Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 6 - Evidence - Meeting of May 27, 2010
OTTAWA, Thursday, May 27, 2010
The Standing Senate Committee on Agriculture and Forestry met this day at 8:05 a.m. to study the current state and future of Canada's forest sector.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Good morning, senators and witnesses. Before proceeding, I would ask the indulgence of all senators. I would like to inform you that His Excellency Felipe Calderón, President of the United Mexican States, will be delivering an address to Parliament at 10 a.m. I would like to have consent that we close this meeting at 9:30 a.m. rather than 10 a.m. I have shared this information with the witnesses and they have agreed.
I see we have consensus. Thank you.
[Translation]
I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry..
[English]
My name is Percy Mockler, and I am a senator for New Brunswick and chair of the committee. I would like to introduce the witnesses. Today, we welcome two academics, Tat Smith, Professor and Dean, Faculty of Forestry, University of Toronto; and Jack Saddler, Dean, Faculty of Forestry, University of British Columbia.
Before hearing our witnesses, I would like to ask the senators to introduce themselves, starting on my left.
[Translation]
Senator Robichaud: Fernand Robichaud, from New Brunswick.
[English]
Senator Fairbairn: Joyce Fairbairn, Lethbridge, Alberta.
Senator Mahovlich: Frank Mahovlich, Ontario.
Senator Plett: Don Plett, Manitoba.
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
[Translation]
Senator Rivard: Michel Rivard, from Quebec.
[English]
The Chair: The committee is continuing its study on the current state and future of Canada's forest sector and looking more particularly at biomass. Thank you for accepting our invitation to appear before us.
[Translation]
I would now invite you to make your presentations, starting with Professor Smith.
[English]
He will be followed by Professor Saddler.
Before hearing from Mr. Smith, I have received documents, senators, in only one official language. I ask permission to distribute them and I will ask our clerk to have translation done on those documents to be redistributed individually after the meeting. On this, do I have consent?
Hon. Senators: Agreed.
Tat Smith, Professor and Dean, Faculty of Forestry, University of Toronto, as an individual: Thank you for the opportunity to be here today. I would like to direct my remarks to the overall supply chain related to bio-energy and the bio-economy. The three documents that I sent to the committee include a report we wrote for NRCan, which was an analysis of sustainability issues related to biofuels. In this context, it referred to the development of biofuels that might come from the forest and new sources of biomass for that, as opposed to first generation biofuels. That is quite a thick document. It is not the document that was distributed to senators this morning. Included was the annotated bibliography that underpinned that. We submitted that study to NRCan, which analyzed the forest and agricultural sectors in Canada. We looked at the locations of biomass, looking at the opportunities for developing this new bio- economy, and trying to look at the sustainability issues related to that. Therefore, we looked at economic, social and environmental issues related to that and proposed a framework for moving forward.
The document that has just been handed out is just about to be published. Given the context of your request for us to speak here today, this chapter might be helpful in understanding where bio-energy and the bio-economy fit into the bigger perspective. The document will be released during the upcoming International Union of Forestry Research Organizations in Korea this summer.
I will pull from these documents a few points that might be helpful in our discussion today. We are interested in your questions and knowing how to get further into the subject.
The first point from our analysis is that the potential for the forest and agriculture sectors to meet more of our renewable energy needs is vast and not yet realized. The analysis shows that there are several challenges to realizing that potential. In the Canadian context of the forest sector, we face a series of challenges. Some of those challenges relate to the land tenures and who has access to the forest. Some relate to the complexity of the supply chain, including the spread out nature of the forests in this big country.
We also have some challenges related to realizing the potential of this fibre and all that is contained in the biomass that is being grown in our forests and on our agricultural land because of the historical way in which our industries have been configured to be the best and the most competitive in what they do. As you know, the industry that has been quite competitive in producing some products but has not been configured in a way to realize the others.
Also known from the analysis is that this whole topic related to biomass and greater utilization of the fibre that we are growing in our forests and on our farms is often of concern to some constituencies. They are concerned that if we take more nutrients, more organic matter, and more structural forest material, it might be a problem for the woodpeckers, beetles and other life forms that live in the forest as well as the forest itself.
Mr. Saddler and I are both involved in the IEA Bioenergy program. We have been working with international collaborators to understand how one can have a scientific underpinning for social, economic and environmental sustainably, while utilizing more material and at the same time sustaining all those values that we want to see in our forests and on our farms.
We think we have a framework for logically moving ahead if the parties can convene and agree on where the values are that we want to protect. As you may have seen recently in some discussions in some of the provinces, that can be quite a polarized conversation at times. How the parties convene, ensure a thorough, objective analysis of the opportunities and end up with a policy that enables us to logically move forward can be a bit challenging. The progress with which we are moving ahead in Canada is challenged a bit by that process. In terms of realizing the huge potential, we need to focus the attention of the best and the brightest on trying to solve these problems so we can make good progress.
I want to say this in a way that sounds like a constructive comment: We could do a better job at stitching together all the parties that could bring their minds to bear in solving some of these challenges. Mr. Saddler and I have a close working collaboration with industry, the federal and provincial governments and NGOs, but we could do a better job of putting those communities together in a way that solves problems in real time and moves us forward instead of wondering whether 10 years from now we will still be discussing many of the same questions. I would urge that we do all that we can to ensure these constituencies come together. At times universities are involved in solving these problems and at times we are excluded from the conversation. We could do a better job at stitching that together. I would urge as well that we ensure that Canada is a strong player in the international collaboration of this work.
Mr. Saddler and I are both task leaders in the international bio-energy collaboration that includes about 23 countries. Sometimes Canada is a strong player in that and sometimes we learn from our Finnish and Swedish colleagues. We see how national- and provincial-level policies can provide a stimulus for teams to form so they can solve problems. In real time, this can reduce the cost of feedstocks to the suppliers and open up markets. Sometimes our policies are not as strongly focused on getting us to new places so we find ourselves unsure of our priorities. Certainly, we would urge Canada to continue to be a strong player and to continue to provide leadership.
An ongoing challenge is determining where the resources should be allocated. From my perspective, I would urge Canada to maintain that presence in the form of strong international leadership. We have a marvellous forest sector and we need to ensure that it is as well focused as it can be.
Jack Saddler, Dean, Faculty of Forestry, University of British Columbia, as an individual: I greatly appreciate the opportunity to speak with the senators here today. From a university perspective, Mr. Smith and I have the luxury of looking longer term, so we do not have to look at it within a political time frame of being re-elected. From a university point of view and a forestry point of view, we look at it within a 50-year time frame. Hopefully, by the time the students we train are 20 years old, they will have picked up skills that will be relevant for another 50 years, and most trees in Canada last 100 years. One issue that we are dealing with now is that many of the applications from the forest were not conceived of even 20 years ago, never mind 50 or 100 years ago. Our challenge in Canada is determining whether we are using this incredible resource wisely.
We present at university with the basic fact that effectively our modern society is based on hydrocarbons, such as coal, oil and gas, and that there is an inevitable move toward carbohydrates found in agriculture and forestry. You may have heard from other witnesses about the conversion of the Five Fs — food, fuel, fibre, feed and fertilizer, for which we will compete globally. We use the wood for fibre but it will also be used for fuel. Canada is blessed with water resources. From a Canadian perspective, moving from a hydrocarbon economy to a carbohydrate economy will take a while, but it is inevitable given that the oil and natural gas will eventually run out whereas the forest can continue to grow and be sustained.
At one time Canada was a world powerhouse in terms of technology with pulp and paper or solid wood but there has been consolidation. The big companies tend to be Finnish, Swedish, and American. Many of our companies are middle sized, which is not a great place to be. If you are small and nimble, you are fine. If you are big, you have the resources to survive a resession. Being in the middle is a bit problematic.
In the oil and gas industry, we have oil refineries. The big bulk products are gasoline or diesel, but the 2,000 other products that give you plastics, dyes, et cetera make the whole thing profitable. In the forest sector, we will still have pulp and paper and solid wood as the main products, but in the same way as the refineries, we will have the energy and the chemicals. In the past, before we had oil, we had naval stores. From trees we got turpentine and other chemicals that we used in sailing ships.
In our perspective, we are fortunate in the university sector because of the forest sector in Canada. We attract some of the best and brightest from around the world, and many of the bright ones stay here and add to our collective, while others go back to their own countries.
We had a big congress on forestry in Vancouver last week where about one third of the delegates were from Asia. Things are changing. The biggest group was from China, where the forest was not so much for pulp and paper or solid wood but for dust suppression, stopping the dust from coming into Beijing, and water handling. Those are other values of forests.
I wish to make three points. First, it is inevitable that the bio-economy will grow, that is, move away from hydrocarbon, and Canada is well placed for this. We have world class agriculture and forestry sectors. The current forestry model, though, is broken, as I am sure you have heard, in the way we look at pulp and paper and solid wood. I believe that we need partnerships. For example, Weyerhaeuser has partnered with Chevron, a big forest company with a big oil company. In Finland, Nesta and Stora have partnered, a big pulp and paper company and a big energy company. We must encourage more dating between companies to reinvent themselves.
As I said, we have an enviable lifestyle and we also have a very robust education sector, so we are able to attract many people. Many of the novel bio-products, such as those our chair just showed, are from our graduates. Our young graduates formed these small- and medium-sized enterprises. Our graduates, who are now 30-year-olds, are spinning off their companies, coming up with innovative products and helping to export products to Asia.
My second point is that the bio-economy is inevitable. We have to educate our own people and attract some of the smartest people to come here. We do that in medicine. Half of the doctors in B.C. are not trained there; many of them come from places like South Africa. Why not bring some smart people to help us with our forest sector?
My third point is partnerships. The reinvention of the forest sector will be partly internal, but much of it is to start working with other groups to use these products. This convergence of the five Fs is inevitable. Let us try to figure out the right way to use our forest resources.
The Chair: Thank you very much, Dr. Saddler.
Before we move to questions, would you please restate the five Fs.
Mr. Saddler: The five Fs are food, fuel, fibre, feed — meaning animal feed — and fertilizer. My students tell me I should always finish with the manure.
Senator Mahovlich: Where do we stand internationally on biomass? I know that Sweden, Finland and France are using biomass, and they are well on their way.
Mr. Smith: There are two ways to answer your question. One is that Canada produces only 5 per cent or 6 per cent of our energy from biomass, whereas the Nordic countries produce 20 per cent to 30 per cent. To put those numbers in perspective, you must understand the difference in our economies. Looking at it that way we might say that we could do better, and we probably can, but we must recognize that in both the Nordic countries and Canada the lion's share of the energy that is realized from biomass is because of the flow through the forest products industry. Eighty per cent of the energy that we get out of biomass is due to the material flow through the supply chain. All the residues from primary, secondary or tertiary production, be it black liquor or other things, are being used by the industry.
Canada looks pretty good from that perspective. The industry is increasingly switching to utilizing that rather than having to use other sources of energy to meet their energy requirements. The total amount of energy that Canada produces through that flow through the forest sector is actually greater than what Finland and Sweden combined produce, because our forest sector is so large. We are a big global player with big through-put in our industry, and we are trying to capture as much as possible.
From that perspective, Canada looks pretty good but, on the other hand, one might ask what the potential is for Canada to realize more value and achieve other goals, whether it is carbon balances or meeting the needs of rural economies and developing new industries. That is where we have huge potential to move ahead.
The business-as-usual scenario means that industry has done all it can to squeeze the most that it can out of the resource that it is bringing in. However, the potential for Canada to be a world leader and be as progressive as possible lies in developing new business models, restructuring the forest sector and bringing together new partnerships like the Weyerhaeuser example. If we drive ourselves hard, we can become world-class leaders in that regard.
Mr. Saddler: The Finns now produce 25 per cent of their total energy from biomass, and their target is to move that up to about 30 per cent.
We have been very fortunate in Canada. In British Columbia, we already have cheap green electricity because of hydroelectric, and it is very difficult to compete with cheap hydro. That is why B.C. is the world's biggest exporter of wood pellets. It still amazes me that we can make money selling wood pellets in Scandinavia. There are two reasons for that. First, they pay a lot more for their energy and, second, they get the carbon credits by replacing a fossil fuel with a carbon neutral fuel.
As you have probably heard in other submissions, the forest sector is now at the forefront of getting off of fuel fossil fuel, to a large extent by copying what the Scandinavians have done. Our potential is huge. Many of the other jurisdictions, such as Scandinavia, have equipment that does not leave much behind in the forest, although they leave enough to ensure that there are sufficient nutrients to regrow.
We have never done that because the economics are such that we have lots of cheap, good material that is worth taking out. Things are changing and we cannot afford to leave that material on the forest floor.
It has been said that Canada is the Saudi Arabia of biomass, but there is recognition that we must do this in a sustainable fashion. Again, we are only scratching the surface of what is there. It will cost. It still takes money to get that material out.
Senator Mahovlich: Are we monitoring our forests properly? Ten years ago, we went to Timmins, Ontario and looked at forest cuttings. They were coming very close to many of the lakes, and it was ruining the fishing in some of those lakes in Northern Ontario. Are companies monitoring this now and protecting our forests?
Mr. Saddler: That is Mr. Smith's area, but I would say Canada is in good shape. If you look at our sustainable forest management, we have more certified forests by independent parties than anyone, so the statement you said would have been true about two or three decades ago, but I do not think it is true now.
Mr. Smith: I would agree. That is where we have tried to urge all the parties that have interests in the forests to get together. Let us agree on what the standards that we are trying to achieve environmentally, and our companies can do that. Because of the third party audits involved in the certification process and the fact that probably a higher percentage of our lands in Canada than any place else in the world, are certified using these third-party audit systems, we are setting a high standard in that regard. The mechanism, pieces and framework are all in place. It is a matter of making the system work and ensuring that we have a strong scientific underpinning for the standards. Reasonable people can disagree about some things, and if we keep talking, we can solve the problems. We can have strong documentation and verified science that would underpin those decisions.
Senator Ogilvie: Professor Saddler, you mentioned that we need to start bringing in smart people to help with our forests. I was struck by that comment. I was on the advisory board at the NRC in Saskatoon, Saskatchewan, where, if I recall correctly, they were the first in the world to clone conifers. They attempted to get our forest products industry interested in the idea of developing elite species. They were unsuccessful, and I believe the technology was sold to Scandinavia.
It seems to me that rather than bringing in people to help us clean up the waste, we ought to be dealing with the issue that you identified when you talked about the size of our industry.
My experience is that our own forest industry, except in pulp and paper, where there was a tremendous amount of research done that was supported by industry and government investment, we have been remarkably lax in looking at innovation, developments and long-term developments in the industry.
I am concerned that we are reaching a point where we want to bring in smart people to deal with our waste whereas we have not been able to develop or adapt the technology that our smart people have done to develop elite species.
I want to come to the overall issue of biomass. From the document you provided us, we can see that, in a climate like ours and the way our forest has developed, by using a forest as a source of biomass in the sense of conversion to biofuel, we are looking at the efficient use of the waste material into secondary uses, which, in some cases, might be conversion to biofuels. Ultimately, as you describe the use of cellulose to produce ethanol and so on, we are looking at the cellular development of organic materials. There is no way tree cells can compete with micro-organisms in the production of bio-polymers and so forth, which is where a great deal intellectual energy is being placed today to try to adapt cellular organisms for the rapid production of the materials that can be used to produce biofuels.
Can I get your views as to whether you are seeing the efficient use, where it fits, of the previously waste biomass from the forest? Is it being used, as we see in some developments now and as indicated your document, in almost a niche area of operation? We have a vast forest, but there are clearly regional niches. Is it being used efficiently as opposed to the idea that we will look at that vast forest resource we have as a source of biofuel?
Mr. Smith: That is an intriguing question. You have covered a lot of ground. Let me try to get directly at your point.
You are painting an important distinction between viewing this vast resource in a relatively crude way versus being more efficient, directed and innovative, perhaps, using greater intelligence to get the most value out of it. Certainly, we would both urge us to be thinking in the terms that you are, namely, the rather crude use of this vast resource to be producing and using that in a relatively low value generating way, in other words just as a source of energy, to put it in the boiler and burn it, kind of thing. That is definitely not the direction we would urge but would push more in the direction of this bio-economy where all the fibre and the components that might utilized would seek their highest value in an optimization scheme. We can think of the supply chain more in terms of the value chain by asking how this material we are growing on our landscapes might achieve its highest value. If we could agree that society would benefit the most of from this in all the ways we are looking for, then that is a good, basic starting point.
The word that will come up will be the bio-economy. There are new studies that are trying to figure out the most business-smart and highest value in a variety of societal measures we could achieve from that fibre. That is something that I would definitely urge us to move towards, and it is where efforts need to be placed. It is in coming up with new business models and putting teams together to solve problems in ways we have not before.
In many ways, it will be viewed as a challenge to the existing industry that depends on throughput from a certain variety of components from the forest. If they can be brought on board to realize that they could be generating greater value, we could start to see integrated operations, perhaps from the nuclei of these existing facilities. This bio-economy and the bio-refinery concept Mr. Saddler referred to is something we would anticipate building from a variety of centres of industrial excellence, perhaps, in the sector there.
Where will the investment be placed, and which business models are likely to go forward? I do not know whether you have talked from Don Roberts from the CIBC. He and his team are starting to get a sense of where the return on investment would be highest. Their studies portray an image of the throughput for a combination of traditional products. They illustrate where we might add new operations and synthesize new materials. One starts to get the feeling, then, that the supply chains we have established are ones that we want to build on. The direction we do not want to go is viewing this in a rather clumsy way of hoovering up the resource to provide feedstock for relatively low- value output when we already generate hydro at 3 cents per kilowatt hour, so we want to enable this new approach. We want to figure out ways to have investment. Where will the investors come from and where will they see important returns? That might help to build on the concept that I hear you referring to.
Mr. Saddler: You raised three points, if I heard you properly, and one of them was a point about training people.
My background is not forestry. How I ended up as the Dean of Forestry is a long story. Something that struck me about working in the forestry sector is that you would see the person running a sawmill who had a forestry degree, not an engineering degree. I found out that part of the reason was how many people of that group really had an education. Many of the workers were excellent people and had picked up some good skill sets, but had not had any tertiary education.
One of the problems now is that the natural users of, say, bio-energy are actually forest products companies. If you look at trying to adopt technology instead of using natural gas, for example, we can gasify biomass but many of the companies do not have the technical expertise to make use of the technology. However, if I go to somewhere like Europe and Scandinavia, inevitably, the people running sawmills have masters in engineering or something equivalent.
Therefore, I think one of the issues we have is lack of technical skills in the current forest sector. In the university, we have tried to invest in some of the programs. At UBC now we have a wood engineering program. However, if you were an 18-year-old and you were an engineer and were thinking of working in petro-chemicals or forest products, which would you pick?
The second point was about the NRC plant technology with the genomics. One of the problems with our federation is the federal provincial split. Again, in British Columbia, we have a big forest sector which reinvests in the forest. Our province uses the bounty, the stumpage, to pay for education and health. One of my contentions is that we do not reinvest in the golden goose that gives us this golden egg.
If you look at it, we have world-class molecular biology with the trees. However, if it was private ownership, they would invest in this superior tree because it pays off, but it is a long time frame. We have an issue because I think the provinces do not reinvest in the resource. The irony is in looking how much we invest in trying to put the fires out rather than putting in these superior trees.
I have a last point about the residue. I think you are right: The interesting thing with the terminology is that nobody calls it waste anymore, because we realize it is worth something. It is now called ``residue'' instead of being called a ``waste.'' What will inevitably happen is you just have to look at the history of the Canadian forest sector. Before, we just cut a tree down, made a two-by-four and threw it away. With bio-refinery, we will go after highest value. Furniture is about the highest value you can get. Then you go through the value chain. Energy is probably the last thing you want to make because here is this nice structural material nature gave us. You use it for furniture, pulp and paper and solid wood. It is inevitable, with environmental costs, that we will make more use of this residue. It is interesting because 10 or 15 years ago, we called it waste. Nobody calls it waste anymore.
Senator Robichaud: We have heard about biomass and bio-energy and how we produce it. In some cases, we do not use it. You alluded to the fact that we produce a lot of wood pellets in British Columbia and they are used elsewhere. In Canada, we import coal to produce electricity in New Brunswick, and I think in Ontario, as well. Somehow, we cannot get our own fuel to use in those facilities.
I want to remind you that when you burn biomass you burn wood and produce greenhouse gas. If you want to touch upon that, too, I think would be helpful.
What is the problem? Do we need to go toward carbon credits to make that kind of fuel economical for those facilities, or is there another way?
Mr. Saddler: The big benefit with biomass is that the carbon released was just captured very recently. Basically, when plant material grows, it takes the sunlight, carbon dioxide and water, and you make the biomass. Really, the carbon is not carbon that is being captured in coal or oil for millennia; this carbon goes around and around. You are not releasing any extra carbon. This is life cycle analysis, LCA. There is lots of work in that area.
That ties into your second question. We use the cheapest form of energy. Coal is cheap in comparison to most forms of energy. That is why the European countries try to even it out with the carbon tax. The only way to even it out is to say there is an environmental cost. One of the reports in the United Kingdom called the Stern Review, which was published about three years ago, looked at the cost of climate change. If we do nothing about it, this is the cost, whether it is floods or ice storms.
I think the only way to drive this as policy is to educate people that, initially, it will always be more expensive using biomass. Again, I use the example with pellets. How can the Swedes afford to buy wood pellets from British Columbia? Their energy costs more, so they as a society, or the utility, charge more for the energy. There is a policy call, there is a carbon tax, so you can use wood pellets that do not release fossil carbon.
There must be a policy driver, but we must ensure we do not make the wrong policy calls because we can screw things up.
Senator Robichaud: What would be a wrong policy call?
Mr. Saddler: A good example is trying to legislate on some things. My own research area is making cellulosic ethanol. The U.S. had a target of so much cellulosic ethanol by a certain date, but the technology was not there to hit that target. As a result, everyone looked foolish and wondered why the target was set when they were not able to reach it.
Sometimes you can have a well-intentioned policy but there are many examples I could quote where it has gone off to the side. We have to be careful. For example, there is a big reservation with the pulp and paper sector that, if we put in a carbon tax, suddenly all these wood chips we use for pulp and paper will go to bio-energy, so we then end up giving the pulp and paper industry an even tougher time.
Mr. Smith: We can see many examples where good intentions could perhaps lead to some clumsy instruments. I am a little concerned about us trying to offset the amount of coal we are using with biomass. In my view, it is a crude way to go about this and it is perhaps along the lines of the question from Senator Ogilvie earlier. Do we just view this as a vast resource to bring in and feed large energy production requirements with huge amounts of feed stock, or should we let the market and innovate ways of using this determine where it should go?
We have to be careful to ensure the scale is appropriate for the use of this fibre as a feedstock. Feeding several hundred megawatt plants with biomass is actually is solving some major energy demand requirements we have on a national level with a mixture of tools. A mixture is important.
One can envisage a way in which we lower our carbon emissions. One could imagine ways in which we lower our fossil fuel and even our coal use. However, only seeking a solution with biomass might not be the best way to go about it. This is where you could get some perverse impacts from well-intended ideas and policies.
The U.S. example was a really good one. They had the intention of increasing their fuel security, they wanted to reduce their emissions and they realize they have a vast resource in their agricultural sector to be able to do that. However, it ended with some perverse consequences rippling through that might have been solved in another way.
We face the same challenges in determining what contributions our agricultural and forestry sectors can make. For example, how are small, forest-dependent communities, such as Timmins, Cochrane and Sault Ste. Marie, meeting their energy requirements versus the demand that a city like Toronto might place on the energy grid. We have to be careful to look at this sector and find innovative solutions to achieving the most value in this bio-economy as we offset our fossil fuel use and carbon emissions.
There are ways that the market can be made to work that will result in innovative solutions and others that might be, perhaps, a bit clumsy and result in some perverse consequences. Certainly, these are some of the considerations as we look at the variety of instruments to achieve the goal of reducing our impacts from the use of fossil fuels.
Senator Robichaud: We must to do something to break the vicious cycle. Perhaps we are too timid but we do not want to be too bold, so we continue to go around in a circle. I hope that the report of the committee will include ways to promote the use of residue from forests and agriculture. I realize that can be difficult when dealing with federal government incentives, in some cases, and provincial governments that control the resource, but something must be done.
You mentioned bio-refinery. How far off is that? The technology is known, but we have not made great use of it.
Mr. Saddler: It is already in place in some jurisdictions. Unfortunately, we continue to come back to the Scandinavian model but in Finland, Sweden or Austria, there is a visible wood culture in everything from furniture to housing. I use an oil refinery as an example, where the big bulk products are the gasoline and the diesel, but there are 2,000 other products. With forests, there is a social and ecological culture, such as going into the forest to pick mushrooms. The Scandinavians have taken that culture further to include furniture, pulp and paper, energy and chemicals. I mention again the partnerships between Stora and Neste the world-class pulp and paper industry in a joint venture to create diesel energy from biomass. It is happening in some jurisdictions. The market is deciding whether to take a tree and make a piece of furniture, where pretty well all the energies are residue. They are investing in fast- growing willow with the thought to how much value they can get from the land. It takes too long to grow conifers, so they grow willows and generate as much biomass as possible.
I apologize for the long answer, but the bio-refinery is here in some areas, and we are blessed with this great land mass and lots of water. It is easy to copy other people but we could be innovative and develop our own aspect to the bio-refinery.
Mr. Smith: I hope we can agree on this urge to act and develop solutions in real time. In terms of the possible perverse consequences, we can learn and avoid so that we can realize the potential and put the market to work. In that way, we can ensure that there are incentives to reduce carbon emissions and clear ways to move forward that will result in many changes. We need to put our minds and our economy to work to achieve that in the near term.
[Translation]
Senator Rivard: You mentioned wood pellets. Over the last few weeks, we had the opportunity to meet wood pellets producers. I think they convinced us of their benefits.
Do you sincerely think that there is a future for that biomass, be it in residential, commercial or institutional heating? Could the government have incentive programs, either pilot projects or transport subsidies? We know that one of the barriers to the development of wood pellets comes from transportation costs.
[English]
Mr. Saddler: I tend to think of pellets in two ways, the first being transportation to move the biomass around, which is one research area that my group has looked at as the bio-economy develops. An oil refinery is really big, as we are finding out with BP in the Gulf of Mexico. Oil is transported through pipelines and in huge oil tankers. The bio- economy will look more like a pulp mill than an oil refinery. The logistics of moving biomass around are quite different in that we cannot blow pellets through a pipe. It will have to be trucked or shipped and will look a lot like a big pulp mill. One-half of the weight of a wood chip, from which we normally make paper, is water. You do not want to ship water around the world, so the pellet industry is a way of densifying the biomass so that we can ship it great distances from B.C. to Sweden, for example.
The second way of thinking about these pellets is that once you have the material, you can burn it directly or mix it with coal, which is a low value for that pellet. Instead, you can look at that pellet as a chemical source, much the same way that we look at oil from which we produce plastics. Densifying the biomass into pellets is necessary to be able to ship it around the world. If you cannot do anything with it, burn it, recover the energy and get the carbon credits. It is good feedstock if considering the other types of chemicals we derive from oil. We know we can burn it — we have the technology — but we could move forward from that starting place. Chemical industries, such as Dow and DuPont, started with oil and determined what could be made from it. We have the pellet, so what can we make from it?
That is a personal opinion. We have the great potential with a rapidly expanding wood pellet industry, but we should do more than just burn the pellets.
Mr. Smith: I agree with Mr. Saddler's points. When I was in Liege Belgium last fall, I saw several barges filled with wood pellets from British Columbia. There were being used to feed a converted coal-fired plant. I had to scratch my head about that. We take trees in British Columbia, run them through the sawmill, make pellets and ship the pellets around the world. The pellets are then pulverized and blown in like pulverized coal. After all that work to deliver the pellets, they have to ``de-pelletize'' the biomass. It makes one realize the volume of the process. In Ontario, we are talking about using 3 million tonnes of pellets per year to offset the use of coal burned in those two plants. The scale is huge.
The principles underlying Mr. Saddler's comments are: Let the markets operate; and let that material achieve it highest value in a societal sense. As we think about incentives, we have to determine what we are trying to achieve. What are the values that these incentives might try to optimize?
I urge caution in that it is a matter of underpinning. What are we trying to achieve for our economy? How will we put people to work? How will Canada get the highest value from the raw materials it is producing versus giving it away at a relatively low value to others to utilize?
The markets will work in various and interesting ways. I looked at the results of Don Robert's analysis of what the highly profitable operations would be. The assumption for the high profitability for burning pellets in Ontario was underpinned by the fact that the province was probably willing to pay $200 a tonne for this stuff. They were willing to out-compete the Europeans. That pushes it off the end of where the market would probably settle in. If you were to watch that market develop, in the long run you would probably see the relative profitability of that operation slide way down the value chain as competition for that fibre evolves.
Getting back to basic principles, the idea of densification of a feedstock is critical, certainly for the supply chain. However, as we look at all the material that is produced in the forest and ask how its value will be optimized, we must realize that pellets are made from white wood, high quality material. They are not made from roadside residue. They do not want bark or foliage; they want the white wood. We must realize that in some cases that is at the higher end of the biomass that the forest is producing. We must be careful about the way in which incentives are placed.
Pellets might be an important source of fuel for schools, hospitals and homes, for users that do not have the high quality demands of the pulverized coal boilers that need clear white wood pellets that they pulverize and blow in. I have seen the little pellet furnaces in the schools in Sweden. They do not have to pulverize the pellets to use them, which costs more money and utilizes more energy to get it into a usable form. They use pellets made from relatively low-value material, which might have bark, foliage and rough wood in it, in ways that meet their energy demands.
I would love to have a pellet stove in my home. Soapstone stoves are absolutely marvellous.
We have to be careful about how we let the market operate, to know what our long-term goals are and how this economy might develop in response to those goals.
[Translation]
Senator Rivard: Would it be possible that the pellet barge you saw in Liege, Belgium coming from BC, was composed of pellets made from wood which had the typical tree disease in BC? Or do you rather think that it is a biomass coming from healthy trees?
[English]
Mr. Smith: I will make a guess, and Mr. Saddler can back me up.
I assume that the pellets I saw came out of mills in Williams Lake and elsewhere that were through-put. They may have been dead trees, but they were certainly highly valuable material. The sawdust and shavings that were coming off those saw logs were being incorporated into those pellets. This represented the utilization of this residual material from the forest products sector. In the way in which that supply chain was organized in that town there was no higher value use for that material. The market was operating and the material was going there as a result. It is my understanding that it is that kind of through-put that was producing the wood going into those pellets.
Mr. Saddler: You raise a good point. Much of the pellets come from beetle-killed lodgepole pine. These are trees that are dying and being cut as quickly as possible before they start chipping. They are of no use for structural wood or pulp and paper. Nearly all of the pellets that are being exported are from beetle-killed trees, and most is sawmill residue. Research is underway to develop ways to use bark, the other material. There is a lot of science in the making of pellets. If there are too many needles or too much bark, the pellet does not hold together well.
You are probably right. I would bet that all the pellets we saw on barges in Belgium were from B.C. beetle-killed pine.
One of the hopes of the current industry is that pellets can be made from the bark, needles and other junk, and all the good wood can be kept for furniture. I think the market will eventually work that out in the same way as what happened with oil. We have companies that make energy, like Exxon Mobile, and we have companies like Dow and Dupont that make chemicals. The same thing will happen with the bio-refinery.
Senator Mercer: I have two questions and one comment.
I want to follow the allusive B.C. pellet that finds its way to Sweden and Belgium. I am interested in how it gets from British Columbia to Europe. I represent Nova Scotia, which is much closer to Sweden and Belgium than the Ports of Vancouver and Prince Rupert. I hope the answer is that you ship it across the country and it is transshipped through the Port of Montreal or the Port of Halifax. That may not be your area of expertise, but we are always looking for business.
Are we properly maintaining, utilizing and capitalizing on our intellectual infrastructure in the forestry sector? Are we developing and recruiting?
We continue to talk about wood pellets and the development of the lumber sector. However, in Eastern Canada, where most of this industry is, our problem is pulp and paper. Our industry is in deep trouble. We have competition from South America where they can grow trees much faster than we can and where labour costs are much lower.
How do we retool the pulp and paper industry to accomplish two things; first, to maintain the jobs in the woods, and second, to maintain the jobs in the plants or mills?
Mr. Saddler: Unfortunately, we do not send the pellets across the country. They go from Prince Rupert and Vancouver via ship through the canal and off to Sweden. That is due in part to handling. It requires a large investment of have all the wood handling components. I can give you a fuller story later, but unfortunately they are not shipped across the country. By ship, you ship by volume, whereas on rail you ship by weight.
I am very concerned about intellectual capacity in the forest sector. The traditional forestry schools are having a hard time attracting students. They are closing down programs because of poor enrolment. In order to reinvent the sector, we need bright people to come in.
Again, I will use the Finland example. Often we are asked to be external examiners for people doing their PhDs. I found a young lady there who finished her PhD in tree genetics, and she was hired by Nokia. With a whole forestry background, why did she go into telecommunications? The answer is: We are after smart people. You find that the forest sector has to compete for smart people in the same way that telecommunications and other people compete for them. I do not have an answer, but I am concerned that the lack of smart people is big part of the problem.
With respect to pulp and paper, again, I will come back to Finland. We are better placed than Finland with our forests. They are now a global player in pulp and paper, so they have invested in South America. It comes back to the issue of Canadian companies being in the middle. They are not big, and some of them are smaller, if you look at some of the companies there. They are more nimble.
Eastern Canada is where we will probably have to get the bio-refinery model working quicker. The problem is that mechanical pulp, if you look at newsprint, will go down. In universities, we do not work with paper anymore; it is all electronic. We will still need paper for packaging and many other things. The example I use is hair clips. We do not use hair clips now; we use gels and other hair products. Some things you do not use much anymore.
Mr. Smith: The situation in academia concerns us. Attracting the best and brightest to solve these problems for the forestry sector is a problem that needs focused discussion. We have had good discussions. Mr. Saddler hosted the International Symposium on Forestry Education at UBC last week, and it was well done. However, the instructive comment was that we are talking to each other as academic institutions, and we are not necessarily engaged in the sector in ways that might solve the problems. We are concerned about this situation.
It is clear that some businesses will continue to decline, so propping them up does not make sense. It is also clear from the analyses that some of the thermo-mechanical pulping operations, with either hardwoods or softwoods, are still likely to be competitive in the long run. If they build on those pulp mill operations to create bio-refineries, they will likely become highly competitive.
We need to anticipate that some capital investments will realize the return on the dollar that some others will not. As rough as it is, we must be willing to recognize that some operations will struggle to compete globally and that others can capitalize on the quality of the fibre we produce, and we must identify those markets as the ones giving the good return, whereas newsprint mills will struggle.
Senator Eaton: Professor Smith, I agree that we have to let the market find the balance of biomass, coal and hydroelectric power. Listening to our various interesting and erudite witnesses, we have learned that there is a wonderful future for wood in bio-products and in pharmaceuticals. However, there seems to be a recurrent theme: Why is wood not being talked about generally in the marketplace as a green product? When you think of what they have done already to destroy the landscapes in Quebec and Ontario with windmill farms, that is the current conversation, but no one talks about wood. That topic has not entered into the political conversations, and certainly not the provincial conversations. It is not in the coffee shop conversations. Yet, we have so much wood.
When you are talking to your young people to get them into the faculties to study forestry, is wood ever described as being this wonderfully green product that we have so much of?
Mr. Smith: We certainly share your enthusiasm and are keen to identify ways to portray the value of this wonderful material that is grown as being able to achieve some innovative ideas. I was pleased, frankly, to see the B.C. presentation by your deputy minister talking about the way in which British Columbia is starting to make a clear case for the way in which wood can be used in structures. Changes to building codes are taking place. Even in China, we see examples of wood structure buildings of up to six storeys meeting the building code. We need to make sure we are having an impact in places where those decisions are made, and, clearly, wood has huge advantages over many other materials.
Senator Eaton: It does, but it does not seem to be in the general conversation. When you pick up the papers every day, you do not read about wood. Has the forestry industry not done its job?
Mr. Smith: To be kind to everyone, I would say let us all put our shoulders to the wheel and get this done.
Senator Eaton: We are looking for specific recommendations that we can put in a report and take to the government.
Mr. Smith: That is an important point to be made.
Mr. Saddler: You raise an excellent point. Looking at global energy use statistically in the pie chart, there is the little bit on renewable energy. Most people would think the biggest chunk of renewable energy is hydro. In fact, bio-energy is more than all the others together, more than hydro or solar. There is an education issue. Partly, it is considered low tech. A windmill looks more high-tech than burning biomass efficiently.
Senator Eaton: Yet, it is a blight on the landscape.
Mr. Saddler: There is definitely a perception. Biomass comes across as being low tech.
Senator Eaton: It is not an efficient way of making power.
Mr. Saddler: It is an excellent point. I was at a renewable energy conference in Denmark, and the Danish Minister for the Environment said the national flower of Denmark is the windmill. She was making the point that the windmill is prevalent.
The impressive thing with Denmark is not so much that about 25 per cent of their energy comes from windmills; it is the fact that they are the biggest exporter of windmills. They make the energy, but they design the windmills and license them to China.
We are the Saudi Arabia of biomass. There is not a public awareness about how clean it is. It is just like the caller saying that you are releasing the carbon, when, actually, that carbon was just taken from sunshine relatively recently.
With respect to the wood pellet, part of my education is that making a pellet is more complicated than I realize, so we are getting innovative in terms of making and transporting pellets.
There is an education, but again it is public perception. Burning biomass does not sound high tech as compared to photovoltaics or windmills. That all sounds a lot sexier.
Senator Eaton: Do you have any specific recommendations?
Mr. Saddler: I would say all our students working on bio-energy realize they are the good guys. It is something that is exciting.
Senator Eaton: You have to get that into the coffee shops.
Mr. Smith: Specific recommendations would follow along the lines of making a clear case for the true value to society of using these materials. Let us identify new ways in which they can be utilized.
Your chair showed us a brilliant piece of engineered wood material that could find new uses for biomass. Let us ensure we have an impact on the building code so we can actually utilize this material. The skating rink in Richmond is a good example of brilliant uses of this technology, and many other structures that could benefit from it, as well.
There are real barriers to the utilization of it, even if we had the right material. If we think about this comprehensively, we can identify all those go forward pieces of action. Also, if it can impact on our programs, we really desperately need to be seen as being part of the solution.
The idea that our faculties would be marginalized by someone's incorrect notion as to what the forest or the forest products sector is all about is unfortunate, but is something with which we are struggling. If we can be seen to be a major player in finding these solutions, then we have some exciting things to be part of. Those would all then underpin these actions that you are looking for. One could think about that comprehensively and I think we have the pieces in place.
Senator Eaton: We have already talked about building codes and value-added products. However, if you come up with a brainwave as to what we can do, perhaps, to encourage either the provincial or federal governments or the Minister of the Environment to push this wonderful green product we have so much of, that would be appreciated.
Senator Fairbairn: I will be quick because most of the questions that I was thinking of asking have been asked.
Do not knock down those big windmills. The very first one that went up was in Pincher Creek. People did not know whether to be excited or frightened. As it is, perhaps it is because we are in the shadow of the mountains, but it has worked well in our agricultural sector.
From the very beginning, you have talked about the learning of all of this. You talked a great deal about British Columbia and we understand why; it is one of their main industries, from top to bottom.
Could you give us an idea of some of the universities or the colleges that are taking a snap to this and going at it? Could you let us know where those places are located?
This is a huge and very exciting operation. It would be interesting, on a certain level, for young people, particularly. I was wondering if you had special thoughts, certainly in British Columbia but elsewhere in the country, with the universities and the colleges.
Mr. Saddler: This is a huge problem. We have the Association of University Forestry Schools, comprised of eight schools, of which Mr. Smith is currently the chair. We are in various stages of decline. Regardless, it is problematic, and that is the forestry school. It is also true of pulp and paper schools.
If you look where we had some real strength, whether at Toronto or McGill, there is now a huge concern. At a time when we need to be building up capacity, they are in decline.
I will use an example. As a way of trying to catalyze the wood culture I mentioned, the provincial and federal government invested in our Centre for Advanced Wood Processing. It focuses on furniture, doorframes and all the higher value uses. We have a capacity to train maybe 180 students. We have not gone past 100. These students are well paid when they graduate. They end up being employed in high positions in industry.
However, there is a big issue of attracting people into the sector. As time goes on, the university presidents are saying, ``Okay, how come there are not enough people coming to these programs?'' There is a Catch-22 in terms of trying to attract people to the sector while it really needs to be reinvented.
I mentioned the five Fs. The three Rs are recruitment, retention and reinvention. Recruit more people and we must retain them. I use Finland as an example because the bright kids in the forest sector get pulled into other sectors. The sector needs to be reinvented.
There is not really anyone we can point to and say ``Here is a success.'' At UBC, we are in good shape, but not in as good a shape as our university president wants us to be.
Senator Fairbairn: What about Alberta?
Mr. Saddler: There is a substantial forest sector in Alberta, and the mountain pine beetle is hitting there as well. Some very good people are looking at composites and some of the material; they are what used to be the Alberta Research Council. However, they have the same problem we have across the country of attracting people into the sector to help with this reinvention.
Mr. Smith: If I could quickly answer, brilliant work is happening in all of our universities by individual faculty. Our faculties in general tend to be competing really well. We lack perhaps comprehensive solutions where we can build teams and have a sense of the centre that Mr. Sadler described. We do not have that kind of investment at Toronto, so our individual faculty are left to compete on their own.
If we were to think this through comprehensively and, to go back to Senator Eaton's question, how could we come up with a solution? There has to be a sense in young kids that our programs will get them an interesting and well paying job. We have to make sure that industry fits together with academia and we work down through the high schools to portray this as an interesting opportunity.
The solution should not be eluding us, but we are challenged. Our faculty probably will not exist in another year, given the path we are on now. The hammer is coming down, and actions are already being taken. You will start to see these programs drop off. Therefore, that focus on the sector that is unique to what a faculty represents just will not be there anymore.
Senator Fairbairn: Do not march away from it because it is a big issue and I agree that there ought to be a way, especially with young people. It is exciting work.
Senator Robichaud: You mentioned the markets should come into play. Usually the markets do not pay too much attention to the jobs that are lost and the social impact on the communities. How much attention should we pay to that?
In New Brunswick, the forest sector activity is way down. It is noticeable. The truckers are unemployed and there is no movement in the industry. Could we not start some activity?
You do not get people coming into your faculty because, in some cases, forestry is seen as a sunset industry, which it is not. If we were to start with some incentives that might not meet exactly what the markets are looking for, then we create some activity, let us say with biomass and pellets; we get something going. Would that not be a way of stimulating the whole industry?
Mr. Saddler: I will give a quick answer, realizing we are pressed for time. I go back to the timeline I mentioned about keeping a student's training relevant for 50 years. The analogy I use goes back to the dirty thirties. Now is the time to have something like the Tennessee Valley Authority so that we reinvest in the forests and replant these superior trees because the legacy will come. As well, the thought of losing rural infrastructure is a huge concern. Once those people move away from their rural communities, it is very hard to return.
Senator Robichaud: They will not return.
Mr. Saddler: There is an onus, in particular on the provinces, to reinvest in the forest. Across the country, we are not replanting, which is a labour intensive, rural activity. There are many things we should be doing. The payoff will come in time, but bear in mind that the United States invested in the 1930s and the payoff came.
Mr. Smith: These are exciting times. We have to realize that society and economies are changing. The advice for keeping markets in the conversation is to realize that we have to be market smart about how we do this. There are ways you can push against the trends that will take place anyway, so we have to determine how we can position ourselves to achieve what we want for society while going with the flow urged by the markets.
The Chair: Before we close, I will put forward a comment and questions for your response in writing to the committee.
An international debate by a chief researcher from Israel suggests that we should have either continuous research on sectors or market-oriented research for the industry. The information should be from the perspective of the current situation in the forest sector, knowing that all the partners and stakeholders are coming to the same table. I would like your comments.
Recently, representatives from the Forest Products Association of Canada suggested to the committee that the federal government should create a fund for renewable energy that would provide assistance in the form of repayable loans at a competitive rate. This fund would extend to multiple sectors of the biomass industry — the five Fs.
What do you think of this idea? How large should the fund be? What would the impact be on rural communities if such a fund existed? What are your comments on holding round tables across Canada to have a cohesive approach for the industry on the use of biomass?
Mr. Smith and Mr. Saddler, thank you for sharing your knowledge with us today. Do you have any closing comments?
Mr. Smith: Thank you for the opportunity to meet and discuss some important questions. We look forward to action from the government to achieve these exciting opportunities for Canada.
Mr. Saddler: Thank you for the opportunity to speak. Three points: First, the bio-economy will happen, and we are well placed to be a key player. Second, it is really about people, so we have to get these smart people from the forest sector in here to help with the reinvention of the industry. Third, there must be partnerships because it cannot take the form of the current forest sector. We have to partner with the energy or chemical companies. We need to work on those three points.
(The committee adjourned.)