Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 9 - Evidence - October 26, 2010
OTTAWA, Tuesday, October 26, 2010
The Standing Senate Committee on Agriculture and Forestry met this day at 5 p.m. to study the current state and future of Canada's forest sector.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: I declare the meeting in session and welcome senators and witnesses to the Standing Senate Committee on Agriculture and Forestry. I am Percy Mockler, senator and chair of the committee.
[Translation]
Honourable senators, we welcome today from Natural Resources Canada, Mr. Jim Farrell, Assistant Deputy Minister, Canadian Forest Service.
[English]
We also welcome Mr. Tom Rosser, Director General, Policy, Economics and Industry Branch, Canadian Forest Service, Natural Resources Canada.
The committee is continuing its study on the current state and future of Canada's forest sector, looking more particularly at examining the performance of old forest sector programs and the Canadian forest as a carbon sink or carbon source activity.
Before I ask the witnesses to make their presentation, I will ask the senators to introduce themselves.
[Translation]
Senator Robichaud: Fernand Robichaud, New Brunswick.
[English]
Senator Mahovlich: Frank Mahovlich, Ontario.
Senator Fairbairn: Joyce Fairbairn, Lethbridge, Alberta.
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
Senator Eaton: Nicole Eaton, Ontario.
Senator Martin: Yonah Martin, British Columbia.
The Chair: Thank you. Witnesses, we want to take this opportunity to thank you for accepting our invitation. I am told by our clerk that Mr. Farrell will make the first presentation. Your presentations will be followed by a question and answer period.
Jim Farrell, Assistant Deputy Minister, Canadian Forest Service, Natural Resources Canada: We would like to give an overview of the response to the general queries that were raised with the department and certainly leave plenty of time for members to pose questions.
I would like to start by thanking the committee for the invitation to present here today. On slide 2, we will try to cover an overview of the sector. I believe I was here less than a year ago, and it is remarkable how much has changed since then.
As a backdrop, we will give you a sense of where things are at from an economic perspective. We will talk about the various programs, most of which remain in play this year. There is also a question raised around Canada's national forest strategies, so I will cover those. Then my colleague Mr. Rosser will talk about forest carbon.
I will start with an overview of the sector. I suspect you are well aware that the last number of years have been difficult for the forest sector. In many respects we saw some of the early indications as early as 2002. For example, from 2002 to today, the Canadian dollar has appreciated more than 50 per cent. That is relevant because that is an appreciation vis-à-vis the U.S. dollar, and the vast majority of our sales, primarily newsprint and softwood lumber, are destined for the U.S. market. The higher dollar makes it more costly to ship lumber there compared to other alternatives the U.S. might have for its buying power.
In that same period of time roughly we have seen a reduction of newsprint by a full 50 per cent. That is around 6 million tonnes of newsprint, which represents the equivalent production of roughly 15 large newsprint mills. As you have no doubt seen, there have been a number of reductions, in Ontario and Quebec as well as in Atlantic Canada, the bulk of which are in the world of newsprint. Eastern Canada has tended to be more newsprint-dependent, and I think that has had an impact on workers and communities as well as on the sector itself. By our count, some seven forest products companies with production capacity in Canada have been under Companies' Creditors Arrangement Act bankruptcy protection. Some of those have exited, and some still remain under the Companies' Creditors Arrangement Act, many of which are newsprint producers.
Housing starts has historically been the big indicator of the health of the entire lumber industry in Canada. We have seen a reduction in housing starts in the U.S. over the last couple of years of more than two thirds, down from a high of 1.7 million housing starts to some 600,000.
At the same time, more recently, we have seen lumber prices start to creep up a little; they have risen by some 33 per cent. Pulp prices have come up a little in the last couple of years. We have also seen some increased investment, primarily stimulated by public spending, in pulp and paper facilities, mostly in Canada.
I guess the one growing early bright spot on the radar for the forest products sector is China. In 2009, Canada's forest products exports to China amounted to $1.6 billion. By value, for example, pulp exports to China was the largest value export into China. Lumber was fifth. We have seen an increase of lumber exports to China that has almost been exponential, and all the forecasts seem to suggest that will remain strong into 2011 as well.
Turning now to some of the investments, over the last couple of years commitments were made in Budget 2009 and Budget 2010 to invest in diversifying Canada's markets, and there were investments in improving the innovation capacity of the sector. One of them is the Transformative Technologies Program, which is primarily to do with investments with research partners like FPInnovations to move to the next level in terms of having options for those in the forest products business moving away from commodities into new products. As a result, that will open up opportunities for new markets.
I will talk more specifically in the next slide about the Pulp and Paper Green Transformation Program, a $1-billion investment announced in 2009, which we are in the process of delivering.
Finally there is Investments in Forest Industry Transformation, or IFIT.
In many respects, these three programs fit together. The first is about developing more options in products, many of which are either still at the bench or pilot scale. The Pulp and Paper Green Transformation Program is about rebuilding the infrastructure and the assets of the pulp sector in Canada. Finally, IFIT is about moving from a pilot scale to a commercial scale of capacity in a whole series of products, both within the pulp and paper sector and in the solid wood sector.
The second suite of programs is around diversifying away from what our historical dependence has been — the U.S. market. The North American Wood First Program is deepening the market. The lumber sector in Canada has been almost entirely dependent on residential housing construction. This is about looking at the applications of wood in non-residential construction, whether institutional construction or retail construction, in both Canada and the U.S. There has been some progress, certainly in the U.S., with companies like McDonald's and Ultramar looking at their stock designs and introducing more wood into the designs and the construction of these facilities across the U.S.
We have been involved with the Canada Wood Export Program since 2001-02. That is primarily offshore. We started with a number of hubs, one in Europe and one in Southeast Asia. The investments in Southeast Asia, primarily China and to some extent Korea, have proven to be terrific successes. The participation in those markets tends to be in the west because of transportation access. However, the reality is that the North American market is big, and any volume one can ship to another market makes room for other Canadian producers in that North American market, especially in today's market, which is a down market.
The Value to Wood program is an R&D transfer program that puts experts into mostly small and medium-sized enterprises to improve their competitiveness in value-added products. They are small to medium-sized enterprises that are into both hardwood and softwood uses of wood. To a great extent, it is a domestic as well as a growing U.S. market in terms of that production.
The Pulp and Paper Green Transformation Program was modelled on similar programs in the U.S. and designed to make the pulp sector more environmentally competitive. It is built on the premise that to move beyond the production of commodity pulp, one of the first challenges is to get the energy agenda in check.
Newsprint and pulp are heavily dependent on energy inputs. The more traditional energy sources can be replaced with biomass energies. One can imagine in the not-too-distant future a pulp sector that not only is entirely independent from traditional sources of energy but also is a net producer of green energy. We are seeing more and more mills moving one after the other into the world where a revenue stream is starting to develop around energy.
The next step after that is to move into a broader suite of bio-based products. Over the next three to five years, we will I think see more and more companies that have been in the traditional commodity pulp business in partnerships with energy companies or other bio-product companies — chemical companies, for example, and materials production companies — looking at a different and new suite of bio-based products based on forest fibre.
Out of the $1 billion, some roughly $800 million worth of projects are already in negotiation. We expect the $1 billion to be fully committed within the next three to five months.
The committee raised the next item on national forest strategies. As you know, in Canada, forest management is entirely within the purview of provinces. In 1985 the forest ministers across the country created the Canadian Council of Forest Ministers. One of the early agenda items they put for themselves was to develop an agenda that described forest and forest management as a whole, as a country.
A big driver for that was the realization that Canada's environmental reputation overseas is viewed as a Canadian reputation as opposed to as any individual region of the country — an acknowledgment that all of the provinces and territories were in the same boat. You are only as strong as your weakest link. That developed a series of strategies starting in 1987, 1992, 1996 and 2003.
Only in late 2008 did ministers develop and sign off on a strategy that essentially talks about two key challenges that are shared across the country. One is the economic and industrial transformation of the sector, and the other is climate change impacts and adaptation — some of the key effects and impacts we are seeing that affect the nature of the growth and extent of Canada's forests. If there are more questions on the strategy, I will be happy to come back to that.
Perhaps I can ask Mr. Rosser to talk about Canada's forests in relation to the carbon cycle.
[Translation]
Tom Rosser, Director General, Policy, Economics and Industry Branch, Canadian Forest Service, Natural Resources Canada: Mr. Chairman, you mentioned at the beginning of this meeting that one of the issues the clerk of the committee has asked us to study is the carbon in our forests.
[English]
Are forests a carbon sink or a source? I begin by noting that forests in Canada and globally play an important role in the carbon cycle, and enormous pools of carbon are stored in forests worldwide. When we talk about a forest as a sink, we generally mean that the pool of carbon is getting bigger year to year. If on the other hand the forest is shrinking, it is a source.
What factors determine whether a forest is a source or a sink? There are many of them. Some of them, such as harvesting and forest management, are within human control; others are part of natural cycles, such as fires and insects.
Scientific research has identified a number of potential mechanisms through which forests can contribute to mitigating greenhouse gases and addressing climate change. Afforestation, for example, the planting of forests on marginal agricultural land or on land that is not being utilized to grow forests, is one means to increase the uptake of carbon in forests.
Deforestation, the permanent removal of forests, is a huge contributor to greenhouse gas emissions worldwide, something like 17 per cent of emissions. It is almost entirely a tropical phenomenon. Every country has some deforestation as a result of agriculture, urban development, et cetera. Certainly by global standards, Canada's level is very low. Nonetheless, reducing the rate of removal of forests is another means through which we can help address climate change through forest management.
Also, there is good reason to believe that the use of biofuels and bio-energy can help reduce climate change if you substitute bio-energy or energy from forest biomass for more intensive energy sources. Also, carbon is stored in forest products; in the jargon, we call it harvested wood products. The idea is that when one produces furniture or lumber to construct a building, the carbon remains stored in that product for decades or more. Increasing the amount of those pools of carbon in actual forest products is another mean through which forests can contribute to addressing climate change.
I believe committee members have a copy of the presentation that we distributed. I will turn to slide 8, which more directly answers the question of Canada's forests as sink or source.
This slide shows the change in carbon stocks in Canada's managed forests every year from 1990 to 2008. You can see there that in most years, Canada's managed forest was a net carbon sink. It absorbed more carbon than it emitted. However, there were a couple of years where it was a large source.
The main determinant of that was not human behaviour; it was fires and insects. For instance, 1995 was a particularly bad fire year. Canada's forests emitted 170 million tonnes of CO2 equivalent. To put that into context, it would have been roughly one quarter of the country's emissions in that particular year.
You will note the growing green bars in some of the more recent years shown in the graph. Those are the amount of forest land disturbed by insects. As I am sure many of you have probably guessed, what you are seeing there is the effect of the mountain pine beetle infestation in British Columbia and Alberta on carbon storage in Canadian forests.
In terms of the future outlook, this is a difficult area in which to make forecasts. Fire cycles and insect cycles are unpredictable, and you can add to that the uncertainties associated with the changing climate. Many experts in this field believe all the variables that affect whether our forests are a carbon source or a sink — that is, forest yields, insects and fire disturbances, all the major variables — may change in time as the climate changes. Therefore, it is hard to get any one expert in the field to offer predictions with any certainty about what the future might hold in this regard.
Senator Eaton: Thank you both very much. Mr. Farrell, on one of your slides, you talk about the production of new renewable energy from forest biomass. Are you referring to wood chips? Are you referring to wood-powered generating areas? Are you talking about using waste products from trees that are cut down to make value-added products or bio-products? What are you talking about when you talk about renewable energy from forest biomass?
Mr. Farrell: Was there a particular slide?
Senator Eaton: Yes, slide 5. It is a complex subject.
Mr. Farrell: It is. In answer, it is all of the above. In this particular program, the primary focus is on increasing the volume of renewable energy being produced in pulp facilities with the primary objective of becoming self-sufficient and the secondary objective of creating a surplus of energy that can be sold back into the grid. Many of the utilities in Canada now offer incentives to actually produce green energy, or energy generally, into the grid. This is now becoming a revenue stream for pulp and paper facilities in many parts of Canada.
Having said that, the preoccupation continues to grow among both levels of government around increasing the volume, availability and accessibility of renewable energy. A number of provinces, Ontario included, offer incentives to producers of energy, such as the folks who produce pellets and sell them to utilities to create green energy. There is a growing pellet business in British Columbia and Alberta, driven primarily by the losses due to the mountain pine beetle. They are manufacturing pellets, putting them on ships and sending them to Europe because of the incentives being paid in Europe to produce more non-fossil fuel energy.
Senator Eaton: Those are not really value-added wood products, are they?
Mr. Farrell: They are not. This is about the residues.
Senator Eaton: It is about the waste. We will not start emphasizing this over manufacture or development of bio- products.
Mr. Farrell: Our analyses tell us that building a whole sector around taking trees out of the bush, grinding them up and making power is a low value-added product.
Senator Eaton: Thank you.
Mr. Rosser, I do not know whether this is in your expertise, but a little while ago the B.C. government protected part of an old growth forest. Are old growth forests not decomposing?
Mr. Rosser: At the risk of venturing outside my area of expertise, I can tell you that the debate around harvest cycles, the age classes of forests and when they are a net source or a net sink is an extremely complex one that does not have simple answers.
The complexity is compounded. The benefit from a climate standpoint of using bio-energy is not the use of bio- energy in itself; it is rather that using bio-energy as a substitute for a more emissions-intensive energy source can help in mitigating greenhouse gas emissions. It depends on your perspective and timeline. The case of making a decision as to whether you are better off from a climate standpoint to harvest a forest or to leave it intact depends on how you would utilize that wood.
Senator Eaton: It depends on the age of the forest.
Mr. Rosser: It does; it is certainly a factor.
Senator Eaton: I guess I should ask that question to a forester. I mean that it is perhaps a more academic question. The term "old growth forest" gets people in the environmental industry up in arms and they start putting their arms around the trees. I am wondering whether those parts of B.C. considered old growth forest are not decomposing and being a source of carbon rather than a sink for carbon.
Mr. Farrell: There are many good reasons to preserve and conserve forests. From a carbon cycle perspective, that probably is not one of them. In the life of any forest, there is a traditional growth curve. Up here is when they get old and start to deteriorate before a new forest grows in. However, in the early stages, there is vigorous growth, and they consume a lot of CO2. At that stage, they become a vigorous sink.
Senator Eaton: I am talking about the stage at the top.
Mr. Farrell: There may be a sizeable stock of carbon, but it is the net change from one year to the next that matters. As Mr. Rosser indicated in his presentation, it is actually negative because there is more decomposing than there is growing.
Senator Eaton: Therefore you could make a case that they should be cut down because they would store carbon if they were cut down and could be used in a value-added product. Additionally, you should be replanting new, vigorous growth.
Mr. Farrell: As I said, there are some very good and different reasons to set aside old growth, but the carbon arguments are not persuasive.
Senator Eaton: Like what?
Mr. Farrell: People like to look at big trees. They are unique. I know I do. There are unique habitats associated with some of these western old forests, which are 200- or 300-year-old ecosystems. Those are legitimate reasons.
However, the notion of putting a fence around a forest because you will protect the carbon forever does not wash scientifically. Ultimately, trees will die and new trees will replace them. The situation will move from a sink to a source to a sink over a millennium.
Senator Eaton: I just wish they would tell us the truth when they put their arms around the trees.
[Translation]
Senator Robichaud: On page 4 of your presentation, you talk about market development and I can read this: "North American Wood First."
What is the role of Natural Resources Canada at this level? What is your role in the promotion of wood first? If we were looking for a way to better use our forests and find alternative uses for wood, do you not think we should first promote it? So can you tell us what the department is doing about that?
Mr. Farrell: I think there are two roles to play: first, promotion, and second, standards and codes.
[English]
The promotion is not just a sort of advertising. With all due to respect to engineers, architects and specifiers, there has been a traditional approach to non-residential construction using steel and concrete. This is not unique to the U.S.; there is a certain bias in Canada as well. They have been effective in coming up with prepackaged specifications that meet all the standards of national or regional building codes. Getting to the folks who make those decisions in the development process of a plan for a building is a promotion part of the agenda.
The other part is that there are real live codes and standards issues. If they want to bring an application of a wood product to a non-residential construction, in many respects it is up to the wood sector to go through all the tests and verification that they meet performance standards in a host of applications. That is the kind of work that no one firm is in a position to do alone, and it will benefit everyone.
That is where we have come forward in a partnership with the industry and provinces. In some cases, some of our U.S. colleagues are also interested in deepening that market. Therefore, it is a matter of promotion as well as of eliminating the technical barriers around codes and standards.
Senator Robichaud: Last week a witness made the point that we need a database for all the products that come out from wood. We do not have that, but it would help the engineers and architects when considering the life cycle of the material.
No one really has that file at hand. Who will start it, do it and maintain it? Is your department playing any role in that, or would you see it as a role that you could play?
Mr. Farrell: We could play a role in trying to facilitate that. The key competition in steel and concrete is their trade associations and the technical competencies associated with those. For example, there is the Canadian Wood Council. Those are the folks who really understand many of the codes and standards and technical dimensions of this. They also rely on organizations like the National Research Council and FPInnovations to do the testing that supports the codes.
I think if we had an ideal, at some point there would be a national or even a binational trade association that would be equally as equipped as the steel producers and the concrete producers are in terms of having the technical data that is all computerized and accessible. That would make it much easier to use wood than it is today.
Senator Robichaud: We have heard that it is no one's responsibility. Some say it should be the Canadian Wood Council, but then people there say maybe it should be a government agency because that is alive. It is not a static thing; you keep the data, but it changes. You look at all the information that is coming in, so you have to update it every so often.
They tended, at least last week, to say that if there were a government agency to take hold of that and put it together, it would certainly help the sector. However, I hear from you that maybe we should not go that way; it should be the industry.
Mr. Farrell: The governments, both national and provincial and even to some extent municipal, are the regulators. They set the rules to maintain safety standards; there is very much a regulatory role.
I think it is important for governments to promote the use of wood, but I think they need to be cautious about being both a regulator and the promoter. If we look to other sectors as examples, the promoters and advocates tend to be around the producers, which are represented by their trade associations. However, in forest products, we are definitely supportive of it and are doing whatever we can to continue to advance the development of those standards. Ultimately, I think the industrial sector itself will have to take ownership of that.
Senator Robichaud: It is a vicious cycle, is it not? If you want to develop standards, you need data about the products you are trying to push forward. If you do not have that, on what do you base the changes to the codes?
Mr. Farrell: That is exactly where we are investing our money right now, doing the standards and codes around the various applications of wood design and wood products, both in non-residential and residential application. Once those are done, it is up to individual trade associations to promote their product versus another product to sell it into the market.
Senator Robichaud: You say you are doing that?
Mr. Farrell: The codes and standards? The bulk of the financing is going toward that.
Senator Ogilvie: Mr. Rosser, I will be following up on the questioning that Senator Eaton started because I think this is important for us to try to get a handle on. You have been very forthcoming with regard to your document and your answers. I want to try to understand it clearly.
First, I would like to start with the diagram on slide 8. To make sure I understand, the line at 0 on the graph is an estimate based on some kind of analysis that would represent the equilibrium point in a forest in Canada — that is, the point at which the carbon absorbed is equal to the carbon released. Is that correct?
Mr. Rosser: That is right. It would be steady state. That pool would be neither increasing nor decreasing.
Senator Ogilvie: That is what I thought, but I wanted to be absolutely certain.
That brings me to an answer that you gave in answering the very clear question that Senator Eaton put to you. I want to come back to it a bit. I would like to put it to you this way: Let us suppose we looked at an acre of forest, just as a unit of forest. If I understood your answer correctly — and intuitively, it is totally understandable — you plant the new forest, and for a certain number of years as the forest is growing it goes from a significant carbon dioxide absorber to a steady state where it reaches an equilibrium — the amount in equals the amount out.
Then, looking historically, eventually the decay essentially neutralizes that, for whatever reason. Really, we only have a certain burst where it is a net absorber, and then we reach a steady state, and then ultimately it becomes a negative — it contributes carbon dioxide back.
In a few web sites — I will not be specific — environmental groups are advertising the idea of selling tree planting as a carbon offset. I have attempted to get from them the carbon dioxide equivalent of an acre of forest, and not one of them will respond. Not one of them will answer the question. It is too bad because it is a problem, but the reality is that over the life cycle, there is not a net value in most cases. I am not trying to be absolute here, but in a general sense.
I want to now follow that with your suggestion. If I heard you correctly, you suggested that a potential for exploitation is the conversion of marginal lands into forest lands, which would provide at least that initial burst of carbon absorption. Is there an analysis that says that the trees, relative to the smaller plants — grasses, shrubs, et cetera — offer a more significant reduction through an initial burst phase, such that when they reach a steady state and over the long term they give a net value relative to small grasses and shrubs?
Mr. Rosser: Do you want to take this one, Mr. Farrell?
Mr. Farrell: This whole notion of afforestation is around an acknowledgment that forests are a considerable consumer of CO2 as they grow. Therefore, a bigger spatial extent of forest will consume more CO2. There is that benefit as the trees continue to grow and sequester CO2. However, as I mentioned, at some point those trees, having grown as much as they will grow, will start on some sort of decline.
On that particular acre you are talking about, there will then be the debit that will have to be considered at some point in the future when the forest gets harvested and used somewhere else, is burned, dies or goes into its natural decline.
Senator Ogilvie: That is not the answer to my question. I understand that, but the acre already has plants growing on it. We know that all green vegetation deals with photosynthesis.
Mr. Farrell: The science says that trees will consume more CO2.
Senator Ogilvie: Relative to grasses?
Mr. Farrell: Yes.
Senator Ogilvie: The science shows that, at least through the burst phase.
Mr. Farrell: Yes.
Senator Ogilvie: My final question, then, is coming to lumber — milled lumber in whatever size. Presumably, if you were going to use it as a storage sink of carbon, you would mill it in as large a cross-sectional dimension as you could. One suggestion that has been made to us is that if you take the large trees and mill them into large lumber — let us say eight inches by eight inches on a cross-section by whatever length — and you are able to store those effectively, that acts as a carbon storage.
As we know, one of the interesting things going on includes people pumping carbon dioxide into deep mines, presumably to mix with some form of calcium, forming calcium carbonate or whatever, or to produce a meta-stable state of carbon dioxide sequestering, which eventually could be released through accident or otherwise back into the atmosphere in an event. It seems to me that milled logs stored effectively could be at least as safe a storage potentially as other things we hear about.
Do you think there is any rational basis for taking that extension of the concept to take a forest, mill it and effectively store the milled lumber as a carbon storage?
Mr. Farrell: As a variation on that particular proposal, the analysis tells us that wood, more than paper, used in traditional uses, whether residential or non-residential construction, does act as that. It lengthens the storage period while actually being in use. That is coupled with the fact that in Canada, once those trees are harvested, new trees are planted. We would argue that it is a very legitimate option around carbon storage. Certainly, the science supports it.
The international discussions — which is not my area of expertise; it is Environment Canada — have still to land on that as an accepted alternative.
Senator Ogilvie: I was going slightly outside of your answer. I understand about using wood in construction as an extension of the carbon cycle. However, the reality is that such wood does come back into producing carbon dioxide because nearly every wooden structure decomposes at some point. A certain amount of used lumber is recycled, but it is a small fraction. The rest returns to carbon dioxide, generally.
Let us suppose that, instead of pumping carbon dioxide gas down the mine, we stored lumber down the mine and somehow sealed that mine so it would not to be subject to anaerobic or aerobic degradation in a foreseeable future. Is there any possibility of that kind of competitive carbon storage?
Mr. Rosser: I am not aware of anyone who has studied the idea or put it forward, but as a concept, yes. It is carbon, and if you store it such that carbon is not released, it would be like any other carbon sink.
Senator Mahovlich: I am back to slide 8, looking at the graph. I notice that we seem to have fires and harvest under control, but insects have gone wild. We do not seem to have been able to control them in the past eight years. With all the science we have, why is that?
Mr. Farrell: The primary contributor in the last eight years has been the pine beetle. In some respects, the other losses to insects almost pale in comparison because of the epidemic.
The beetle is a native pest, one that has lived here before, but this is an unprecedented explosion of growth. The way the life cycle of the beetle works, there is only very a small period of time when the beetle is not actually buried inside the bark of the tree, and that makes it extremely difficult to get at. There are some products that could be used on a tree-by-tree basis, but they are pretty pricey, and there is nothing that will treat the hundreds of thousands of hectares, which is the scale of the challenge, in any effective way.
Some of this testing and scientific research takes years and years to do. In many respects, we may be ready for the next epidemic, but I am afraid we missed this one. It is not unique to Canada. Our friends in the U.S. have an epidemic equally as large as ours and are faced with the same kinds of consequences and fall down in timber.
Senator Mahovlich: Is there not a bird interested in that pine beetle, a woodpecker, perhaps?
Mr. Farrell: I think all the birds in the West are really fat and sick of eating beetles. They want to move on to something else.
Senator Runciman: I apologize because as a substitute on the committee, some of my questions may have no relevance to your report, but I do have an interest in some of these areas, specifically jobs.
As a rough estimate, what has been the impact on jobs in the pulp and paper industry over the last 20 years? I know about my area of Eastern Ontario with Domtar, for example, and the impact that had on the city of Cornwall. From my reading of newspapers, I know it is not just Ontario but a number of provinces that have been impacted by the closure of plants. What has been the job loss rate over the past 10 or 15 years?
Mr. Farrell: Going back to 2002-03, I believe the employment level in the pulp and paper and solid wood sector, the forestry services sector, was roughly 370,000 people. The low point, which I guess our data shows for 2009, was around 240,000. Overall, a little more 100,000 jobs have been lost. However, there is a seasonal variation with that.
Senator Runciman: What time period is that?
Mr. Farrell: That is over the last six or seven years.
Senator Runciman: Where do you see it going? I know you mentioned some programs you have initiated in conjunction with the provinces. Is there a light at the end of the tunnel? I know you are making best efforts, but is there any possibility that some of these communities that have been impacted, especially smaller communities in remote areas, might see renewed opportunity or some hope that those jobs could return some day?
Mr. Farrell: Two things have happened over the last decade in the sector, and some of it is structural and some of it is cyclical. Unfortunately, with the crisis in the market as well as the financial crisis, much of that was compressed into a four- or five-year period. If left to its own devices, it would have played out over a longer period, such as 10 years.
The structural change is primarily around newsprint. The demand for North American newsprint has plummeted by 60 per cent.
Senator Runciman: It is unlikely to return.
Mr. Farrell: Yes, it is unlikely to return. The recession accelerated that. Advertisers sponsor a lot of newspaper sales across North America.
The bulk of the pulp and paper losses were in newsprint. The vast majority of those were in Eastern Canada, and it is pretty hard to imagine many of those newsprint mills opening up again, although a number of companies are looking at how to reinvent some of the capacity in that infrastructure.
Senator Runciman: Some of them have been mothballed, unlike Domtar in Cornwall, which has been closed and removed.
Is energy pricing a challenge in that industry? I know you talked about looking at alternatives to lower costs. I recall Northern Ontario talking about the availability of hydro power, but the producers in those areas have to pay the provincial rate, if you will, rather than having very limited transmission costs. There is no recognition of their easy access to that kind of power source. Is that a problem only in Northwestern Ontario and Northeastern Ontario?
Mr. Farrell: No, it is a problem with newsprint. The way newsprint is made, it is either ground or refined; you get some chips or a log and you grind it up to make it into a fibre. The fibre goes into a slurry, and you put it on a wire, nice and thin. Then you drain the water and make paper.
In that process, you do not actually cook something, unlike the pulp process. When you cook something, you generate heat, which can be used internally to offset buying heat or can be put through some sort of a converter to generate power. Many pulp companies are looking at diversifying their suite of products by reducing their input costs and diversifying their output costs.
Newsprint producers have had a difficult time coming up with an alternate business line. Some that have a modified pulp capacity to produce this slurry for paper have some options, but it has been very difficult for newsprint producers. Most firms would rather not sell a newsprint mill because it is a capacity issue; the more capacity you have out there, the more it depresses prices. Many companies have actually closed facilities for fear of putting more product on the market and dampening an already dampened price.
Senator Runciman: You mentioned hubs in your presentation. You mentioned Korea and other jurisdictions. How do you define a "hub"? What does that mean?
Mr. Farrell: If I said "hub," I am not sure I meant to. Let us use China as an example. In partnership with a number of provinces and companies, we have an office in Shanghai. I think we had 20 or so people in Shanghai.
Senator Runciman: Does the ministry have an office there, or does the Government of Canada?
Mr. Farrell: It is a partnership. You would see "Canada Wood" on the banner, on the front door and on people's cards. They have created a small not-for-profit corporation that we support, the Province of British Columbia supports and industry supports, primarily for promotion and codes and standards.
When we go into a new market like that and want to sell wood, we are the guys who have to prove a building will not fall down in an earthquake, will not burn down all the houses next door if a fire starts in it and will be stable if you build up six storeys. The responsibility to prove that the technical standards work is with the person who wants to sell the wood, not with the person who will buy the wood. That has been our focus for almost 10 years.
Senator Runciman: Do you actually have people on the ground in these jurisdictions?
Mr. Farrell: Yes. Some of them are Canadians, but the vast majority are locally engaged experts.
Senator Runciman: I suppose the jurisdictions in question are looking to have a government presence when they are having those conferences.
Mr. Farrell: You are absolutely right. For example, people from the Government of China want to see someone from the Government of Canada because in their world that carries some credibility. They also know the key issue is around codes and standards, and they want to see that the government supports the idea.
Senator Runciman: Senator Mahovlich was asking about the pine beetle. Your chart shows that it dropped fairly significantly in 2008. Do you have any indication of what 2009 was like?
Mr. Rosser: The bars on the graph show square kilometres of forest disturbed by fires, insects and harvesting. My understanding is that what you are seeing in this graph is a tailing off of the rate of growth in the number of hectares that have been affected by the pine beetle. To be clear, yes, that probably is true. It may well continue on into the future. However, the impacts of the pine beetle — depressed harvest levels in the future and carbon impacts — will be with us for a long time.
Senator Runciman: You may have responded to this already, but how do you combat pine beetles? How do the provinces combat that problem?
Mr. Farrell: In 2006, 2007 and 2008, we worked with the British Columbia folks to try individual tree sanitation to try to get ahead of it as the bugs move. It is not like a fire where you can see the face coming nicely; rather, there is this chaotic movement of flights of the beetles when they are adults and they fly ahead.
In some respects, I think we would have had more success had it not been for the unprecedented weather event in 2007, which saw beetles up as far as 30,000 feet being blown in air masses; they were jumping kilometres ahead. That was an unusual weather event, but it served to show that what we thought might be an ability to slow the spread — I do not think we are under any illusion that we can stop the spread, but we had hoped to slow it down.
Senator Runciman: You will recall the gypsy moth infestation in Ontario a number of years ago and the spraying that occurred to minimize the damage. Is anything comparable happening with the pine beetle?
Mr. Farrell: At this point there is no registered product available to combat beetles. Beetles are fundamentally different from the gypsy moth or budworm. Budworms are more like moths and spend a lot of time as larvae, little caterpillars on the branches. At that time in the spring you have a three- or four-week window when you can apply a biological pesticide that has a big impact on knocking back the pest. The beetles do not have a similar life cycle.
Senator Runciman: Are they confined to Western Canada?
Mr. Farrell: The mountain pine beetle is, yes, but science has shown that it can survive on jack pine, which is a species found all the way to Newfoundland and Labrador. With the colder climates, as you move into the continental effect of the country, the trees do not grow in that same sort of tight formation we see in central British Columbia. However, it is a species that the bug will eat.
Senator Mahovlich: I think in minus 40 degrees they cannot survive.
Mr. Farrell: That is right, but they are amazingly adapted. They have this almost antifreeze type of fluid in their body that kicks in at a certain point in late November, depending on where they are. One weather event that has historically always knocked the population back is 10 or 12 days of minus 35 degrees in early November, which is not totally unusual in Northern Alberta and Northern Saskatchewan. However, what allowed the bug to grow as quickly as it did was that that kind of weather did not occur for that first 10- or 12-year period. It allowed them to continue to expand.
Senator Martin: I, too, am visiting this committee, but I remember being here earlier on in the study and looking at some innovative technologies and programs in other jurisdictions. I wanted to ask some questions about the innovation topic.
I am from B.C. as well, so this concern of pine beetles has been something we have talked about for the past few years. Thank you for your information today.
Innovation arises out of the need and, as you mentioned, the global pressures. We have this abundance of natural resources in Canada, and everything has become such a global economy.
You outlined on slide 4 some of these programs under innovation. I wanted to first ask about the effectiveness of these programs and our global innovation compared to what else is out there. You mentioned that we are known as global forest stewards. How are we doing in the field of innovation?
Mr. Farrell: One of the fundamental principles that we in the department assumed at the beginning of this agenda is that the model upon which the Canadian forest products industry was built, going back over 200 years with shipments to Europe for shipbuilding, was based around volume and a very high-quality resource. In many respects, that model has continued to grow. We are the biggest shippers of newsprint, the biggest shippers of softwood pulp and one of the biggest shippers of softwood lumber.
As the nature of the forest has changed and is changing, as is people's public expectations of their forest, including more set-asides and constraints, those natural advantages we enjoyed that built the forest sector we do not enjoy anymore. There is this whole notion of moving. As we talked about, the sector is employing fewer people than it did five years ago. That will probably not change an awful lot.
We think the real opportunity is looking at the forest as a value proposition rather than as a volume proposition. What adds to that mix, then, are new and creative ways to use Canada's forest fibre. We will never grow fibre as quickly as Uruguay or Chile or any of the Central or South American countries. However, very few areas in the world have the spatial extent and volume of Canada's forest fibre as well as the diversity of those fibres.
What can we do with this fibre that will give us some kind of a five- or ten-year jump in competition? What we can make from our fibre that our competitors cannot make easily? One product we are pretty excited about is nano- crystalline cellulose, NCC, which is an extraction of forest fibre at its nano level to be able to manipulate cellulose at the nano level to give it a whole different set of characteristics than what you would normally expect from fibre — the way it passes light, the way it is aligned to create different strength characteristics that you would never expect from forests, as well as durability characteristics. The applications are almost endless.
One of the first challenges was to get a private sector partner willing to take the risk of moving from the bench to some kind of a scale so that we can produce some volume and then start experimenting with the applications in different products. There is now one under construction in Southern Quebec just outside of Montreal — a partnership with Domtar, FPInnovations, the Province of Quebec and ourselves. We expect that within a year or so, a one-tonne-per-day production facility will be up and running.
In spite of the fact that these programs are funded for a couple of years, we are under no illusion that we will revolutionize the forest sector in a couple of years. However, a key indicator of some level of success is more interest from the private sector once that table is set in moving to a platform technology like NCC. It is not the only one, but it is the one I am more familiar with.
We are looking at the production of lignin, the glue that holds the cellulose fibres together, as well as applications of wood. For example, the traditional approach to building houses in Canada is two-by-four and two-by-six platform frame construction. There is development of a product called a cross-laminated timber, which involves getting a lot of pieces of wood and gluing them together in widths of eight feet to twelve feet in lengths as long as you want and maybe six to eight inches thick. It can be pre-routed for access for electrical or for plumbing. Essentially, they replace the slabs of concrete that you might see on a construction site for a multi-storey building. There is a nine- or ten-storey building in London. One of our pilot projects is to put in place a capacity to create some of that cross-laminated timber to start doing buildings out of it. Once it has been demonstrated that the technology works, my view is that the government should be stepping back and looking at the private sector to invest in that capacity as well as in the marketing associated with selling it.
With the solid wood side and the composite side, I am hopeful about putting fibres together in different formations to make different products.
Senator Martin: I imagine there are many other examples you could talk about. It is exciting to hear about them. I am curious because we hear about this in other studies; for instance, the Transport Committee is undertaking a study on the airline industry.
The innovation is there. You have the people, the knowledge and the technology to move forward, but do you find any challenges with provincial and federal jurisdictional conflicts? Does it happen that what one province says is good for the forestry sector another says is the worst thing you can do? Are you facing those challenges? Does that impede progress in what we need to be doing in this transformation?
Mr. Farrell: Legitimately, the provinces' number one priority is their domestic sector and the capacity there.
One positive dimension of a crisis is that it tends to rivet the mind and focus the attention. I have certainly seen a lot of collective and shared interests in finding solutions over the last four or five years, given the dimensions of the problem.
Senator Fairbairn: Thank you very much. I will try to control myself from talking about the pine beetle because it was very much around where I am from.
The Canadian Boreal Forest Agreement was unveiled on May 18 of this year. I am not sure that I understand it correctly. It seems that governments are not engaged in this particularly. They have not become party to this agreement. I wondered what problem would push the federal government or others away from it instead of being in a place to help the signatories of this agreement. Can you help us understand the agreement and then indicate to us whether there is a reason not to agree? Maybe there is a reason that you will agree.
Mr. Farrell: The agreement was signed between the member companies. That is, the Forest Products Association of Canada and some of the major environmental groups in Canada, as well as some of the charitable foundations that historically have been financing a number of the campaigns over the last 10 years, both domestically and internationally. I wanted to situate that.
As a result, they might well be better positioned than I to talk about the details of the agreement, how it came about and what the next steps are. You are absolutely right: It involved neither the federal nor the provincial governments. I think it showed a lot of courage on both sides to try to find a common way forward through some deep-seated differences that have developed over the years. It is a step in the right direction. Having said that, the devil will always be in the details, and provincial governments have the responsibility to see what actually happens on the ground.
From both an industry and an environmental community perspective, I think just arriving at that agreement was an acknowledgment that it was about substance as opposed to ideology. For the longest time it was not clear whether it was about ideology as opposed to substance.
Either the environmental community or the firms themselves will tell you that it is a first step in what will be a process that will undoubtedly involve provincial governments around specific decisions on the ground and how forest land is used.
Senator Fairbairn: Following that, it may come in a spot of time that the government could step forward in the national interest.
Mr. Farrell: Inevitably, at some point there will be discussion about permanent set-asides, national parks and so on.
Senator Fairbairn: It is important.
Mr. Rosser: We will see how it all plays out.
Senator Fairbairn: That would be great. Keep us posted.
The Chair: The First Nations were not part of this agreement. Do you have any comment on that?
Mr. Rosser: I do not.
The Chair: You do not. Thank you very much.
Senator Duffy: Thank you both for coming here this evening. This is an important topic. We have heard you both before. As always, you bring a wealth of wisdom. We are lucky to have people of your expertise available to advise the government.
Senator Martin talked about innovation. The other day we heard witnesses from the province of Quebec talk about taking sap from birch trees and using it for medical purposes. We also heard about putting wood fibre in automobiles and about many other new and innovative uses for wood.
Have you any thoughts about the medical or quasi-medical use of these products? When we asked the witnesses, they seemed fairly proprietary. They had not yet nailed down all their commercial deals and were worried about some of their intellectual property. Without violating any commercial confidences, could you tell us about some of these areas? A huge group of people across the country are affected by this downturn, and I think they would be fascinated. The more areas we can show where things are happening, the better; it serves to reassure the public that we have not forgotten them.
Mr. Farrell: That is an excellent point. I think I spoke before about moving from a volume world to a value world. The notion of the more medicinal values of native plant species, both trees and other plants, historically has been in the purview of indigenous Aboriginal Canadians. In the last 20 years it has sparked more recognition by both the science community and the courts of the value of traditional knowledge. Many of these uses have been recorded over generations through the oral tradition and traditional knowledge.
I had a question at a seminar a few weeks ago about when that traditional knowledge will actually be at the same level as the scientific, peer-reviewed, traditional European-based societies' expectations of what is true and what is not. It is getting there, but it will be a while.
International negotiations on the Convention on Biological Diversity are ongoing in Nagoya right now, and one of the issues, more so with developing countries but certainly with indigenous peoples anywhere, is this whole business about access to and benefit sharing of genetic resources. This goes back to the point that there is a fundamental value embodied in plant X or plant Y, and losing the proprietary rights to that threatens indigenous peoples' opportunity to generate the value themselves from those products.
Even globally there is more and more recognition of the value that represents, and countries are concerned about protecting their rights to that genetic resource. It is of growing interest and value, and it will only continue to grow in value.
Senator Duffy: We are talking about a bottle of birch sap that, after it was treated, was worth $800. Apparently it is popular in Europe.
Mr. Farrell: It is more valuable than single malt.
Senator Duffy: And better for you, probably. Thank you.
[Translation]
Senator Robichaud: My question was about birch water, a natural product that is collected just like maple sap. The firm Biothec Foresterie is looking for a way to market this product. We also heard about yew and some kind of mushroom. They are talking about big research and big projects. This also involves big industry. Can Natural Resources Canada help this kind of company?
Some small entrepreneurs also need help and guidance. Can you assist them? They do not create many jobs but the jobs they do create are in rural areas. Aboriginal people would harvest the product and could also take advantage of the marketing. Presently, birch water is imported from Switzerland. Why can we not produce it and market it here? What can you do to help this industry?
[English]
Mr. Farrell: I have two dimensions of an answer. In terms of programmatic involvement in that, we have a model forest program, which is more recently the communities program, where we have 11 sites, two of them in Quebec, that are primarily focused on the relationship between local communities and their surrounding forest and not the traditional lumber production or newsprint production. They have developed quite a number of small co-ops and information on non-timber forest products. It is a modest program, 11 locations in a network across Canada, but that network is connected to a global network, an international model forest network, that involves some 38 countries across the world.
One of the model forests in Canada it around the area of Mont-Laurier, and it has a partnership with a similar model forest in Cameroon. They exchange experts as well as folks back and forth looking at non-timber forest products in the tropical forests of Cameroon and looking at the potential in the forests in south central Quebec.
From a research side, we have researchers, mainly in Ontario, looking at the actual biological compounds in various trees and plant species and how you extract them and profile them. There is a small effort around research as well as actively working with communities around non-timber forest products.
[Translation]
Senator Robichaud: There is presently a marketing problem. We have the resource. Apparently, it is very easy to collect birch or yew water. The problem is access to markets. This is where there is a barrier to development and job creation through the use of this product.
[English]
Mr. Farrell: The Department of Foreign Affairs and International Trade has a number of export development programs. I would not presume to be an expert on them, but they are more targeted to small and medium-sized enterprises. That area might offer some opportunity for exporting.
You are absolutely right. Taxol, from the plant genus Taxus, is known to be a biological compound that helps in the treatment of cancers. As time comes along, the challenge is how to move from a cottage scale to a more commercial scale where you can actually get a volume to generate a reasonable rate of return. Many of these are still in that stage because the volume needed to make them commercially available runs into issues around access, cost of inputs and transportation. I would agree that marketing is a big part of it as well.
Senator Eaton: To follow on what Senator Duffy started, we heard last week about the nano-crystalline cellulose, which is an exciting alternative to pulp and paper. Are you doing anything to encourage some of the bigger companies that have fallen on hard times to convert to doing things like that?
Mr. Farrell: The one partnership project is with Domtar, a company in Eastern Canada, and under the Investments in Forest Industry Transformation program, IFIT, as well as the Transformative Technologies Program, funds have been available for demonstrations of technology in partnership with firms currently operating in Canada.
With IFIT, we are just at the process of reviewing project proposals right now. I would expect that over the next two to three months there will be announcements around partnerships that involve some of the existing firms in Canada, and you may well know the names of them, to encourage them just to get started moving on a different set of products away from commodities.
Senator Eaton: One of our excellent witnesses, the chair of the TD Bank Financial Group, made an interesting comment. He said Canadians are not business ambitious. We have all these wonderful universities. I had the opportunity to tour the University of Guelph to see what is happening there in bio-forestry and pharma-products. Does any government department go to those universities, pull them by the hair, take what they are doing, put them with a company and say, "There will be tax incentives. Come on guys, get going"? Does that ever happen?
Mr. Farrell: Dragging people by the hair? Governments gave that up long ago.
Senator Eaton: We are always silent in this country.
Mr. Farrell: We have been focused since 2005 on the national forest innovation system, which frankly has been highly fragmented and somewhat inefficient in how it uses public funds. One of the first steps was to amalgamate the three research institutes that did pulp and paper, solid wood, and harvesting and transportation, to create FPInnovations.
Senator Eaton: It seems to be wonderful. Every time they come here, they have interesting things to present.
Mr. Farrell: The gap, though, was in the upper end in the forest itself, to fully connect the value chain from the tree growing in the forest all the way through the various manufacturing processes and end up on the shelf somewhere.
Within my own organization, the Canadian Forest Service, we set up the Canadian Wood Fibre Centre, which essentially is a virtual part of FPInnovations. They take research direction from their board of directors and work in partnership.
The third part of that agenda was to get the universities and the academic community plugged in. We were able to get an allocation of $10 million a year from the Natural Sciences and Engineering Research Council of Canada, NSERC. That started two years ago. We now have eight networks across the country that are hard-wired into FPInnovations. That does two things. One is that it broadens the reach of capacity beyond the walls of FPInnovations into the various experts, whether they be at École Polytechnique Montréal, the University of British Columbia or the University of Toronto. Thus the experts do not have to be in-house; they can be in academia. Second, it makes it interesting and attractive to generate the next generation of skills, whether at the master's level or the PhD level, and to come back and work in the sector. That will be more durable than any sort of short-term research. It has been a difficult sector to attract the best and brightest to come to work in over the last 10 years.
Senator Eaton: It fell by the wayside. It kept making money but did not have to put a lot of money into research or innovation.
We found that out from witnesses who came from the concrete and steel lobby. They had been going into schools and teaching people new methods, and they told us how the forestry industry has not done that.
You talk about going into the forest, to FPInnovations and to the store shelf. Is the last link there?
Mr. Farrell: In the new regime of products, no, although it is for the commodities. We know how to sell two-by- fours, pulp and newsprint. However, with the products you are talking about, that is where we have to move from pilot scale to commercial scale, because then you have something to sell. You have some kind of a competitive product, economically in terms of properties. You cannot sell that until you have some of that stuff.
The next five years will see moving beyond research scale to actually having competitive products that work, and then you have something to sell.
Senator Eaton: Do you go out ahead and source markets ahead of time?
Mr. Farrell: The government? No. We have done that in the wood products business. As I mentioned to Senator Robichaud, there is a legitimate role for public involvement in areas involving public safety. That is where codes and standards for residential and non-residential construction come into play.
This is new territory — a whole new suite of products. It might turn out to be a gap that has yet to be filled. We have been focusing on ensuring the chain from the tree to at least —
Senator Eaton: FPInnovations.
Mr. Farrell: And into the mills now. We have seen that over the last three or four years, and not just the traditional players; we see more interest from energy companies because of the green energy dimension. However, the last part needs work over the next five years.
Senator Eaton: Mr. Rosser, when people object to clear-cutting the forest, is it really an aesthetic consideration?
Mr. Rosser: From a carbon point of view, the science groups like the Intergovernmental Panel on Climate Change have been explicit that, in most cases, harvesting a forest on a sustained yield basis and using that fibre to produce products to meet society's needs for energy and shelter and so on is the most effective means through which forest resources can be used to mitigate climate change.
Senator Eaton: Then you regrow and replant.
Mr. Rosser: That is right. It is maintaining the forest and either growing it or maintaining its size that is key, from a carbon point of view. There might be other public good or societal reasons why you would want to protect a forest. However, in general, the science is fairly explicit from a carbon standpoint how forests can best contribute to mitigating greenhouse gas emissions.
Senator Eaton: Thank you very much.
The Chair: Before we close, there are a few questions. Mr. Farrell, you have mentioned the Pulp and Paper Green Transformation Program for $1 billion. Is there money in that program to complete the objectives the government wanted?
Mr. Farrell: I believe so. The allocation process was based on the production of black liquor by firms over a certain period of time. By the time the program was actually announced, the formula for distributing the funds basically already directed which companies got how much money over what period of time. Over the last year or so, we have been putting agreements into place to use the funds for capital investments in mills across the country.
It is our view that this investment will have a dramatic impact on the profitability and environmental sustainability of a number of these mills across the country.
The Chair: Especially the pulp and paper mills.
Mr. Farrell: Strictly the pulp mills.
The Chair: There is still concern that the U.S. will be embarking on continuing their program at that point. Do you have any comment on what impact it will have on that industry, even with the $1 billion that we have invested?
Mr. Farrell: The level of incentives being paid to companies in the U.S. has been an ongoing concern for Canadian producers and the Canadian government. The concern is not only short-term profitability but also a fundamental step change in comparative advantage if those investments are put into facilities in the U.S. It is an ongoing concern in Canada, and it has been raised with the U.S.
Senator Robichaud: Whatever programs they put in are not countervailable, but ours all are.
Mr. Farrell: The terms and conditions of the Softwood Lumber Agreement do have an allocation of responsibility that is different from one side of the border to the next.
The Chair: We have visited two icons in Canada; the Richmond Olympic Oval and the Fondaction office building in Quebec, which is a six-storey building. By the way, the building you mentioned in the U.K. is nine storeys. One of the two main players — if I can say "main players" — we have visited is Chantiers Chibougamau, which does cross- laminated and beams up to 60 and 80 feet.
I want to ask a question, and feel free if you want to answer. What are your comments, Mr. Rosser and Mr. Farrell, on Bill C-429, which we have in the other house?
Mr. Farrell: As I understand it, Bill C-429 is a proposal to amend legislation within the purview of the Minister of Public Works and Government Services that would oblige the minister and the ministry to actively consider the use of wood in any building constructed by and funded by the department. That is my understanding of what the bill suggests.
I understand it is in committee now between second and third reading. Undoubtedly they will continue to hear witnesses and bring back the bill for consideration to the house sometime around Christmas.
As a forester, I have a lot of personal sympathy with using wood. Our friends in Quebec and British Columbia have been consistently vigilant in reminding us that they have taken on legislation in their jurisdictions, and they are encouraging us to do a similar change in Canada. I will leave it up to the honourable members of the house to decide the future of that bill, but, as I say, I am a great wood supporter.
Mr. Rosser: I do not have much to add. Mr. Farrell referred to the legislation and policies in place in Quebec and British Columbia around this. We do see debate about the appropriate means of trying to recognize the use of wood or promote the use of wood. We also spoke earlier about the North American Wood First Program and some of the efforts we have done in partnership with others around outreach to architects, specifiers and so on. Many would argue that those kinds of efforts over a period of years have played an important enabling role in building the capacity of those active in commercial construction to utilize wood to the point that it becomes possible to consider options on its use.
Mr. Farrell: Notwithstanding that, our own staff is working with public works staff as well as the National Research Council to look at what are the actual technical barriers in the National Building Code. There may be a way to come at this challenge of systemic barriers in some people's minds regarding the use of wood.
The Chair: Mr. Farrell, that gives me a great opportunity to ask you this question. Last week, we heard from a witness who talked to us about the importance of a green building code. We had senators who are present today, and if you permit me, I will mention Senator Eaton, present when we had the National Building Code witness here.
The last time changes were made to the National Building Code of Canada was in 2005. I will leave this as a personal comment. It seems there is maybe a lack of openness to change such codes because they vary so much from province to province.
With your experience as a forester, do you think a green building code would enable the forest industry and the non- residential construction industry to use more wood?
Mr. Farrell: Let us go back to the National Building Code. My understanding is that there is a cycle, and the next cycle for review is 2015, but the work needs to be done by 2013 to get through the various committee and engineering processes.
I am not entirely sure what this notion of a green building code means. I suspect the witness that brought that idea forward probably has a sharper view than I do as to what that means. However, it is probably legitimate to say that wood in some respects could be more competitive, depending on the lens one looks through.
For example, with respect to life cycle analysis, the total environmental footprint that a wood product has versus a non-renewable product, to compare environmental impacts I think the wood industry would like to look at the entire production system as opposed to just various pieces of it. Senator Runciman mentioned that there is a relatively low volume of recycled wood, which is probably true. On the converse, there is probably a high percentage of steel that is recycled, just given the nature of it.
However, if you look back at the entire construction process, with energies consumed and greenhouse gases released, clearly I think wood can stand up to any other competitive product, given the opportunity to compete on that basis.
The Chair: This is a personal comment also. I believe that every material has its proper usage. With that said, we will share with you a document that was sent to us by the Athena Institute. They confirmed at the committee that they had this document circulated through the federal government and different ministries with respect to a green building code. We will bring that to your attention.
Before closing, I have one other question. I hope you have taken the time to read our first interim report, The Canadian Forest Sector: Past, Present, Future. At page 33, there is a reference to various initiatives, because of the forestry crisis that we have experienced, to facilitate forest companies' access to credit — including for example $13 billion in additional funding to financial Crown corporations — and an increase in lending limits. The Business Development Bank of Canada, BDC, also received $100 million to establish an operating line of credit guarantee program and maybe also risk capital.
I am sure you are following these hearings very closely, because I had conversations with your ministry. Have we met our objectives with that particular program?
Mr. Farrell: I would have to defer to BDC and to Export Development Canada, EDC, to get their views. As you know, EDC is a corporation that behaves very much like a chartered bank. There are issues around privacy, client privilege and those sorts of things.
However, over the course of the crisis, we have worked extremely closely with EDC around both access to credit domestically and their core business, which is insurance on accounts receivable for overseas shipments. Unlike chartered banks, they have been extremely engaged with the forest products sector. Some of their biggest clients are in Canada's forest products industry.
I would have to defer to EDC and BDC on the effectiveness of the program. I am sure you have heard that over the period from 2007 to 2009, there was a lot of interest in loan guarantees for firms. Certainly, EDC or BDC was in that business, basically on market terms. I would have to defer to them to give you specifics around the volume of business and around how much funding both organizations had out.
The Chair: Thank you. Mr. Farrell and Mr. Rosser, thank you very much for being here. You have been very informative and educational. I now declare the meeting adjourned.
(The committee adjourned.)