Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 5 - Evidence - Meeting of June 4, 2009

OTTAWA, Thursday, June 4, 2009

The Standing Senate Committee on Agriculture and Forestry met this day at 8:08 a.m. to study the current state and future of Canada's forest sector.

Senator Percy Mockler (Chair) in the chair.


The Chair: I declare the meeting in session. I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry. I am Senator Percy Mockler from New Brunswick, chair of the committee. I would like to start by asking the members of the committee to introduce themselves.


I will begin on my left with the deputy chair of the committee.

Senator Fairbairn: I am Joyce Fairbairn, from Lethbridge, Alberta.


Senator Mercer: I am Senator Terry Mercer from Nova Scotia.


Senator Cordy: I am Jane Cordy from Nova Scotia.


Senator Poulin: I am Marie Poulin and I have been representing Northern Ontario in the Senate since 1995.

Senator Eaton: Good morning, my name is Nicole Eaton and I am a senator from Ontario.

Senator Housakos: Good morning, my name is Leo Housakos, from Montreal, Quebec.

The Chair: The committee is continuing its study on the current state and future of Canada's forest sector. Today we are hearing from representatives from Quebec who will discuss their visions, difficulties, challenges and possible solutions specific to the forestry sector in both Quebec and Canada.

We humbly welcome Yves Lachapelle, Forestry Director, Special Advisor, Strategic Issues, from the Quebec Forest Industry Council. We are also pleased to welcome Carl-Éric Guertin, Communications Director, Quebec Wood Export Bureau; as well as someone whom I have met previously, Pierre-Maurice Gagnon, President, Fédération des producteurs de bois du Québec. With him today is Jean-Pierre Dansereau, Director General. Gentlemen, welcome. The committee thanks you for accepting its invitation to appear today.

I would now invite you to make your presentations. These will be followed by a question-and-answer session with the senators. We will now start with Mr. Gagnon, followed by Messrs. Lachapelle, Guertin and Dansereau.

Pierre-Maurice Gagnon, President, Fédération des producteurs de bois du Québec: Mr. Chair, I am pleased to appear here on behalf of all Quebec owners whom I represent. I myself am an owner. The current crisis in the forestry sector is hitting us hard.

Last week we attended a convention that was held in Abitibi. Although people are finding the situation extremely difficult, their morale remains good. The owners we represent are courageous people who never give up. I would like to give the floor to my colleague, Jean-Pierre Dansereau, who will give you an overview of the forestry situation in Quebec and North America.

Jean-Pierre Dansereau, Director General, Fédération des producteurs de bois du Québec: Mr. Chair, I in turn would like to thank you for receiving us. Unfortunately, the document that we sent you was only in French. I do not know if you have the English translation, but I would be pleased to answer your questions following the presentation if there are things you did not quite understand.

I would like to begin by making a brief presentation on the private forests in Quebec, which has some 130,000 woodlot owners. Those people account for 20 per cent of the forest industry's supply, which represents a substantial economic, environmental and social contribution to the rural communities in all regions of our province.

Our federation represents unions and marketing boards, organizations selling wood to various industries. Annually, some 20,000 to 25,000 producers market wood. Estimates show that over a five-year period, some 50,000 individuals and families work in the forestry sector.

The crisis is having as strong an impact on the private forestry sector as on other sectors of the industry.

Our document includes a number of charts. You see that there has been a loss of market share of over 40 per cent in terms of volume accompanied by a significant price drop, amounting to an estimated loss of revenue for our sector of over 50 per cent. For the private forestry, direct economic benefits would normally vary between $300 and $400 million. They have now dropped to $150 million annually.

From 2006 to 2009 estimated losses exceed $500 million if we consider the drop in assistance for forest development programs and loss of market share. A number of operators depending upon or earning most of their income from wood sales are facing difficulties. Some operators have had to dispose of equipment or land because they are no longer able to meet their financial obligations. It should be said that after a number of years of this crisis, our organizations are also having some difficulty coping. Financial effects are significant.

In the second part of our brief you will find a number of comments on the forest sector crisis and its causes. My first comment would be that we should be discussing crises within the forest sector and not just a crisis. There are a number of crises for which explanations differ. The challenges affecting the pulp, paper and paperboard industry are not the same as those affecting the construction materials industry. Added to this would be the financial crisis in the U.S. and the world economic crisis which developed as a result of the former.

In the forest sector, there are also a number of causes. The pulp and paper sector has seen a fundamental change in markets whereas the construction materials sector has been facing a slump in the cycle which should return to normal.

In every case, there are common factors, the global financial crisis, the fluctuation in exchange rates, changing energy prices and supply costs for these industries, and the emergence of new competitors on the world scene. We believe these crises are quite telling. It was not within our power to change them, there were factors that went beyond the control of major stakeholders and of governments in Canada. However, they bring to light the shortcomings within the various components of the forest sector.

These crises also demonstrate the fact that the primary business model — mass production for a mainly U.S. market based on low-cost materials, cheap energy and a favourable exchange rate — is obsolete.

Our industry was based on that. Today we see that conditions have changed and that this model is no longer viable. Although forest companies may long for the good old days, it is unlikely that they will experience these favourable conditions again consistently in the future. We will not see these conditions again. We will continue to see demand for forest products, but in a very different environment. The forest sectors in Quebec and Canada will have a limited future if our forestry companies do not adapt. Conditions have altered dramatically.

We would now like to turn more specifically to lumber producers, those who produce the resource. Private woodlot operators can provide a good snapshot of the current situation and also offer a vision of the future in the area of resource production.

We find that lumber markets today have not yet adapted to the reality of the fact that wood must be grown and harvested, and that in Canada, a northern country, our climate does not allow us to compete with other producing countries namely in the southern hemisphere.

Our production must be environmentally responsible, consider the various uses for forests, and far more expectations from the public than in the past. We must also consider working conditions in North American society. Workers expect certain standards and incomes.

Market prices seem to favour clearing out natural forests rather than supporting sustainable forestry. The challenge rests in changing this fact. The full range of production costs cannot be managed internally at this point. The state must provide support to offset market deficiencies.

Here is our view of the future. We believe that the Canadian and Quebec forest sectors have a limited future if the sustainable production of forest resources, including timber, does not become an independent economic activity that can support workers and producers. They should be able to enjoy proper working conditions.

An overemphasis on the consolidation of primary producers must not be the only strategy for emerging from the crisis and adapting to change. We will have to do more. The consolidations exact a high price from communities and small businesses and will in no way guarantee the development of a strong forest sector able to deal with the new realities. Market signals trigger activities that focus on short-term results and specific interests for companies and shareholders. The development of the forest sector requires long-term objectives serving a range of collective interests.

The third part of our presentation addresses a few points to consider. First of all, for the entire forest sector, we believe that federal and provincial policies must encourage the development of productive, diverse forests with high quality wood to support a range of activities including a diversified processing industry. While they must support each other, development policies for forested areas should be separate from those for industry. The future forest industry will have to be able to carve out its market share in the context of high supply and operating costs, which characterize our situation in North America. Secondary and tertiary processing companies, with their greater focus on adding value, will be more likely to shoulder these costs.

It will be a challenge to find a sectoral model that enables primary processing companies to develop as well. Future purchasers able to deal with these conditions are more likely to be in the secondary and tertiary processing sector. Nevertheless, there will still be a need for the primary processing sector. The challenge rests in knowing how to develop a satisfactory economic model while paying the current prices for resources and inputs.

We would now like to turn to specific aspects of private family-owned forests. We believe that wood production on private forested land should be the canary in the coal mine. Canaries were once used in mines to serve as warnings of imminent danger. If this sector cannot develop and be sustained then the entire sector is in danger and cannot survive current conditions.

When giving companies access to public forests, creating policies and programs to develop these forests and encouraging industrial development, governments must ensure that they are not creating conditions that are unfair to private forest owners.

In closing I would like to share with you the expectations that private woodlot operators have of the federal government. In times of crisis, we expect support, as do others, to help us survive these difficult times. We would like to see investments in silviculture programs. In fact we are pleased to see that an announcement has been made to this effect in Quebec by a federal-provincial working group.

There needs to be assistance with certification in order to meet market needs. We also need support to help relieve producers' financial burdens. These individuals may lose their investments in their machinery and their land. They need support, for a few years, to weather this crisis.

Further, tax legislation should be changed in order to support the sustainable management of woodlots to encourage the sustainable development of private forests and to counter the negative financial effects of forest pest infestations. Our B.C. colleagues are dealing with a pine engraver infestation which has caused serious problems. We therefore call for the establishment of individual forestry savings funds which would allow families and individuals to set money aside to reinvest in their timber.

Finally we believe the federal government can play a role in the emergence of new markets. Lumber production is one area, but other services and resources also exist and play an active role in the forest sector. The establishment of a community energy investment fund would give communities the opportunity to acquire equipment and set up infrastructure to use lumber for energy production at the local and regional level. Processes should be developed for a carbon credit marketing system. These processes should be tailored to small private woodlots which are parceled out and are not managed on the same scale as large public forests.

Pilot projects should be set up to encourage payment for environmental goods and services, the ability for private woodlots to contribute to a healthy environment, to air and water purification and the esthetic aspect of conservation of attractive landscapes and the environment. These environmental goods and services are useful amenities for society as a whole, and ones for which individuals and communities should receive compensation.

Yves Lachapelle, Forestry Director, Special Adviser, Strategic Issues, Quebec Forest Industry Council: Mr. Chair, I thank you for the invitation to participate in the work of your committee. The Quebec Forest Industry Council never turns down an opportunity to do what it can towards enabling the forest sector to emerge from the current appalling and unprecedented crisis.

The Quebec Forest Industry Council speaks for Quebec's forest industry. It represents the very great majority of companies active in Quebec in softwood, pulp, paper, paperboard and pressboard. Our mission is the defence of these companies' interests, the promotion of their contribution to socio-economic development, integrated forest management and sustainable forestry, and the optimum use of natural resources. Our council works with government bodies, public and parapublic agencies, organizations and the general public. It encourages responsible behaviour by its members with regard to the environmental, economic and social aspects of their activities.

The forest industry is Canada's leading industry, involving some 825,000 workers. In Quebec alone it represents $14 billion in sales, $3.5 billion in salaries, $1.5 billion in various taxes paid. Close to 250 villages and towns depend upon on it, 150 of them exclusively.

This is an industry spread out over the entire country, in a host of small communities.

There is concern for the fate of seal hunters and their situation requires that action be taken. There is a great deal of concern for the 500,000 auto workers working in several cities. Again, it is up to the government to shore up this industry. To do so it has granted $2.7 billion in loan guarantees. We learned recently that the government was getting involved to support GM and this is an important step.

But what of the 825,000 forestry workers? The forestry industry obtained $170 million in direct support for marketing.

As Mr. Dansereau mentioned earlier, the Quebec government recently invested in silviculture. Again, bravo! The silviculture industry is in serious danger and we share the view that investing in private forests is important.

But at this point, the survival of the Canada-U.S. softwood lumber agreement appears to matter more than the survival of the forest industry. That is of concern to us. What good will it do to save the agreement if the industry does not exist anymore? What will that get us?

In Quebec, the forest sector is experiencing two crises, one situational, and the other structural. It is significant that Quebec companies were the first to exit the market when prices started to drop. As soon as the market started showing signs of weakness we began to experience this crisis, as of 2005, due to our structural weaknesses. Mr. Dansereau earlier on referred to a number of weaknesses within the forest industry; we are very conscious of these.

Of course there is the small size of our trees — you cannot compare Quebec trees to those of B.C.; the remoteness and inaccessibility of our mature softwood forests; the dispersion of pine and deciduous growth in our deciduous forests, the small size of our mills and the underuse of their installed production capacity.

As an example, if you consider the mills in the Lower St. Lawrence-Gaspé Peninsula, the processing capacity used amounts to barely 30 per cent. So, mills are operating on a one-work-shift basis, 10 months per year.

There is also the very high cost of fibre, the highest cost for wood chips. The Government of Quebec which is responsible for forest management has begun to make a number of adjustments. We recognize that efforts have been made to address this aspect of the structural crisis.

Quebec mills are among the Canadian forest enterprises with the highest production costs, and also among those that have the most limited product ranges.

And then, out of a laudable desire to reduce greenhouse gases, our neighbour to the south started promoting fossil fuel substitution measures, and these have backfired for us. American kraft pulp mills found an artificial competitive advantage on the order of US$200 per metric tonne by burning spent pulping liquor, which put prices, and their Quebec and Canadian competitors, on the skids.

What should be done to get out of this crisis? And particularly, what should be done to prepare for the recovery? There will be a recovery, but we do not know when it will happen — we have no crystal ball. What should we be doing to ensure that Quebec's forestry companies are not the last to benefit from the recovery? We were the first to be affected, what can we do to ensure we are not the last to benefit from it?

We have told you several times that access to credit at a commercial rate is a short-term solution. That is what you did in the case of Bombardier, and also in the case of the automobile industry. In the Lumber IV agreement, the settlement of the last softwood lumber war with the Americans, over $1 billion was left on the table. That meant that companies had no money to do major repair work, and even less to invest in new techniques or in improvements to existing techniques. This point must be clear: the forestry is not asking for subsidies.

When we allow companies to go further into debt, we are not talking about subsidies, but we are not necessarily helping them. We have some companies that just need a little oxygen to get through the next year. And that is our main demand to government. The government has gone a great deal, we want it to continue, and we want access to credit at a commercial rate.

We are asking the government to give our companies access to credit at normal rates, because at this time — and you read the newspapers like everyone else — some companies are paying interest rates on their loans or on refinancing their debt that would make usurers blush.

As far as the agreement goes, will politicians be proud to say that they saved the softwood lumber agreement, if all our companies are closed down? Or if all our workers are unemployed or on income security? Or if the structure of our forestry regions is destroyed?

At the moment, the Canadian government has a legal opinion confirming that a measure of this type would not be contrary to the softwood lumber agreement. Why does it not take action now? There is no doubt that in the softwood lumber agreement, certain procedures are available. At the moment, we are negotiating about the use of these procedures. We think action is required.

Moreover, on May 29 of this year, the Quebec National Assembly unanimously passed the following motion:

That the National Assembly acknowledge the critical situation that Quebec's forestry workers, their families and communities are experiencing, and exhort the federal government to provide significant and urgent assistance to the workers as well as to the industry, a crucial sector of Quebec's economy.

We have to wonder when we see the different treatment reserved for the forestry industry and for other sectors — we were talking about the automobile industry a little earlier. Sometimes I wonder whether the fact that the forestry industry is spread throughout our resource regions, in small communities outside major centres, accounts for the fact that our industry is seen as less of a priority, less important for government, because there may be fewer voters in these regions, fewer ridings to protect.

We must not forget that Canada is a huge country. Most of the population lives in the south. Maintaining a competitive forestry industry plays a crucial role in a dynamic land use strategy.

We can only claim sovereignty over our huge country if we truly occupy it. Indeed, the current government understood this when it invested in the North to ensure Arctic sovereignty.

If Canada does not look after the forest sector and it fails to survive this crisis, the government will inevitably have to do what older countries have done and invest massively in land occupation policies that will cost a hundred times more than it would cost to act now to save our sector, which enables a dynamic occupation of the territory.

To those who think that the forest industry just makes two-by-fours, Quebec leads Canada in secondary and tertiary wood processing. Almost 50 per cent of our exports are made up of value-added products.

Yes, we did produce two-by-fours and newsprint for a long time, but the crisis merely hastened a certain trend that had already begun.

Thank you for your attention, I will remain available for your questions.

The Chair: Thank you very much, Mr. Lachapelle.

Carl-Éric Guertin, Communications Director, Quebec Wood Export Bureau: Mr. Chair, on behalf of the Quebec Wood Export Bureau, I would like to thank you for the opportunity to lay out our vision of the future of the wood products sector.

I will not refer to the current crisis. Today, I want to send a message concerning the future and explain our vision of our organization. Yes, the wood products sector in Quebec and Canada has a future.

My organization comprises businesses specializing in softwood and hardwood lumber, wood floors, prefabricated homes and engineering products such as roof trusses, joists and wall panels. The mission of our organization is to develop the market for Quebec wood products in as many countries as possible. We have offices in China, Japan, England and France.

In my presentation, I will try to demonstrate that there is a future for the wood products industry in both Quebec and Canada. There is a future, because we believe that wood is tomorrow's green gold. Wood and its use in construction and as an energy source constitute ways of fighting climate change, and this is now increasingly recognized on the international stage.

I will close with some concrete measures that could be implemented by the federal government.

According to the most recent FAO report on the state of forests in the world, the consumption of industrial wood in 2005 was 1.7 billion cubic meters and should rise to 2.2 billion cubic meters in 2020, and then to 2.4 billion in 2030, that is, an increase of 45 per cent in the use of industrial roundwood. So there will be a demand for our products.

The explanation for this long-term demand is the increase in the world population. In 2005, it was 6.4 billion, but this should reach 8.2 billion by 2030. In terms of economic growth, the GDP in 2005 was $47 trillion and should rise to 100 trillion by 2030. Environmental policies and legislation will influence the demand for wood products in the long term. Logging will be banned in more and more forests across the globe. Energy policies implemented with a view to using wood as a bioenergy resource will also influence demand.

I would like to explain to you the link between wood products and climate change. On the international scale, if we look at the sources of greenhouse gas emissions, we all know very well that there are fossil fuels. Deforestation in the tropics is a second factor that contributes to greenhouse gas emissions. Forestation, replanting and increased biomass can act as carbon sinks.

According to the IPCC report published in 2007, the net balance of greenhouse gas emissions is 3.2 gigatonnes of carbon per year. The largest sources of carbon emissions due to human activity are fossil fuels — replacing fossil fuels by wood-based bio-energy is one alternative — deforestation, which accounts for 18 per cent of greenhouse gases — more than transportation — and the third main cause of emissions is the production of concrete, a competitor of wood materials.

I would like to explain to you the global context of the change in forest area between 2000 and 2005, and later, I will explain the impact on the forest industry.

Between 1990 and 2005, 13 million hectares per year were lost throughout the world, the equivalent of the size of Greece. In Canada, there is no loss due to deforestation. Deforestation does not refer to logging. The definition of deforestation is the change in the use of the territory. For example, forests may be cut down to make way for farming or mining. So there is no loss of forest area in Canada. Our logging practices here are healthy. There will be increased pressure to find wood sources. Canada does not lose forest area and buyers with environmental concerns will look to us because our forests are well-managed and we have the largest area of certified forests in the world. In addition, our businesses are socially responsible. All this corresponds to the requirements of those seeking wood products and they will certainly turn their backs on certain regions of the world in order to source from Canada. So there is certainly a future in terms of supply.

We believe that the wood products industry has a shinning future. The experts from the Intergovernmental Panel on Climate Change (IPCC) say that substituting wood for concrete is a way of decreasing anthropogenic carbon emissions by 1.4 tonnes per cubic metre of wood used. The use of wood should be promoted in our commercial buildings and multi-storey structures because our homes in Canada are made of wood, but wood could be used more in our commercial and institutional buildings.

In France, President Sarkozy announced, on May 20, a tenfold increase in the minimum amount of wood to be used in new buildings as of 2010 as part of the French strategy to fight climate change. Currently, the French government requires that two cubic decimetres of wood be used for every square metre of surface area in new buildings.

The experts say that the use of wood in construction is a way of creating a carbon stock for the building's lifespan of 0.9 tonnes of CO2 per cubic metre of wood used. In other words, this table as well as the mouldings represent carbon. The more we use wood products, the more we store carbon and help fight climate change.

In July 2007, the minister of forests of New Zealand announced that all buildings up to four storeys funded by the government would have to consider wood as a main material for the structure and at the same time, it recognized that the use of wood is a way to fight climate change, for example, by carbon capture. Also, the production of wood as compared to steel or concrete is much less energy-intensive. So we kill two birds with one stone. We emit one less tonne of greenhouse gas while storing a tonne of carbon.

The ITCC experts also say that consuming wood to generate energy, either at the end of the wood product life cycle or other sources, and thus replacing fossil fuels, is a key way of developing wood use. This means that we should encourage the use of wood as a renewable energy source, in the production of cellulose ethanol, for institutional heating, and to heat our federal and municipal buildings using wood processing or logging waste.

It is important to remember that we believe that the wood product industry has a future. It will be tomorrow's green gold. Deforestation, the problem situations, and the environmental awareness of buyers means that they will look to Canada. However, we must be prepared for the recovery and to meet buyers' environmental requirements. We are certified, but we must encourage our businesses to implement traceability systems to meet government requirements. For example, if we wish to sell to the British government, we must be able to prove that our products are legal and sustainable using traceability systems based on sustainable forest management.

In the short term, we must develop the Canadian market and increase the use of wood in commercial buildings. For example, the federal government could put in place a policy to encourage the use of wood in its structures. The use of wood must be promoted in products such as mouldings, tables and doors. We must diversify our markets and reduce dependency on the U.S. market. We must also continue to develop value-added products. Mr. Lachapelle mentioned that in Quebec, 50 per cent of our exports are value-added, but for commercial buildings, new products must be developed that will allow us to build tall structures much more quickly. We also need policies to foster the use of wood in public buildings. There are other examples of this, such as Austria and Finland. Quebec has adopted a strategy to increase the use of wood. The Quebec government wants to set an example, and this strategy will certainly help the forest industry, but it is also a strategy to fight climate change. We must use wood waste, both from forest harvesting and at the end of a product's life cycle to produce bio-energy and replace fossil fuels. This must be taken into account, and policies must also be implemented to prevent the disposal of wood waste in landfills. What is currently sent to landfills could be recovered by the strand board and pulp and paper industries, but also to produce energy.

Senator Poulin: I would like to thank you, gentlemen, for your presentations. The information you have provided us with is very important for our study.

I always ask all our witnesses the same question, because the main objective of our study is to establish the main causes of the crisis in the forest industry.

"The crises" — as you so aptly call them, gentlemen — have been going on for a long time. I come from Northern Ontario, and so I clearly understand the impact that this lengthy crisis has had and continues to have on our communities.

Mr. Gagnon, as representative of the owners of this industry in Quebec, how have the owners of small sawmills analyzed the causes of this crisis?

Mr. Gagnon: We represent the owners of private woodlots, but I have an answer anyway. We do not own sawmills. We do not want to blame anyone and everyone, but we are feeling the crisis as well. As owners, we experience it every day. I understand that the context is beyond our control, that it is global in scope, but I am speaking to you as an owner. Not all of our owners earn their livelihood through the forest, but some of them do.

Although the crisis has been going on for three years, the owners still hope that the problem will be solved. The crisis is getting worse every day, but people are still optimistic and believe that a recovery will happen. We think that the worst is behind us. In a year or two, three at the most, I think we will see some change. That is what I believe. We try to remain positive. Otherwise, why would we be here with you today? There is hope and there are solutions.

For example, as owners — and I am not trying to blow my own horn — we agree with the idea of preferential interest rates for the forest industry. The people we do business with are in a very bad situation; they are on their way out. We are dealing with people who are poorer than we are at this time. How can we sell to businesses that cannot even manage to pay their bills?

We also think that the commercial construction industry should be encouraged to use wood. Initiatives have already been taken in this regard, but it is slow.

I hope that I have answered your question.

Senator Poulin: You are being very helpful.

Mr. Lachapelle, in your presentation, you drew our attention to the fact that the forest industry, by its very nature, is active in many small communities scattered throughout the country and that that has not been a good thing, compared to the automotive industry, for example, which is more concentrated in larger centres near the borders. The lumber industry was faced with the same challenge. What have you done to try to overcome the problems caused by this "scattering" of the industry?

Mr. Lachapelle: The industrial structure was developed in proximity to the resource. With the settlement of the country, a plethora of small businesses developed. For example, small villages grew up around sawmills. First the sawmill was built, then the church and then the village grew gradually around that. To find solutions, one must not assume that there is antagonism between the rural and urban communities, among other things. The important thing is dialogue and concerted action. Last year, we conducted an exercise with a large group of partners and we realized the importance of working with the Fédération québécoise des municipalités, which represents all the rural municipalities in our resource regions.

We are all trying to deal with the crisis and I appreciate what Mr. Gagnon said about all being in the same boat. It is not just part of the industry that will weather this crisis, it is an entire sector. The forest industry is so important for these regions that it is only if we present a united front that it will survive. We hope that those who can act will make the right decisions.

We are experiencing two crises: a structural crisis and a crisis of context. Currently, action can be taken by the provincial government to stem the structural crisis, while other context-specific action can be taken by both levels of government. The sector is united in that regard. We have seen this in the past year. Both sides have had to make a great many compromises. We know that we depend on private forest producers. Private forests represent 20 per cent of our supply. They are the forests that are the closest to our plants, on the best land and with the best conditions. We cannot afford to lose private forest producers.

I mentioned that the efforts made by the federal-provincial committee to announce investments in order to keep our people active in public forests as well as private ones are extremely important. We must keep these people active. We are one part of a whole and it is the whole that will weather the crisis.

Senator Poulin: Thank you, Mr. Lachapelle.

Mr. Guertin, one of your remarks touched me in particular. You said that the forest industry is tomorrow's green gold. Given that we are dealing with two responsibilities, the forest industry and the environment, what role does the federal government play in their future?

Mr. Guertin: First, I think that the federal government must promote the use of wood in the construction and renovation of its public buildings. It must also send a message to the international community that the use of wood is a way of tackling climate change. I think this message needs to be sent to support the industry, but also because it is the right thing to do. Canadians must realize that the use of wood is an effective way to reduce greenhouse gas emissions. That is the role the federal government should play.


Senator Eaton: That was very interesting and fascinating.

Mr. Dansereau, you mentioned that we should be aware of the difference between developing the forest and industrial development. Could you elaborate?


Mr. Dansereau: I am going to come back to the question asked by Senator Poulin, who was wondering about the causes of the dispersal of our industry. One of the major characteristics of the Canadian forestry sector as a whole, and this is true in Quebec, is the predominance of public forests. These forests are at the disposal of the governments and that influences the way they develop forestry policy.

What we can see if we look to the past is that access to these forests was used to ensure local and regional socio- economic development by fostering industrial development.

All the decisions that were made in the past were justified, given the situation at the time. People were seeking to develop plants to employ people in the regions near the resource, and the government was able to give access to these resources.

We can see today that, although these decisions were the right ones at the time, they have created problems today. Given the way we allowed forest land management to develop, we can see in the long term that we have been impoverished, not in terms of forest area, but in terms of the quality of the forests and the wood we find there. That is the answer to your question: the focus was on industrial development; people were not sufficiently concerned with forest development over the long term.


Senator Eaton: Do you mean forestry by-products, for example, medicinal and water, those kinds of things?


Mr. Dansereau: No, I am really talking about forests for lumber production. As Mr. Lachapelle was mentioning, one of the problems the industry he represents is facing is that our forests, in Quebec, are smaller and smaller and more remote. In the past the forest was big and close by. How is it this is no longer the case? It is because we developed short- term policies to come to the assistance of the forestry industry, so that the industry would work well and create jobs. That was fine, it was what people wanted.

At this point, we have realized that we should have been developing the industry and maintaining our nearer, rich and dynamic forests at the same time. We now must make those decisions. We must say that yes, the industry must be developed, we must ensure its transformation — and I think all of the presentations agreed on that point, the industry must adapt — but if we do not want to be facing the same problems in the future, we must also invest in silviculture and forest management today.

The new products, non-timber forest products, will be new approaches and supplementary markets, but in the short term that will not replace the importance of the processing of wood products.

Senator Eaton: Thank you.


Senator Eaton: Mr. Lachapelle, you were talking about the car industry, why it received help from the government and why the forest industry has not. Is it because the crisis was immediate and the car industry was forced to come up with a survival plan?

We have been listening to wonderful witnesses over the last many weeks, and unfortunately there is not one plan, or is there? Is there one plan that you could take across this immense country, present it to the government and say, "This is the plan"?


Mr. Lachapelle: You are right, there is no easy comparison. There are limits to comparing an automobile industry with just a few players to a forestry industry where there are a great many businesses and a very great number of facilities. There is no single owner of the industry in Quebec. I agree with what Mr. Dansereau was saying at the outset, that consolidation is not the only thing. Consolidation is only one component in the reinvention and reorganization of the industry, of products and procedures. Therefore I see that it is more difficult in the forestry industry than in the automotive industry.

Having said that, what we need is access to some financial breathing room for businesses, and that is the primary reason why I appeared before the committee today. We have very good businesses that have made enormous efforts in terms of diversifying their products, and they are actually at the limit of their credit; their lines of credit are maxed out. When you refinance your line of credit, you find yourself with prohibitively high interest rates. Twenty per cent would be a low rate in this context.

It is in this sense that I believe we cannot have an action plan like the automobile sectors' plan. It clearly cannot be as simple as in the automobile industry, but the issue is how we can help the survivors to be ready for the recovery. Perhaps I am an optimist; I know that in some sectors such as the quality hardwood sawmills, we believe that by the end of the year we will see some recovery. If we assume that we are a year away from a recovery, how many businesses will be able to survive that long? Because we have not seen the bottom of the barrel yet.

Senator, we know of the increase in the number of businesses that have put themselves under bankruptcy protection, but as far as small businesses are concerned, many will have to table their financial statements soon.

It is therefore clear that the action to be taken cannot be the same; we cannot say: "table your restructuring plan and if it is satisfactory we will allow you to survive."

Mr. Dansereau: I wanted to add that the comparison Mr. Lachapelle is making is not such a bad one, as far as Quebec is concerned in any case. AbitibiBowater probably holds 30 per cent or more of supply rights. It is under the protection of the Companies' Creditors Arrangement Act and is in the process of preparing a recovery plan that it will have to get approved. This company, like the car companies, will have to change the kinds of products it makes and streamline its production facilities.

The comparison remains a good one. What we can see is that you have to be desperate before making these decisions.


Senator Eaton: It is a fair comparison, but it is different. As you said, the auto sector is Southern Ontario. The Canadian forest industry is coast to coast to coast. There are many different parts to the industry, as we have learned. It is a very difficult issue. There is a difficulty in finding a solution to so many problems that share many of the same underlying reasons.

Mr. Dansereau: If you take a good look at the volumes, you will find out that there are not that many players in the Canadian forest industry. There are many small ones, but many big ones, too.

Senator Eaton: Finally, Mr. Guertin, I could not agree with you more. I have been reading much about wood being the next green gold, but I do not see any marketing. Marketing is such a huge tool these days for consumer products. Where is your marketing campaign?

Mr. Guertin: It is coming. It is true that it is coming.

First of all, NRCan has a program called Wood First. It is $10 million over one or two years. That is a program from coast to coast to develop a non-residential market in the U.S. and in Canada. Part of that money comes to my association, and it will be matched by the provincial government to do a campaign. We have formed a coalition called Coalition québécoise du bois, which is comprised of NGOs, unions and universities.


Senator Eaton: Will that be the case across the country? It should be.


Mr. Guertin: I will finish with Quebec, and then I will talk about the rest of Canada.

We have formed a coalition. We will meet and come up with a marketing plan to disseminate information about wood and how wood is good for tackling climate change. We have formed this coalition because the forest industry has difficulty selling itself. If you say to the general public, "Use wood," and the message comes from the forest products industry, I am not sure that the message will be well received; but if other NGOs agree with the concepts of the Intergovernmental Panel on Climate Change, as well as architects and unions, they will disseminate information, and I think that is the way to go. That is coming.

Senator Eaton: Have you seen the booklet sent out by the steel workers on why wood is so green?

Mr. Guertin: I have not seen it, but there is a brochure from Europe called Tackle Climate Change: Use Wood. There is a Canadian version of it, and there will be a Quebec version as well.

There are other initiatives in the rest of Canada, but in the province of Quebec, we decided to form a broad coalition of people who believe in using wood to tackle climate change. That is the goal. If you talk about forest practices, the general public will not believe we have good forest practices, but when you present the big picture from around the world, people will understand and that is the way we will go.

Senator Eaton: Good luck.

Mr. Guertin: Thank you.

Senator Mercer: "Fascinating" is the word that Senator Eaton used, and this study has become fascinating. Every time someone testifies, we uncover something new.

Your reference to this program at NRCan should really give us a clue that we should invite their officials to appear as witnesses down the road.

We have talked about things being at liquidation level pricing and private forests really being the canary in the coal mine. We also talked about the fact that the first ones hurt, and we really do not want to be the last ones in the recovery. Someone described this the other night as a perfect storm, and I think we are there.

I want to go back to our recent study on rural poverty. You mentioned access to credit, which has become a very serious problem. Senator Duffy is sponsoring a bill on the farming side. We obviously will have to start talking about access to credit in general in rural Canada. We discovered serious social problems when we did the rural poverty study, one of which was that the bankruptcy rate in rural Canada is surprisingly high. Even though many of these people have woodlots, this is not their principal area of income. They are farmers or fishermen and do other things. Could you enlighten me about the bankruptcy rate?

Another thing we discovered in that study was an extremely high suicide rate amongst farmers, which we were surprised to learn, or at least I was. These are the social and personal effects of what is happening in this crisis now.


Mr. Dansereau: We mentioned in our presentation that some private woodlot owners are in difficulty, particularly those drawing significant income or their main income from their activities. The reasons are simple, as these people have to invest in their equipment and in their land in order to produce.

Contrary to what happens on public lands, private woodlot operators must have equipment and machinery, yes, often on a smaller scale and therefore less expensive, but they also have to invest in their forest properties. And those who have followed the evolution of property values know that those values are on the rise.

People invest in order to buy land, to buy wood rights and machinery. We demonstrated the importance of the drop in markets, the drop in prices and the losses in volume. In some areas, it is more significant than the situation in general that we presented to you for the province of Quebec; there are areas where private woodlot owners have no market, no possibility of selling their wood. They must continue to face their financial obligations.

People who have built wood production businesses have to liquidate their equipment, and in some cases, sell off or liquidate their forest properties. They are seeing their businesses disappear. It is no surprise that in that sector, in rural sectors facing problems in forestry and agriculture, where we are seeing the general economic slowdown, there is despair that results in higher bankruptcy levels and potentially in higher rates of suicide.

I would be dishonest to say that we have seen that at home, but in the rural context, it is clear that there are crisis- level problems.

Mr. Gagnon, who is also a president at the regional level can certainly testify or speak to you about the real calls for help that he receives from the producers that he represents.

Mr. Gagnon: Yes, I would be pleased to take the floor for a few minutes. What we are currently experiencing in our region, as well as at the provincial level, is the lack of a market for wood. It is true that no factories are buying. In fact, many have closed and others are running at half speed.

When we talk about the suicide rate, I must tell you I am also a farmer and a woodlot owner. Even if it hurts, we are sometimes obliged to sell a woodlot. Even if at times we have several wooded lots, we call them woodlots but they really are like our lunch box. It is heartbreaking. Personally, I have had to refinance my properties three times. I am certainly going to continue working, but I ask the good Lord to let me live to the age of 90 so I can leave this to my children without any debts. I am 62 years old now, and I am getting ready to refinance for a fourth time. It is not easy nowadays. It is true that the suicide rate and the discouragement is greater now than it was, in the rural world, both for farmers and for private forest operators, I can tell you that. I am now working on things I can do with these people. These are people who do not open up easily. The owners and the farmers are proud people, but in a good sense. These people do not talk about their situation. It is true that the situation is currently of great concern for rural people, both farm producers and private woodlot operators.


Senator Mercer: These are real people problems, and these are real people. Sometimes we forget about that as we are talking about these grand schemes.

Mr. Dansereau, you talked about outdated business models. How do we change these models as we prepare for what we hope will be a very positive upturn in the market? When we come out of this mess, how do we look better and be better prepared to ride the wave? There will be another downturn. Hopefully it is 20 or 30 years away, but we know it will come because it always does at some point. It is cyclical. How do we change the outdated business models to ensure that Canadian businesses and Canadian woodlot owners are better prepared?


Mr. Dansereau: I am giving you the point of view of a resource producer and not of an industrial processor. How to prepare? Courageous political decisions need to be taken. The industry of the future will not look like the one of today. The main development tool of our governments, particularly provincial governments — as I mentioned earlier — is access to public forests. If governments want to support the industry, which today is in crisis, and which provides jobs, they have to ensure that these companies can access the trees.

In the industry of the future, some of today's companies will survive and new ones will also be created. The government must have more say in how it grants access to public forests in order to direct the industry's development; industry alone cannot make all the decisions.

Yes, things are changing. My colleagues mentioned this and I think they are right. Some companies are extremely dynamic, and they have begun to look at value-added sectors. However, there are still companies which operate under an old business model. If the building materials sector picks up again, a lot of people who have been talking about value-added will go back to the old way of doing things, because everyone will want to hurry up and get the machine started again, to produce two-by-fours in order to supply the market. But the government has to intervene at that point. It has to see farther than short-term market signals, especially in the forestry sector.

The forests on which the industry is based should be managed over 50, 100 or 150 years. It takes a lot of courage to do that. The government should ask itself what its vision is for this industry. It must have policies which give access to natural resources, and it must implement the plans to make this a reality. The government must reinvest in communities and not allow equipment to deteriorate over time. This requires vision and courage.


Senator Mercer: We need to link some of the things you are saying. The Quebec Wood Export Bureau and federal agencies involved in export development and industrial development all need to be involved in helping, not just to retool at the local level but to retool higher up. We have to stop viewing ourselves as only providers of two-by-fours.

In Atlantic Canada, we do not have a lot of value-added to what we produce, other than paper. You do have a value-added industry in Quebec. How are they surviving? Are we seeing, as we see in other industries, a fair amount of the industry being moved off shore to Mexico, China, Malaysia and other places where there are lower labour costs?

Of course, we ship raw materials, which come back to us in finished products that we have to buy. It seems to me that we are missing a step and an opportunity here. Is this having a big effect on the industry in Quebec?


Mr. Lachapelle: I will try to answer that question. The restructuring of Quebec's industry must happen through innovation. The Société générale de financement du Québec has received about 650 applications to invest in projects to change processes and products, so that companies can even benefit from economic downturns.

Take the newsprint sector, which is a traditional market. Despite the high quality of paper manufactured in Quebec, which is based on the quality of black spruce fibre, the market for this product is shrinking. It is going down by about 8 per cent per year. A lot of money has been invested in research. In fact, the federal government has contributed greatly to research, in particular through FPInnovations Paprican. So the medium term looks very promising.

There is also talk of nanocellulose. Instead of using the larger part of wood fibre, part of that can be used in new materials, which in turn could be used in the development of new and much greener products. As well, there is also a huge energy potential, which Mr. Guertin spoke about at length.

As for the lumber industry, you are right, the Chinese have been buying Canada's lumber, and send it back in the form of higher-priced, processed products, which our companies could not compete with. It was a real problem. Let it be said that the quality of our products is such that they are still competitive and that there is still a demand for them. However, this does not mean it is good for everyone. As for the development of new market niches, in which products manufactured at the second or third processing stages would be sold, even if Quebec is very advanced in this area, it has no choice, it will have to move ahead with the development of such new products which are currently being developed, and for which new uses are being found, as well as new business concepts.

As for the industry, there is an enormous amount of work going on. I believe that the commodity sector will always be there. However, not everyone will remain in this sector. There will be far fewer players to compete on international markets in the commodity sector. What remains important is the entire chain of production. It applies to the entire forestry sector. We are talking about companies that are currently using the by-products or co-products from the first stage of processing, and which create products like roof trusses, I beams, housing components, pre-fabricated housing units, and so on. That is the way of the future.

As for the forest supply, I share the concern of our friends who are the owners of private woodlots. One of the things which worries us, is that one day there will be no producers left. One day, all the workers will be gone too. There are people like Mr. Gagnon who learned the job at a young age and who are still willing to get up at five in the morning to go to work. But the longer the forestry sector is in a difficult situation, the more our young people will become discouraged and look for work elsewhere. Even if there are great opportunities, great companies and good markets, it all begins there. If the owner of a private woodlot is not involved in the production of wood from his forest, even if you have the best system of the world, it will lead to nothing.

In his presentation, Mr. Dansereau referred to — I do not remember his exact wording — individual savings funds which would allow owners to use the money earned during the good times to upgrade their forests. In fact, I wanted to support what Mr. Dansereau said about the tax status of lumber producers.

We are trying to keep up, but it is clear that we will never adapt quickly enough. Mr. Dansereau said that sales had dropped by 40 per cent, and I do not even know whether in 2009 we will have a harvest rate of 40 per cent on public lands. This is truly a disaster. All of these specialized workers and entrepreneurs who had invested between $1.5 million and $2 million in equipment have had to pay back the banks. Have we lost these people?


Mr. Guertin: There are a lot of responses that I could provide. First, you talk about overseas competition in China, Malaysia and Indonesia. They are doing mass production and, to differentiate ourselves, we need to be able to have a niche market. The companies that are still alive today and are winning are moving to a niche market, not mass production.

In terms of furniture, we need to do custom-made production and to respond quickly to what the customer wants. We should not be doing massive production or middle quality. We need to produce high-quality products. We also need to table the environmental credentials of our forestry products. We have certified products and forests in Canada. We need to market those credentials.

Those I call the winning companies are those who are able to cross this crisis at the moment by doing a bit of export. They are what I call in French, "une compagnie agile." They are able to turn around quickly what the customers overseas want as a product. They need to go to overseas market to develop new partnerships and new customers. They need to go out there.

If they sit down and use the old models, they will not win. They need to develop niche markets, environment credentials and to go overseas and be agile. They have to say, "The market in the last few months was hot in the Middle East. Tomorrow, it will be the U.K." They need to be flexible.

We must also support R&D. We see buildings in Europe being built nine storeys high, with the first floor made of concrete and then eight storeys of wood. We also need to promote that in Canada and encourage R&D so that we can develop products to construct bigger buildings in wood.

Senator Duffy: We are very concerned about this issue and we appreciate your input.

A word to those in the industry: We understand that it is the largest employer in Canada, and in many communities it is the sole employer. We are seized of this matter and are determined to help make a difference. You are providing us with important information on this subject matter today.

For your information, in the last budget — and I think Mr. Guertin alluded to it — $170 million was allocated over two years to deal with a number of the issues you raised, including new technologies, pilot projects to demonstrate new products; the very sorts of things are you were speaking about.

Earlier, when we held our hearings, the Canadian Institute of Forestry was here. They have a remarkable DVD in which they show the construction of up to nine- and ten-storey buildings using wood, as you have mentioned. Senator Eaton has become their prime salesperson now, I think. We asked how far around the world that DVD had gone, and we were told that it will soon come out.

What is going on? We are in a crisis. We have a product to sell. More than a month has gone by and we have not seen those DVDs. I think they should be flooding the world. They cost a buck a piece to make. It is frustrating to me that two months later we are still talking about telling the world what we have and telling Canadians how they can build using wood and that, when the recovery comes — which it will — this is the way to go. It is greener, it is good and it is Canadian.

Mr. Guertin: Why are we not moving as fast as you would wish? The forestry products industry in Canada is from coast to coast. There are many associations and players: pulp, paper, wood panels and engineered wood products. There are many associations. We have formed within Canada an association called Canada Wood, which represents different organizations, like mine, who work on overseas market development.

It sometimes takes time to make the people work together, but we are working together. There is no doubt about it. Why this product is not out yet, I cannot answer. However, the industry is working together in Canada. There are many different ongoing initiatives, but I cannot say anything about this project.

We have been doing promotion overseas — called Canada Wood — with other organizations, and I can tell you that we have had successes.

Senator Duffy: Mr. Gagnon, when we talk about private woodlot owners, there is a bill now in Parliament to expand the farm loans act. Would your group consider looking at that and coming back to tell us whether there is a role for concessional financing for woodlots and those involved in silviculture and your industry?


Mr. Gagnon: Yes, we are open to that.


Senator Duffy: It is very much like CMHC, Canada Mortgage and Housing Corporation, where the government would guarantee the loan. We are doing it now for farmers. We are also providing tax concessions and loans for the inter-generational transfer of farms. The woodlot operators would be in much the same situation, and we would be open to have a serious look at trying to use that.


Mr. Gagnon: Yes, we are open to examining that possibility. In fact, in the current economic crisis, it is not easy to get a loan. When you go to the bank or to the coop, and you tell them that you work in the forestry sector, you are immediately turned away. Getting financing is a very real problem for the owners.


Senator Duffy: Someone used the phrase "20 per cent." Is that true? That is incredible.


Mr. Lachapelle: Indeed, some loans have interest rates of over 20 per cent for the refinancing of companies' debts. As soon as a company has been labelled at-risk, the rates skyrocket. Commercial rates start at about 7, 8 or 9 per cent, but the highest rates exceed 20 per cent.

Mr. Dansereau: Senator Duffy, I wanted to tell you that from the point of view of the federal and provincial governments, the production of lumber from private woodlots is considered an agricultural undertaking. Private woodlot owners already have access to agricultural funding programs both at the federal and provincial levels. Of course, these programs could be improved to help operators, but in a crisis situation, what people need is not a heavier debt load, or to do anything hasty, but a reprieve. What is necessary in terms of credit is a suspension of payments on loans, and subsidies to help companies pay the interest on the borrowed capital. If governments could offer this in the short term until the crisis blows over, people will be able to weather the storm without having to sell off their assets.

The guarantee the government has given financial institutions is this: the financial institutions are to grant companies a suspension of payments on the capital amount, so that the government can help private woodlot owners, among others, to pay the interest on the capital amount.


Senator Duffy: Would our trade obligations allow that kind of subsidy?

Mr. Dansereau: I would think so. I am not sure for industry. I know about woodlots. I think it would be all right. Such a program already exists at the provincial level for operators on public lands. It is in place now in Quebec.

Senator Duffy: Is it about 75 per cent of the forests in Quebec that the provincial government controls?

Mr. Dansereau: It is 90 per cent.

Senator Duffy: Your real case is in Quebec City, not here.

Mr. Dansereau: Part of the money —

Senator Duffy: We are glad to see you anyway.

That was only a joke. We are all in this together, and we will do what we can to help.

Senator Cordy: We all agree that we have to do the right things now to ensure that the industry is viable when the economy comes back.

I wanted to talk about access to credit and Senator Duffy has done that. Like Senator Duffy, I agree that interest rates of 20 per cent are like deals that you would make in a back alley with daily interest rates. It should not be the case at a time when the Bank of Canada's lending rate is less than 1 per cent.

We are learning that when one of the largest industries in Canada asks for a loan, either they do not get it or the interest rates are 20 per cent or higher. In my opinion, that is totally unacceptable.

I agree with you that the federal government should be providing more grants. I think you called it payment holidays. Some industries in Canada would seem to be receiving substantial amounts of money. I am not criticizing that; I am simply saying that when an industry like the forestry sector has huge job losses, there seems to be something lost in balancing it.

We also see it in Nova Scotia in the lobster industry. I saw trucks by the side of the road last weekend selling lobsters in an effort to at least cut out the cost of the middleman.

Mr. Lachapelle, you expressed frustrations with the softwood lumber deal. I am new to this committee and the lumber file. You said that $1 billion dollars was left on the table by Canada, which is a lot of money. What do you mean by that? It was left on the table for whom? Is it Canadian money?


Mr. Lachapelle: It is the forestry companies' money. The softwood lumber war — I was referring to Lumber IV — has been going on since the beginning of the 1980s, when the Americans objected to the free flow of our products across their borders. Under the previous agreement, the export duty system collected $5 billion dollars from the industry, which was reimbursed only $4 billion. So the Americans kept one billion dollars. In my statement, I raised this issue only in the interest of highlighting the problems of liquidity.

Over the last decade, the Quebec forestry industry reinvested about 87 per cent of its profits into processes and plants. Since the market was strong, our products were sold in the United States and we were able to pay the $5 billion in duties. However, our debt load rose and the reimbursement of the $4 billion allowed us to pay back most of that debt. But we ended up without any liquid reserves. Without any available money, it has been difficult for our companies to maintain their operations and to adapt, especially from a technological point of view.

In Quebec, we have an advantage. How is it that Quebec has been able to export its products from smaller-sized trees to the United States? The members of the American coalition asked themselves this question in the course of their discussions. One of the explanations for this is the technology we use. Quebec is the champion of spinney processing. Quebec needs about 1.4 cubic metres of wood to produce a thousand board feet. However, in the United States, they need seven cubic meters of wood to produce the same amount of saw timber. So our technology is what makes the difference. But if we are to remain at the technological forefront, we must constantly reinvest. We could do so in the 1990s, but that is just not possible anymore. Our American competitors have received one billion dollars of our money and we have no cash reserves. The problem was due to the fact that, structurally, we had too many companies and we did not build new plants. Changes had to be made, because the situation was evolving.

I talked about reinventing the forestry industry. However, we cannot restructure the companies operating in this sector, because of financial problems. Previously, it was a lack of cash reserves, but now it is simply a matter of survival.

Yesterday, I was travelling with Minister Lebel and told him this: "We need more help. We need to survive. We are aware that not every company will survive, but our sector must be ready for economic growth when it happens again."


Senator Cordy: Mr. Dansereau, you spoke about one of the pilot projects where forest landowners would provide environmental services. This seems like a great time to do that because of the downturn in the economy. Going back to Senator Eaton's comment, this would be one of those public relations things that would be a good sell to the public. You said financial support from the federal government would be beneficial. Are you receiving any federal support for pilot projects within the industry?


Mr. Dansereau: We do not currently receive that type of help.

I was on a panel with Peter DeMarsh, the president of the Canadian Federation of Woodlot Owners. We were there at your first meeting. Mr. DeMarsh explained that this was one of the projects of the Canadian Federation of Woodlot Owners.

We are taking action and have made representations before the federal government to get it to fund projects like those in the farm sector. Indeed, some projects have been funded, especially in Western Canada, where farm producers received payments for the environmental services they were providing, which involved certain practices to maintain water quality and the beauty of the landscape. These kinds of practices exist elsewhere in the world.

In some countries, such as Switzerland, farmers are paid to make sure that their cows remain in the fields so that tourists can appreciate them in the beautiful landscape. The City of New York has a management structure for its drinking water supply reservoirs. Rather than build new water purification plants, which would be very expensive to both build and operate, the City of New York decided to implement financial incentive programs for producers of wood and agricultural products who operate near watersheds, to encourage them to adopt practices which protect the water quality. These people are paid for that.

In the pilot projects we are promoting, we would like each province to be able to experiment with different approaches, where they are paid for their trouble. Producers would have to deliver a service. We should be able to measure the impact of the new practices on the air quality or on the beauty of the landscape, and on other services as well, to determine the economic value added to those practices. This is currently under development. However, it is not yet happening in the forestry sector in Quebec or in Canada.


Senator Cordy: Have you tried to obtain funding? Have you spoken to anyone?

Mr. Dansereau: Yes, we have.

Senator Cordy: With no success?

Mr. Dansereau: No results yet.

Senator Fairbairn: I have more of a comment than a question.

Not so long ago, I was sitting over on Parliament Hill having breakfast with a large number of poultry farmers, one of whom came from the area of Abitibi. He was not at all talking to me about poultry; he was talking to me about exactly what you have been saying today, and he was in quite a state of anxiety.

We have heard a great deal in the last several weeks, but I have to say that today you have given us one of the most profound senses to come out on this issue.

We know that this is a big problem in all parts of Canada. I am from Alberta. We have had lots of problems with mad cow disease, bad climate and the price of wheat dropping, but we are now in a state of anxiety because of the beetle that is about to creep across from British Columbia.

You have given us an outstanding performance today, and we are very fortunate to have you here. I simply wanted to say that what you are telling us is that the federal government must step in on this. The province of Quebec has a background and a story that is in some ways more profound than in other parts of the country, even though the forestry issue is a national issue. Listening to you today, it is more than just an issue in your province. I simply want to thank you for coming and being so open in your comments and your suggestions because that is what we have to hear.

I gather from what you have said that you are getting an open ear from the nation's capital, and I hope that in your conversations you and all the people in other parts of the province of Quebec are being heard in the way you have put this forward today. I hope profoundly that the response will come in a method that will allow you to move ahead. It is a tough row. You actually ought to be on the road; the way that you are allowing us to learn has been profoundly helpful today.

Obviously, we will do everything we can in this committee to assert as much pressure as we can to make sure that what you are saying is being understood and hopefully helped along. I want to thank you for doing this. Keep your spirits up and, as I say, hit the road and let everyone hear what you have said to us here today. It has been very important and we are grateful.


The Chair: Since we are running out of time, I would like to ask you three questions, and I would ask you to send in your written responses at a later date. I find the attitude of the financial institutions unacceptable. They are charging interest rates varying between 5 per cent and 20 per cent.


It is unbelievable and, in my mind, it is unacceptable. It is unbelievable, in a time where we should all be part of —


What structure should be put in place immediately to counter the unacceptable attitude of financial institutions?

We heard from representatives of La Grappe agroénergétique des Coteaux, which is located in Abitibi. They talked about community energy investment funds. Do you think that this type of fund could be a solution?

Mr. Dansereau: The Fédération des producteurs de bois du Québec is already working on a project which it would like to present to the authorities within the coming weeks or months. We would be pleased to send you a copy.

The Chair: It is possible that we will ask you to appear again.

We often discuss issues related to softwood and hardwood lumber.


People tell me that in softwood there is a lot of research and development.


I have been told that as far as hardwood is concerned, Canada is lagging behind because it does not conduct enough research in this field.

I would like to know what your recommendations would be with regard to the role the Canadian government should play.

Ten or 15 years ago, it would not have been possible to gather all stakeholders around the same table, as we are doing today, to find common solutions for saving jobs in the forestry industry and for preparing for the next economic upswing.


On behalf of the committee, thank you for appearing today. Your presentations and responses were enlightening.


Your testimony has been very enlightening. We may invite you to appear again before the end of our deliberations. I have asked the analysts to share your observations with committee members in order that we conduct a follow-up.

That being said, thank you very much, and we wish you a safe return to la belle province of Quebec.


Senators, we will move in camera for a few minutes.

(The committee continued in camera.)

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