in play. I have been involved in a number of collaborations at the grassroots level of these institutions. The survey I mentioned was funded by DNR. However, my own colleague from Université de Moncton in Edmundston and two CFS employees who were lower-level researchers took a long time to hammer out the data sharing and intellectual property rights. We worked at a high level and the collaboration was very effective. When the survey results came out and the government did not like what we said, all hell broke loose at that point.

However, it worked at a grassroots level, which is the best way I can describe it. It would be challenging to figure out ways to funnel money. Often, money is not accessible unless there are federal, provincial and university personnel involved. Changing that might make some of those types of projects happen, if there are other ways to offer money. Then maybe we can work up the chain and convince directors that it is a good thing to do.

Senator Callbeck: You have all talked about the federal role in providing leadership and developing a vision. You have given many ideas. One idea came out of a study done by this Committee on Agriculture when senator Fairbairn was chair that looked at rural poverty. Mr. Floyd, were you a witness on that study?

Mr. Floyd: No.

Senator Callbeck: One recommendation was that the federal government immediately convene a national summit with all the relevant stakeholders with the aim of developing a national strategy. I would like to get your comments on whether you agree with that.

Mr. Floyd: I would agree with that.

I made reference to this National Forest Strategy process that Canada has had now almost 30 years. The basic idea was that we would find ways to bring all of the stakeholders together. We would set goals in terms of sustainable forest management and forest policy. Jointly, we would create that vision and find a way to implement it.

That role is largely now within the purview of the Canadian Council of Forest Ministers. I think there would be strong support in some parts of the environmental community. Many different stakeholders would appreciate an opportunity to do that.

Mr. Williams: I think it would be a very good thing to do.

In 1998, the Norwegian government embarked on a similar program chaired by the prime minister of the country at the time. It was one of the examples I had in mind, and I believe both my colleagues mentioned the success of Scandinavian countries that have forest resources similar to ours. Four of the top 10 forest companies in the world by sales are based in Scandinavia. Canada has none.

A strategic approach that has the buy-in of all partners and that has a well-thought-out and debated articulation of where the country wants to go would be beneficial. One of the questions would be this: How much of a forest sector do we want? Significant parts of the population would like to see very little or no forestry. Many do not have an opinion. However, it is fair game to ask the question. It would be a very good national debate.

Mr. Beckley: If something like that had been done 15 years ago, it would have been extremely contentious and everyone would have stormed away angry and upset. The climate is very different now, partly because of the crisis and partly because of the successes of forest certification that has brought together the environmental community and more progressive elements of the forest industry.

It used to be that environmentalists lined up on one side and forestry on the other. People can now see some bifurcation in the industrial sector. You have interesting partnerships between environmental NGOs and more progressive forest industries. Environmental communities use those groups to shame lower-level performers into doing a better job.

There is much more common ground. The culture of dialogue around forestry has evolved. People who could not be in the same room 10 or 15 years ago routinely sit down together and try to figure out what they have in common.

Mr. Floyd and I have been involved in an initiative started by J.D. Irving Limited in New Brunswick. They hired a high-priced outside facilitator and invited academics and all of the environmental NGOs in New Brunswick to sit down for five meetings and decide whether there was anything they agree on. If so, was there anything they could do to advance that agenda, even if it were only 5 per cent or 6 per cent of the total package? Some very good things came out of that.

The climate is much riper for something like that to succeed currently.

Senator Callbeck: It is good to hear that you agree with that recommendation.

I want to ask you about another recommendation made by the committee, specifically, that the federal government provide initiatives for sustainable forestry management in private woodlots through the income tax system. Do you all agree with that?

Mr. Beckley: I think Peter deMarsh of the Canadian Federation of Woodlot Owners made a presentation here earlier. I know him well. I am also a woodlot owner. I own 160 acres outside of Fredericton, where I live.

Mr. deMarsh and the New Brunswick Federation of Woodlot Owners have been advocates for getting someone to write woodlot owners a cheque for maintaining aesthetic quality, water quality, providing habitat, et cetera. They do not care if it is the federal or provincial government. Mr. Williams made the point that much of the public does not have opinion. I think much of the public does not understand the degree of subsidies already provided to woodlot owners for basically growing fibre through silviculture, planting and tending stands of trees.

I have suggested in the past that the amount of money that flows to woodlot owners currently might be socially acceptable, not for growing fibre to supply industry, but for protecting environmental amenities. There are no programs like that in Canada. They do have programs like that in places like Costa Rica, where they have payment for environmental services. Private landowners are paid to maintain environmental quality.

This notion of positioning ourselves as the most green forest managers in the world will ultimately have a payoff in trying to sell our products elsewhere. I think there is lots of room for innovation in that area.

Mr. Williams: The quid pro quo for that should be a requirement that private woodlot owners manage to high environmental standards. For example, they cannot cut to the edge of streams and cannot do whatever they want.

Mr. Floyd: It was not only a matter of income tax — Mr. deMarsh also made the point when he appeared before the committee that there is an issue with inheritance tax as well. Forest owners have the typical problem of having income in one in 20 years or one in 25 years. It becomes a matter of how you treat that in terms of taxes.

Senator Callbeck: Mr. Beckley spoke about Sweden and Finland doing a good job of working up the value chain. Mr. Williams mentioned Canada trying that. Why have Sweden and Finland been successful but not Canada?

Mr. Beckley: I do not know. I am going to Sweden in three weeks. Maybe I will ask around and discover a little more. I have a research project there that I will be doing for two weeks.

I think they had a lot of foresight in terms of buying equipment from Germany or somewhere else — rather, they decided to make their own. My chainsaw is a Jonsered from Sweden; my thinning saw is a Husqvarna. These are household names for people who have woodlots or are in the forest sector. We buy services from them as well. As Mr. Williams said, they have some of the largest manufacturing firms and have spread out around the world.

I do not really know the answer; but, in the back of my mind, I am thinking they must have had a much more coordinated investment strategy and a real commitment to doing the R&D so that they were ahead of the curve, not playing catch-up.

Mr. Williams: It is a good question. I am not sure of the answer either, but in part it is due to research and development. Several years ago there was a concerted effort to reorganize forest research in Scandinavia in order to capture efficiencies. They devote 3 per cent to 4 per cent of their GDP to research, which is much greater than ours.

Mr. Floyd: Mr. Beckley made the point a few minutes ago that if you think about our markets, we have largely depended upon commodity-grade lumber, so two-by-fours and two-by-sixes for the housing market, and we really did not need to innovate because that was a fairly easy market for us to capture and to export to. We were never forced to be innovative and to put more money into R&D, specifically development into advanced value-added wood products. If you look at the value-added wood-products sector in Canada compared to other forested countries, you would see that in Scandinavia they have done a better job of developing those higher-value and innovative products than we have here.

The Chair: With the indulgence of the senators, I would like to ask a few questions.

I certainly do not want to engage in the debate that Senator Carstairs linked to federal-provincial relationships. I think the witnesses are right. We have a crisis and challenge in the forestry sector. With all due respect, some of the comments we heard today would not have been possible going back 10 or 15 years ago. Now we are at the table because of a crisis and the challenges in one of the most important sectors of Canada and North America, forestry, and we can discuss it.

To follow up on Senator Carstairs' point, without opening a constitutional debate on the responsibilities of the provinces versus the federal government, suppose I were to say to you that you were the federal government. What would you do immediately, with your experience as important stakeholders, as university researchers, dealing with the training of employees, working with employees at the silviculture level as well as the people working in the mills and those so-called leaders of the industry and the big mill operations — what would you recommend?

Mr. Williams: I would convene the major stakeholders and participants and start to develop a process for developing a vision and a strategic plan. A coherent, strategic plan is necessary. Not only does there have to be a plan, but the process in getting there has to be developed and well-thought-out.

For example, we need to be looking to the future, and we need to bear in mind that the plan we develop has to deal with what we anticipate future conditions to be and not necessarily trying to rebuild the industry the way it was or recreate the past. There is a need for a lot of discussion, and there is probably also the need for some significant integrative studies. The issues are highly integrated, and it is not so common to find the governments or partners or participants whose input is required to solve a problem all working together.

A good example could be climate change, and invasive species is another example, which of course has links to climate change. Anything to do with water would be another integrative example as well. It is those sorts of things that I would embark on at first.

Mr. Beckley: Much of it may come down to basic human social skills. It is almost a matter of attitude and approach. As Senator Carstairs said, sometimes the feeling from the federal government is, "Well, it is our money. This is what you are going to do," as opposed to, "How can we help?" You could go to the provinces and ask, "What are the problems?" Have the conversation, "Can we agree on the problem? What are our appropriate roles? What can you do? What can we do?" It would be sort of a scaled-up version of the process that Dr. Floyd and I are involved in with J.D. Irving and NGOs. Part of that has worked by getting an external, trained, consensus-building institute facilitator to manage that process. That will not happen overnight. That kind of relationship building has to evolve and trust has to emerge. The depth of the crisis now and the necessity to move and to change some things might make the partners more willing to engage in that sort of dialogue.

Mr. Floyd: I can think of several things along a different line in terms of what I would do right now. There is a real need for demonstration and development projects, and the federal government has a role in cooperating with the provincial governments to do a couple of these things. We keep talking about biofuels, for example. Whether it is biochemicals like acetic acid or whether we are talking about alcohol production from cellulose, it is time to put some of those facilities in place.

The U.S. has done that successfully through their Department of Energy by offering a series of competitive grants to companies, often in cooperation with universities, to actually build these demonstration pilot projects. The first large wood ethyl-alcohol project is going online in Georgia next year. The University of Maine received a $26-million grant from the Department of Energy to build a biotechnology centre at Orno. Those are the kinds of things we have yet to do in Canada, and there is room for that.

I mentioned briefly in my testimony that there is a role for the federal government and the provinces to play together in terms of offering the scholarships and other financial support that we need, not just at the university level but at the community college level, and then you suggested silviculture and other sorts of field skills. We have a real labour- recruiting problem that will occur soon. It will be harder and harder to find people who want to work in the bush. It is also getting difficult to recruit students at the community college level and at the university level. There is a role for the federal government and the provinces to play together to resolve that.

The Chair: There is another element. In order to find solutions that will sustain the viability of our forests and better jobs and the economy in the forest industry, another player has to come to the table, and that is the community, the local service districts or municipal governments.

Mr. Beckley, I know you had research and you had to return the funds. Maybe now is the time to go back.

I will share with you the impact we had in north-western New Brunswick, and I know it had an impact also in Nova Scotia and Quebec, especially with AbitibiBowater in Dalhousie. I sat at a table and we said, no, we just cannot have the presence of the federal government or the provincial government; we need to also involve the community, where the towns, villages and cities could be part of the discussion table. I would hope that what I have heard from you tonight, when we talk about managing our forests, also includes hardwood industries; right?

Mr. Floyd: Yes.

The Chair: Therefore, there is one comment that I would like to have clarification or comments on. With what you have seen with the senators asking questions, if you would like to add something, please feel free to send in writing your additional comments to the committee.

Being a next door neighbour to the state of Maine, Mr. Williams, you talked about getting out from under U.S. countervailing conditions. I would like to hear more comments on that.

Mr. Williams: Since at least 1986, when the Mulroney government made an agreement with the U.S. government to put an export tax on softwood lumber, there has always been a tax or some kind of duty on lumber. There have always been limits on how much can be exported into the U.S.

Part of the profit that should have gone to the firms producing the lumber ended up going to one or another of the governments. In some cases, it was eventually returned. I believe, under the export tax, it was returned; but after that, it was a duty that was put on by the U.S. and that was lost money. It actually went to their competitors in the U.S.

The other thing is that there were restrictions on market share as well, which enabled other competitors to enter into the U.S. market and gain a larger foothold.

The effect of the export tax is that it has sapped away a portion of what should have been the profit of the Canadian companies, and it has also weakened their ability to maintain their markets in the U.S. It has been one of the factors that, over time, have been detrimental to the industry.

The Chair: Does anyone else have any comments on that?

Mr. Floyd: You are well aware of the wars that go back to 1840 or something like that. This dispute has been ongoing for 150 years. It will probably not go away any time soon.

Mr. Williams is right; it is detrimental. The point that he raised is an interesting one, whether or not we can create auction markets for our standing timber. That is a really interesting question. Is there a way to do that?

As you well know, the recent auditor general's report in New Brunswick has suggested that the pricing system that we have is not really a fair-market pricing system. The better way to do that would be if we could find a way to ensure we had a number of different firms that were competing to purchase either standing timber or purchase the lumber. That does not always happen.

Mr. Beckley: If I could comment first on your notion of what is the community role, the community is a critical player, and I feel they have felt completely disenfranchised.

A colleague of mine from the University of Alberta, John Parkins, and I have a project where we are looking at these forest industries in crisis and trying to determine what are the variables whereby some are able to pull themselves up by their bootstraps and reinvent a new future for themselves and others flounder.

As part of that process last summer, we went around to mayors and councillors in Nackawick, Dalhousie, Bathurst and Miramichi. To a person, they were extremely frustrated, not with the federal-provincial division, but within the provincial government.

If a new wood user wanted to open up a facility in a community, that individual was dealing with Business New Brunswick, but the land was tied up and administered by the Department of Natural Resources. There were petty jealousies between those departments. The labour issues were all handled by Human Social Services.

The mayors just wanted something better for their community and they were getting the run-around from these different provincial agencies. In some respects, I think this notion of community forestry models, and giving them something to be able to try something on their own, might be a solution; but again, they cannot be cast adrift and told to go and make this happen, because some serious capacity building will need to go along with that effort.

To tie this issue in with the issue of more open markets for timber, some of those community forests might be in a good position to find market niches and to compete and be able to pay a higher price for that timber if it were made available. They could attract private-sector partners to come in if they knew they could get certain volumes of wood that have been traditionally tied up with the larger players.

It would create a more diverse and robust forest sector altogether. It would be more nimble, able to take advantage of opportunities as they arise. I am not exactly sure what the government role would be in helping to make that happen, but it is an important direction to strive for.

The Chair: We have a time factor, and I would like to ask the last question. If you could send an answer in writing, I would appreciate it.

Regarding the comments you have made on carbon management, what would you recommend to governments? Here I want to share with you that when I talk about governments, it is municipal, provincial, and federal governments.

Witnesses, on behalf of the committee, we want to thank you for accepting our invitation to be here and share your professionalism with us. As I said to you before we commenced the meeting, you are an important stakeholder. As you said so precisely regarding some of the conversations and the sharing of information here today in 2009, on May 26, we could certainly not have that conversation 10 or 15 years ago.

On behalf of the committee, I wish to thank you for appearing today. It was very enlightening.

Senators, we will meet on Thursday, at the usual time, and we will be hearing witnesses from Ontario. I declare the meeting adjourned.

Senator Fairbairn: I would like to make a final comment. I am from southern Alberta. We have a problem there in the forestry world in our mountains, with the mountain pine beetle starting to come across. On two occasions in flying out, I was sitting by two different young fellows and an older person. They were all coming out from New Brunswick to go into Crowsnest Pass. They had been working in the forestry industry and they were bringing their stuff with them, leaving their families and coming to give a hand for what is in the process of happening in that difficult place.

Mr. Beckley: Our young people are one of our biggest exports from the Maritimes.

(The committee adjourned.)


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