Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 11 - Evidence - November 23, 2010
OTTAWA, Tuesday, November 23, 2010
The Standing Senate Committee on Agriculture and Forestry met this day at 5:10 p.m. to study the current state and future of Canada's forest sector.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Honourable senators, I see that we have quorum. I declare the meeting in session.
[Translation]
Welcome to this meeting of the Standing Senate Committee on Agriculture and Forestry.
[English]
Welcome to our witnesses and honourable senators. I will start by introducing myself. I am Percy Mockler, a senator from New Brunswick and chair of the committee. At this point, I would like to ask honourable senators, starting on my left, to introduce themselves.
Senator Robichaud: Fernand Robichaud, New Brunswick.
Senator Mahovlich: Frank Mahovlich, Ontario.
Senator Marshall: Beth Marshall, Newfoundland and Labrador.
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
Senator Carignan: Claude Carignan, Quebec.
Senator Eaton: Nicole Eaton, Ontario.
Senator Rivard: Michel Rivard, Quebec.
The Chair: Thank you. The committee is continuing with its study on the current state and the future of Canada's forest sector. Today we are examining the issue of workers in the forestry industry.
[Translation]
Today, we are examining the issue of workers in the forestry industry.
[English]
Today, honourable senators, we welcome three witnesses from three different organizations. From the Forest Products Sector Council, we have Mr. Keith Lancastle, Executive Director. Thank you, Mr. Lancastle, for accepting our invitation to be here today.
From the Communications, Energy and Paperworkers Union of Canada, we have Mr. Dave Coles, President.
From the Northern Development Initiative Trust, we have Ms. Janine North. Ms. North, thank you for the great hospitality you provided the committee when we were in Williams Lake, British Columbia.
We thank you all for accepting our invitation. Before I ask you to make your presentations, I would like to ask honourable senators for consensus. Our witnesses today have handed the clerk copies of their presentations in one of the official languages.
[Translation]
Do we permit the distribution of presentations after we have the translation and it will be sent to you?
Senator Robichaud: Before we have the translation.
The Chair: Yes, thank you Senator Robichaud.
[English]
Will we permit that the presentations be distributed now and that the translation be sent to honourable senators once it is available?
Hon. Senators: Agreed.
The Chair: Thank you. I now invite the witnesses to make their presentations, followed by a question and answer session from honourable senators.
Keith Lancastle, Executive Director, Forest Products Sector Council: Thank you for the opportunity to be here this afternoon to present on the labour force requirements for the forest products sector now and into the future over the next decade.
We have prepared a PowerPoint presentation that incorporates some graphs we would like to work with this afternoon to present some of the key findings of the work we are undertaking presently.
Over the time that I have with you this afternoon, I would like to speak to a number of items. I would like to begin with a short introduction on our organization, the Forest Products Sector Council, and provide a little context-setting piece about the brighter future for the forest products sector across the country. I will concentrate the bulk of my time on our forecasts and perspectives on the future labour force requirements and different scenarios that we are forecasting over the next decade, and then I will close off with some final thoughts.
The Forest Products Sector Council was established in June of 2008 as an independent not-for-profit organization. We receive operational and project-based funding through the Government of Canada's Sector Council Program, through Human Resources and Skills Development Canada, HRSDC. Our council is governed and directed by a 15- person board of directors that includes seven representatives of major forest products companies across the country; five representatives of the major unions across the country, including the Communications, Energy and Paperworkers Union of Canada; and three directors at large. It is a 15-member board we work with and for on behalf of the forest products sector as a whole.
The scope of our work is focused on the entire value chain in the primary forest products sector, beginning with silviculture and forestry management right through to dimensional lumber, panel and fine paper. This is a sector that has typically been very active across the country, with concentrations in Ontario, Quebec, British Columbia, Alberta and New Brunswick.
Certainly the industry has been through some very difficult times, and I know committee members are well aware of some of the challenges the sector has been facing over the last five years, but there is an increasing recognition that we may well have hit rock bottom and that recovery is starting to occur. We are seeing demands for many of the traditional products that the sector has produced beginning to increase, particularly focused on lumber at present. We are seeing growth in new markets, not only for some of our traditional products but also for some of the new and emerging products and processes within the sector, and we are seeing traction in terms of efforts to increase the use of Canadian wood in a wide variety of applications across the country.
Certainly the perspective of our organization is that new products and processes such as biomass, bio-energy and composites combined with traditional operations and traditional offerings represent the best potential for future growth and prosperity of the sector.
We see an evolving and a changing need for workers over the coming decade. We know that as demand for our products returns, we will need to look at recruiting significant numbers of new workers. We say in presentations to industry that the slowdown did nothing to reverse the aging trend, and certainly as a sector with an older demographic base, the issues of attrition and retirement will be significant for us going forward.
Clearly, as changes in processes and changes in products continue to evolve, they will have an impact on the skills and knowledge requirements of the workers. We will clearly need some updating of skills and knowledge, with a strong premium on literacy and computer skills in the coming decade.
One of our foundational pieces as an organization is a piece of research that we call a sector study. I will share with you today findings from that research. Essentially, this study develops a profile of the future labour force demands for the sector as a whole, including numbers of workers by region and by sub-sector within the forest products sector; some insight into the knowledge, skills and training needs of that sector; and some further insight into some critical occupations that will be essential for the future prosperity of the sector.
The study will look at the impact of changing technology and at the need for changing occupations as a result of industry restructuring, technological changes and economic scenarios. Most important, we will develop a set of recommendations and a path forward to help ensure the sector can meet its future labour force needs.
I want to share with you some key findings that our study has found to date, which underpin some of the challenges and opportunities we will face over the coming decade. Our current workforce is predominantly male; 85 per cent of the workers in the sector are male. We do face some issues in education and training; 17 per cent of our workers have less than a high school diploma, compared to 12 per cent for all other industries across the labour market. That is contrasted by the fact that 39 per cent our workers have post-secondary credentials, including apprenticeship and trade certification, compared to 35 per cent for all other industries. We are facing a bit of a paradox in that respect. Again, it is the issue of the age of the sector. Our sector is older than average, and our estimates are that up to a third of our workers will be retiring by 2020, compared to 20 per cent for the entire workforce. Again, the emphasis on workforce skills requirements escalates as technology and new processes begin to take root.
This graph demonstrates the makeup of the sector. You see the forest products workforce in blue versus the entire workforce. Again, you see some significant disparities, particularly in the 45- to 54-year-old age band and the 15- to 24- year-old age band where we have respectively a much greater concentration and a much lower concentration. It demonstrates clearly the issues we face around an aging workforce.
I am pleased to be able to share with honourable senators today some results from our scenario planning exercise. We have engaged some labour market economists to look at labour force demand considering the impact of a number of factors. We have looked at the impact of varying levels of housing starts both in the U.S. market and in domestic markets and have looked at GDP rates in both the U.S. and Canada. We have looked at exchange rates; as an export- dependent sector, that obviously has a significant impact on our capabilities going forward. We have looked at market expansion not only for our traditional products but for new and emerging products and the issues of technological advancements. We have produced a set of four scenarios that paint a significantly varying picture for future labour force demand.
If we look at the total employment, and this again is for the primary forest products sector as a whole, we see that we have four different scenarios: a green, blue, brown and red scenario. The green scenario, the most optimistic of the scenarios, is predicated on a number of different factors: a robust recovery in U.S. housing, favourable market and trading conditions that allow us to continue to enter new markets with our existing and emerging products, favourable realities in terms of trade and so on. The blue and brown are probably the more likely scenarios, and the red is a worst- case scenario that incorporates things like a potential double dip in the U.S. economy and the possibility of a U.S. recession towards the latter part of the decade.
We think it is important to note that in three of the four scenarios we do see some relatively robust growth in terms of the workforce potential for the sector, and as I pointed out to an industry group in British Columbia a couple weeks ago, even in the worst-case scenario we essentially hold our own over the next decade. However, I reminded the group that one third of their workers will be retiring over the next decade. Even that represents the need to recruit an additional 50,000 people into this sector over the coming decade, so clearly we will require some new entrants — with a wide variation in the potential numbers.
To break it down and give you a more granular perspective looking at some of the specific sub-sectors of the industry, these are scenario numbers for forestry and logging. Again we see in the green scenario, the most optimistic one, some very significant growth through the middle part of the decade with a levelling off towards the latter part of the decade. It is a little less robust in the blue and brown scenarios, but again there is a levelling off from 2015 through to 2020.
Sawmills has again a more dramatic growth all the way through and in fact grows even in the red scenario, underpinning the importance of lumber to the recovery of the sector and the future of the sector going forward.
Veneer plywood and engineered wood is a growth scenario in all four cases, with very significant and steady growth in the green scenario and flatter performance in the early part of the decade in the red scenario but increasing towards the latter part of the decade and up to 2020.
Pulp, paper and paperboard is a less optimistic or positive scenario in almost all cases. The green scenario sees us essentially holding our own with a slight increase by the end of 2020. The blue, brown and red scenarios all show decline in pulp, paper and paperboard through to 2020. Again, these numbers include not only pulp but also all the traditional grades of paper that have been produced. The general wisdom seems to be that pulp is a more buoyant commodity, certainly through to the middle part of the decade.
Finally, support for forestry — and these are the foresters, the forest scientists, technicians and technologists who will be driving the innovation agenda — and we see growth in all four scenarios but obviously a significant degree of growth in the green scenario.
To sum up, looking at the future labour market, the scenarios all suggest some degree of workforce recovery through to the next decade, even the worst-case scenario. It is important to note that the peak levels of employment we saw around 2003 are not likely to be seen again. Clearly our more optimistic outcomes and scenarios are predicated on continuing market growth for our traditional products and new and emerging products, on recovery in some of our traditional markets such as the U.S., and on the industry's ultimate ability to transform and to add some of the new and emerging technologies to traditional operations.
I have a few final thoughts. The industry faces some potentially uncertain times, and certainly that is a localized reality in the near to mid-term future, but all indications suggest that we as a nation are well placed to profit from future demands for forest products across the continent and across the world. Clearly, however, if we are to capitalize on future opportunities, the sector will continue to need highly skilled and educated workers, with a particular emphasis on trades and technical disciplines, literacy and numeracy.
The Chair: Thank you, Mr. Lancastle, for that presentation. Ms. North, the floor is yours.
Janine North, Chief Executive Officer, Northern Development Initiative Trust: Thank you, Mr. Chair and senators, for inviting me out of the cold from British Columbia here to beautiful balmy Ottawa.
My presentation will talk about delivering funding in a very effective way out to the sector and then what areas we think are needed from a federal perspective. I will focus on British Columbia, but certainly these are strategies that could be implemented across Canada.
I have a very practical background in this sector. I have spent 30 years working in the sector, whether it was managing very large forest districts in British Columbia or managing large logging companies with $25 million in revenues from harvesting or now funding the sector as one of 10 sectors that Northern Development Initiative Trust funds.
What if I told you that you could take an area of government services and funding delivery, and let us say it is Western Economic Diversification Canada as an example, provide a legislated mandate and a capital base of $185 million and an operations endowment of $25 million and tell them that they have to run the organization on the income from that endowment and that you expect the capital base, that $185 million, to still be there in 5, 10 and 25 years? And what if you also got 40 per cent return on the government's money in terms of flowing out to communities and to industry, and you were able to see the growth of 8,000 jobs, and you had 0 per cent slippage in your projects and any unspent funds, and you had a 98 per cent public and client overall support and acceptance approval rating?
That would be a very good deal for the taxpayers and for the industry, and in fact, that is what we have done with the Northern Development Initiative Trust. We have legislation from 2005 in British Columbia, $185 million, and currently the capital base is above that, and $75 million has flowed out into almost 700 projects in all sectors. We work at less than 1 per cent overhead, and when we delivered $30 million of federal stimulus money for the Community Adjustment Fund, we did that contract at 1 per cent overhead with zero slippage, and the funds that went into loans are already flowing back to the federal government.
That is the sort of successful funding arrangement that can be struck in Canada. How is it done? It is done with a very entrepreneurial approach with excellent project management software. It is done close to the communities and the industries you are trying to serve. We have eight staff based out of Prince George, and we provide funding out to 10 industry sectors across 70 per cent of British Columbia, 40 communities and 88 First Nations within that area.
We have moved a bit less than $25 million into the bio-energy sectors and into making a difference that has allowed mills to start up in Mackenzie, in Chetwynd, and in Fort St. James, very small communities that were hard hit by the downturn in the forestry sector. It is things like using wood biomass now to lower their costs of production, lower their costs of operating dry kilns and having much of the energy met through that mill through wood biomass. It is through allowing small and medium-sized enterprises to diversify into pellet production or into delivering biomass to pellet companies or wood-burning enterprises like Capital Power in Williams Lake, which is the largest biomass energy plant in North America.
We would like to see that very diverse cluster contained either on one industrial site or across a community that ranges everything from log home construction, to dimensional or traditional saw mills, to pellet production, to cross- laminated timbers, to wood-fired or biomass-fired energy, so that the entire spectrum of forest biomass is used within one community.
What is stopping this from happening, stopping a diversified and very profitable forest sector?
To give you some background, our region is the most dependent in Canada on the forest industry. It has about 15.5 per cent employment compared to employment levels in other regions that range down to 2.2 per cent. Forestry is the first- or second-largest source of basic income — 62 per cent in rural B.C. — and supports more communities outside the Vancouver area than all other business sectors combined. More than 270,000 people, or 14 per cent of our total workforce, are employed by the forest industry, and we saw 14,000 jobs lost during the recent recession.
One of the big challenges we are seeing is access to capital, access to equity. We run 10 programs within the trust, as well as serving others through moving out funding. We have a lack of access to capital. We have one program where we have up to 25 per cent loan guarantees for the Business Development Bank of Canada, BDC, so that they can take a stronger or more aggressive risk profile. We put $15 million toward that, and we are not seeing that tapped to the degree that we would like.
Basically, the balance sheets in the forest industry over the last few years will not enable them to access debt financing from Canada's major banks or from BDC with a stronger risk profile, even with our up to 25 per cent loan guarantee.
Therefore, many of the small and medium-sized enterprises are turning to a mix of trying to source higher equity funding in combination with debt funding. Many were extremely appreciative of the Community Adjustment Fund and how that enabled 0 per cent five-year loans to companies. We see that as one of the major sources of need in growing this diversified and strong forest sector.
On Thursday, we will have a meeting of 30 investors from across Northern British Columbia — these are individuals who provide angel financing and who invest in small companies and start-ups — and then 50 entrepreneurs who are looking for that sort of financing. We will talk about a mechanism that we can use in Northern British Columbia where we do not have the angel forum that is offered in Vancouver.
We are having issues with access to capital. Is it a matter of Northern Development Initiative screening the business plans from entrepreneurs and then having a way to have a greater deal flow through to investors? Is it like an innovation fund for our region? Our board is certainly supportive of partnering with investors to do that. We are exploring that.
In the paper I have provided, starting on page 4, you will see a number of ideas for what it will take to build that diverse cluster of forest enterprises located in our small communities. One is capital availability, and I have talked about the challenges with the sector's balance sheets.
Second, in British Columbia, we need resolution of treaties to enable forest tenure certainty and joint ventures with forest companies that leverage interim treaty agreements. We believe that once we at least reach interim treaty agreements, we can certainly use those for collateral for financing in the sector and making arrangements that are not only profitable, provide employment for our First Nations and increase the standard of living but also certainly provide the partnership in the labour force that the forest sector needs.
We also see the need for a regionally focused equity fund for First Nations joint ventures with the resource sector companies. Our board is willing to support this and is looking for partnership to do so. We are a catalyst for funding. Even across a region like ours, we cannot do it all.
With respect to funding to assist the commercialization of new forest product technologies and products, we are able to be very flexible in both repayable and non-repayable contributions to commercialized new technologies. Although Natural Resources Canada has some wonderful programs, we have seen that many of the programs developed by the federal government are programs that rebate once monies are spent rather than look at the business plan and actually move money into commercialization as the entrepreneur or as the small company that is spun off from a university needs it to buy the capital equipment and move that forward.
The next item is wood-first initiatives and regulatory changes in building codes across Canada that champion wood use in buildings funded by the federal government and in housing up to six storeys. Housing with six storeys is a major interest in Asia, and at this point, 52 per cent of the exports in B.C. are going to Japan and China. Canada has replaced Russia as China's second-largest trading partner in lumber.
A wood innovation and design centre has been proposed in the last three Speeches from the Throne by the provincial government in British Columbia. We believe that is one of the keys for Canada's competitiveness in wood innovation and architectural design and how to use that. The B.C. government has approached the federal government about a capital contribution to that centre.
With respect to accelerated depreciation for capital investment and manufacturing equipment, when I talk to chief executive officers of small and medium-sized enterprises in forest manufacturing, this is a key program for them. They require about a year's lead time for ordering capital equipment, and this program expires next December. If they could request something, it would be that this program is extended until 2014 to allow them to continue to invest in capital equipment and ramp up their competitiveness coming out of this recession. It is a huge benefit.
The final two items are very much focused on the increased traction we are seeing with our markets in Asia. Export marketing programs that are partnered with the Province of British Columbia and many other provinces, as well as the expertise that comes through the Export Development Corporation and BDC, are critical to continuing that success. I mentioned that 52 per cent of exports out of B.C. are going to Asia this year, and last year it was 25 per cent. That is hugely robust growth in one year. You can see a couple of graphs that show our softwood lumber exports to China from B.C. and how they ramped up dramatically from 2000 to 2010, as well as general forest products across all sectors and how they have ramped up in export value to China.
It is important that we continue to work with the sector in marketing opportunities, and I provided you with a number of examples of the success that is happening in China as a result of federal funding and certainly B.C. partnerships and industry partnerships working in that market.
The final area that would propel the forest industry forward for Western Canada — not just British Columbia — is a northern gateway forest products port to Asia. Currently, Vancouver is congested as a port; it is exceeding capacity in forest products.
We have an uncongested port, an uncongested rail line in terms of Canadian National moving rails cars through to the Prince Rupert area, but we do not have break bulk shipping to Asia. We cannot load lumber. We cannot load pulp. We cannot load pellets other than at Ridley Island. Ridley Island, which is a major coal port, will reach capacity next year for coal. Loading pellets is a much slower and less profitable process, and you will see that port consumed by the demands from the coal sector, and we will leave our forest products produced in Western Canada and in British Columbia and not be able to get them offshore. This is one of the chief concerns being voiced by Chinese CEOs at this point in time to government officials in British Columbia who are doing trade missions.
If Western Canada and B.C. can move forest products offshore, that allows the rest of Canada to profit by being able to move forest products down through Eastern Canada to the Eastern U.S. and to the markets.
It is a synergy to have that shipping off the north coast of the western part of our land, and we would look forward to that being one of the opportunities for the federal government to participate in. Thank you.
The Chair: Thank you, Ms. North.
Dave Coles, President, Communications, Energy and Paperworkers Union of Canada: I am the politician in the room. First, particularly for the Conservative senators, I have had an ongoing dispute with the Prime Minister around forestry from time to time, including in his office; but I would like to deliver a message through you that the government should be congratulated for having the courage to fund the Forest Products Sector Council. We are active participants, along with major corporations in the forest industry. The council is in fact doing very good work, and the government should be complimented for funding such a group, which I think is essential for us moving forward.
The document in front of you has been prepared by the Forest Products Sector Council. I will not speak to it, but I would like you to use it as an educational tool for the issues around the transition of workers as the industry continues to go through its restructuring.
The real purpose of my presentation to you today is that we need your help to ensure that politicians and Parliament and provincial governments understand that they are wrong when they say that the forest industry is a sunset industry. It is not. It is not. In fact, it is a sunrise industry.
I think Mr. Lancastle will be able to verify that there is hardly a CEO's office across Canada and parts of the world that I have not been in the in the last 24 months, and they deserve a smack upside of the head for not being able to prepare for that disaster that took place in Canada. We lost 100,000 forestry jobs, documented, and 40,000 of those workers are still unemployed.
That is now and yesterday. We are of the view, and we are not the only trade union in Canada that believes this, that, properly managed, the forest sector is the ultimate green economy. You know those damned trees just have a bad habit of continuing to grow, and they keep growing, and when the bugs kill them, new ones come in behind. However, it is our responsibility as a society, and I think we need the guidance of the government, to ensure that we regain our place in the world economy around forestry. I am either lucky or unlucky, depending on how you want to look at it. We also represent a significant number of workers who work in the tar sands.
Senator Eaton: Oil sands.
Mr. Coles: Not true. It is only oil after it is upgraded, and they are building a pipeline to the United States that carries the tar to the refineries.
I have to tell you, we cannot build an economy just on Alberta and Saskatchewan. We need to have a diversified economy. Any economist of any stripe will tell you we need to have various views on economy, and the sector is an integral part of that economy.
There are some proposals that we would like you to champion: We need to have a national summit on the forest industry to devise an industrial strategy. Ms. North and Mr. Lancastle are a small part of some very intellectual discussions that are taking place in our country about the future of the forest industry, but we need to be able to pull it together, and we do have the support of every major CEO in this country to have such a summit. We have been unable to convince the politicians to have such a summit.
Yes, there are issues that have to be resolved. What can we agree to disagree on? There are hurdles. I am not naive. I have been around the horn in this industry for a long time. I am a fifth-generation forestry worker. We represent workers in every province of this country, and every single CEO I have spoken to in the last 24 months agrees there needs to be an industrial strategy in Canada for the forest sector.
Today, the press release is out that AbitibiBowater will exit with Companies' Creditors Arrangement Act, CCAA, bankruptcy protection. It was one of our largest employers that went into bankruptcy protection, but it is not the only one. Many more are struggling to exit. There are solutions to this problem, but I am afraid they cannot be done in isolation. The ideas used in Northern British Columbia are as valid in Canada and in Quebec as they are anywhere else, but they need to be coalesced and drawn into an industrial economic strategy.
I am a dreamer, but I am not a dreamer on this one. We can regain our position in the world as a huge economic driver in the forest sector. I have been all over Europe and South America; I have seen the big equipment. However, we have many advantages here, from skill levels to democratic governments to access to fibre to water, infrastructure and education. We have many things in our camp, in our corner.
I do see the graphs and that the decline of paper production and pulp production does not look good for the future. However, I can tell you that in the last several months, two old, closed facilities — one in Quebec and one in Mackenzie, British Columbia — were restarted, and I am confident they will be economic miracles. They will do well.
I can tell you right now that when I first got involved as a politician in this union, we were watching the death of dissolving pulp mills. There were four, five or six left in the world. Fifteen years later, many of those shuttered pulp mills are being converted to dissolving pulp. Why? Cotton is on the way down, and rayon is on the way up. There are also mills in Quebec and in Saskatchewan, and with a little luck and a bounce within a few weeks, there will be an announcement that those mills will start to produce dissolving pulp for the production of rayon.
There is hope. Doom and gloom is not good for investment. You cannot get young women and men to get an engineering degree in the forest industry if they think it is a death knell and they will never get a job. Major employers have a problem: They are losing steam engineers, welders and pipefitters to the patch because, although those workers like where they live, they see no future.
My pitch to you would be to consider in your deliberations recommending that we have a national strategy, a summit to develop the long-term economic goals. It is no good in the forest industry to run quarter to quarter to quarter. That will not work. The forest industry needs to have a long-term horizon. What will 20 quarters out look like? Where will the industry be in 25 and 30 years?
I want to close on one point: what Ms. North said regarding access to capital. One of the death knells of the industry has been access to capital at fair market value — not cheap, not free, not subsidized. It does not matter whether you talk to AbitibiBowater, Joe Kruger or Jim Irving, all of whom I have spoken to in the last 72 hours. They will tell you the same thing: They need access to capital at a fair market value.
One proposal would be to have loan guarantees to the industry. In fact, they are being whacked with usury rates — my word — of 14 per cent, 16 per cent and 18 per cent to refinance their operating capital and their debts. You cannot function on that. You are dead. That is part of the problem in the North when they cannot get so-called angel financing. Mercy financing is really the name.
There are real things that can be done in this country to ensure the forest sector is environmentally friendly. They have it down. It can be and is a very clean and diversified segment of our society. Frankly, we will not stop screaming from the soapbox until we get the population and the politicians in this country to accept that the forest sector is a good place to work. It is okay to live in Corner Brook, Newfoundland, and work in the bush. It is okay to live in Mackenzie and have your kids go to school there. We do not all have to be in the Golden Triangle, in Montreal, Toronto or Vancouver. My father, grandfather, great-grandfather and I were all raised in a rural forestry community. It is a neat place to raise a family. My children will never work in the forestry industry. In the town I came from, the saw mills are gone and the pulp mills are closed, but it does not mean it has to stay that way. As I said earlier, the fibre is still there; you just have to understand how to manage it.
Senator Mercer: Thank you for your presentations. They were informative.
Mr. Coles, I do not necessarily agree with everything you said, but I think your suggestion of a summit on the forestry sector is important. We need to have everyone sitting down talking about this. We need governments, industry, unions, municipalities, everyone to sit down and talk about this generally. Hopefully a report may be a catalyst to start that process.
Mr. Lancastle, you said we have hit rock bottom and are on our way back up; you have seen some changes in that regard. However, 40 people at the Groupe Savoie sawmill, the largest sawmill in Nova Scotia, received notice yesterday that they will be laid off in December. I do not think we have hit rock bottom yet.
You talked a lot about the need for workers in the future, which is the bright side of this story. As Mr. Coles and others have said, this is not a sunset industry; this is a sunrise industry. Many good things will happen here if we manage it properly.
Is there a plan somewhere that has identified the people who need to be trained? Training is both a federal and a provincial responsibility, depending on how you look at it. Are we laying out the program so that we will be ready as the industry makes that turn? Will we have the workers we need?
Referring to the statistics that were provided that a third of the sector will be retiring in a short time, it is a daunting task to replace those people. We are not talking about replacing them with unskilled workers but with skilled workers. Mr. Coles said it is difficult for young people to go into an industry if they do not see jobs there.
Mr. Lancastle: Regarding the comment about hitting rock bottom, certainly we recognize that some communities and situations continue to face closures and challenges. That is the short- to medium-term reality. If you are in a community that has been affected, it is a significant impact. I did not mean to in any way downplay the impact on those communities.
As for the looking-forward piece and analyzing the skills and knowledge requirements and the resulting training needs, in fact, that is the next phase of our research, which will be completed over the next few months. It is our intention to release our final report, which will include an analysis of the future training requirements and future skills requirements as well as gaps associated with meeting those future needs, in May of 2011. We look forward to the opportunity to provide that type of insight over the course of the next few months.
Senator Mercer: Thank you. I have the advantage and privilege of being on the Standing Senate Committee on Transport and Communications, so when you talked about the difficulties in the Vancouver port and said that there are no break bulk facilities at Prince Rupert, I am familiar with that. It is a real problem. The bottleneck in Vancouver has not been fixed by Prince Rupert. Only on the container side have we solved problems, but the last time I flew into Vancouver, there were still six to eight ships sitting in the stream. That is not solving the problem.
There are break bulk facilities in Vancouver. Some of them are dedicated to grain and some to potash. Are none of the facilities there adaptable enough to switch to lumber?
Ms. North: It is more economic for most of the sawmills and the forest industry north of about Williams Lake, the centre of B.C., to ship out through Prince Rupert, providing there are loading facilities and break bulk facilities. Even though scheduling rail cars with CN and service levels can be challenging, there is more capacity on the CN line there than there is on both the CN and CP lines moving into Vancouver. We are finding that most companies would like to shift into a northern port. Also, the shipping time to China and Japan is about one and a half to two days shorter from Prince Rupert. They would like to time the escalation of shipments out of Prince Rupert along with the escalation we are seeing in export activities to Asia.
Senator Mercer: Do you have any idea how many empty containers are being shipped out of Prince Rupert?
Ms. North: A large number of containers are being shipped empty from Prince Rupert.
There are two reload facilities, one in Prince George and one in Prince Rupert on Ridley Island, packaging and containerizing lumber right now to go out by container. The challenge is with the bulk products, and now with Eurocan shut down in Kitimat, that wharf facility is not available for shipments. It is currently on the market but has not been transferred to someone else who will open it up to other forest activities.
Senator Mercer: Unlike in other parts of the country, the availability of empty containers is not a problem. East of British Columbia there is a real problem of having empty containers at the right spot at the right time to fill them with whatever we are exporting.
I am not familiar enough with the port in Prince Rupert, so my question is not asked knowing the answer. Is there not a part of Prince Rupert port that might be adaptable to break bulk with a minimum amount of work?
Ms. North: The area that is adaptable to break bulk with a reasonable amount of work would be the closed down pulp plant facility on Watson Island, which is immediately adjacent to Prince Rupert. The area is called Port Edward. That is capable of shipping out break bulk forest products, as would be Ridley Island, but it would take an investment in rail line upgrading, road upgrading and loading facilities on either of those sites. The entire port at Prince Rupert, within Prince Rupert at this point, has been shifted to the container model.
Senator Mercer: We have talked a lot about using rail. Are there enough spur lines off the line going to Prince Rupert that, if there were repackaging sites along the route, they could get to the communities? Is there anything from Williams Lake, Prince George, et cetera? Are there lines that meet up with the CN line going to Prince Rupert?
Ms. North: Most of the communities are on the CN main line. The challenge is the upgrading in rail track that is required to ship either out of Kitimat or out of the Watson Island facility in the Prince Rupert area. To ship out more forest products, either of those two areas needs track upgrading, road upgrading and also loading facilities as well as bins for pellets.
Senator Eaton: Thank you very much. You are appearing before us at the end of a long year's study we have done, and, Mr. Coles, I would like to agree with Senator Mercer. We see this very much as a sunrise industry. We have all been very excited. We have listened to people talk about nano-crystalline cellulose, value-added wood products, six- storey buildings, bridges in Oslo made of wood capable of withstanding military tanks moving across them, so we do not have such a pessimistic view here. We are all very optimistic. We have also heard from the Canadian Wood Council and FPInnovations. They are doing interesting things all across the country from university labs to companies.
Mr. Lancastle, you showed us on a graph where you see our workforce going in the various wood sectors. How competitive are we in labour with the U.S. or Brazil? Those are our big competitors, are they not, in the world? Our workforce will be very instrumental as to how competitive we are, will it not?
Mr. Lancastle: Canada has a number of competitive advantages on the world stage. We have some of the highest- quality fibre in the world and the best sustainability practices in the world, and certainly those bode well for us internationally. Many of our mills will stack up against the world's best in terms of their ability to be productive. We do have some facilities across the country that may not be as productive as others, but we are seeing capital investment in sawmills particularly. There have been a number of announcements in the last few months where we are seeing increased productivity in the mills, so our productivity is improving. Our scenarios are predicated on that trend continuing and on the estimation that we will continue to be able to be more productive over time.
It is not a one-size-fits-all answer, I am afraid. There are situations where we may not be as internationally competitive, but clearly, as an export-dependent sector, that is an area we continue to need to press on if we are to achieve those kinds of results.
Senator Eaton: If you had one recommendation for our report, what would it be?
Mr. Lancastle: I would echo Mr. Coles' comments about the importance of recognizing the potential that exists for the sector and really speaking to the excellence that exists within the sector and the prospect around transformation integrated with an existing facility as really being critical to the sector's success.
Senator Eaton: We have had several business people here who challenged us and said Canadians are not business ambitious enough. This has to do a bit with entrepreneurs, and you were talking about entrepreneurs.
What would it be in terms of absolute productivity? We seem to have great research in the universities doing really interesting things; it continues on. What do we need to get that commercialized? What will make us more competitive, more productive?
Mr. Lancastle: We have a great many examples where commercialization and transformation have already taken place. I think of the pulp mill in Thurso that has made an almost complete 180-degree turnaround from a traditional kraft pulp mill into a mill that will now be producing the dissolving pulp for the production of rayon. Are there examples of that kind of transformation that have already taken place? Yes. We need more of them; we need more of those good examples to move forward.
Senator Eaton: What will encourage innovation, in other words?
Mr. Lancastle: There is no single bullet, no single piece. It is a requirement where market conditions will allow us to introduce those products. We will have access to the fibre we need under the terms and conditions we need. We need exchange rates that are favourable to that kind of investment.
Senator Eaton: We might not control our exchange rates.
Mr. Lancastle: There are some things beyond our control, but when we think of things like access to fibre, access to workers and the like, those are the kinds of factors that will contribute to a successful sector in the future.
Senator Eaton: This is perhaps a double-pronged question. Ms. North, you said if we could settle some treaties, which I guess is a provincial jurisdiction, that would put more money into the bands' hands. Would that give you more access to First Nations labour?
Ms. North: Yes. It is a huge part of the equation in British Columbia. Even if we do not have final resolution of treaties, if we get to an interim treaty agreement, that then can offer access to capital and access to labour force and joint partnerships. It is a huge piece of the equation for the continuing competitiveness of the forest sector in British Columbia. If there are two things holding our forest sector back, it is access to capital and continuing a competitive tax strategy around manufacturing tax and being able to write that off.
As for the labour force, where I have been involved, two things are making a difference in recruiting labour. One is simulation equipment and the new technologies around that, which we will finance and partner with college institutions, because you want young people to have simulator training before they go on to a $250,000 or $300,000 piece of equipment.
The other is having the health and safety and supervisory planning and training in place. We have a program where we will rebate 50 per cent back to any company that is involved in manufacturing and resource processing so that they can do what it takes to work on their business, get consulting expertise to work on their business, and if it means a health and safety plan and supervisory training to be able to mentor that young workforce, we will do that.
Senator Eaton: Do you have a lobby group? You are about to or you might go into an election in British Columbia.
Ms. North: Yes.
Senator Eaton: Do you have a forestry lobby group that will go after whoever forms the next government to deal with the treaty issues?
Ms. North: John Allan and the Council of Forest Industries are very interested in seeing that resolved, and the First Nations are organized in a number of different structures and are also very interested.
In terms of the capital coming around treaty, the lands will come from B.C. and the capital from the federal government, but there must be a commitment on the part of both parties.
[Translation]
Senator Carignan: My question is for Mr. Lancastle. I have listened to your presentation and I have read your documents. Your council seems to focus its attention on the traditional segments of forestry and the wood industry.
You say at the start of your presentation that the council focuses on the primary forest products sector. The chart on potential growth of employment seems aimed also at rather traditional areas.
Judging from Ms. North's presentation and the questions by the committee members, the future seems bright, in part because of new technologies such as biomass and the more technological sectors. To project employment trends, did you take into account new technologies and new forestry products or did you consider only the traditional sectors?
It would be good to add to this lack of future jobs the future market developments in the area of forestry.
Mr. Lancastle: Thank you for that question. I will answer in English, if you do not mind.
[English]
Our forecasts are predicated on the integration of new and emerging technologies with traditional offerings; for example, the inclusion of a pellet plant has an add-on to a sawmill. The leadership within the industry, certainly as articulated by the Forest Products Association of Canada's Future Bio-pathways Project, speaks to the integration of new and emerging technologies with existing operations as being the most optimal approach, not only in terms of employment multipliers but also in terms of effective utilization of fibre. We are seeing some outstanding usages where we are increasing utilization up to 95 per cent to 97 per cent of fibre. We believe that is the future of the sector — ensuring that we optimize the use of every ounce and cubic metre of fibre that is harvested, whether it ultimately ends up in a pulp mill, a paper mill or going through a sawmill.
Our forecasts on based on the assumption that these new and emerging technologies will be integrated into existing operations and the employment multipliers that result from the expansion of these operations into these new and emerging technologies. I should say as well that these are talking about advancements that are close, if not ready, for commercialization. We are not even scratching the surface on some of the developments that are further out in time.
The answer to your question is that we are looking at the advancements as an adjunct to traditional operations and also maintaining the traditional operations of the sector as a basis for the future of the sector.
Senator Plett: Thank you folks for appearing. I have a couple of very basic questions and then maybe a few comments.
Mr. Lancastle, you mentioned that in your industry, 17 per cent of the workforce are people without a high school diploma as compared to the average of 12 per cent. Not wanting to in any way downplay the forest industry, is that a problem for you? Are there not many jobs in the forest industry where you can use unskilled labour? Certainly people without a high school diploma can learn to drive a truck, get their licences for same and can operate equipment. Do you see that as being a problem in your industry?
Mr. Lancastle: The current reality is that we have an older-than-average workforce. We have had a chance to talk to mill workers across the country who have been in the same mill in some cases for 30 to 35 years. I recall one individual in Thunder Bay who said, "At the end of my Grade 11 school term, I walked through the front door into the back with my boots over my shoulder and never left.'' These are individuals who have made their lives and careers within the sector.
Senator Plett: Probably one of the best employees.
Mr. Lancastle: Likely. Certainly as we look forward, though, when we look at computer literacy and the need to operate more highly technologically advanced equipment, issues of literacy and numeracy become that much more important. Again, with an opportunity to visit some mills where there is older equipment, if I can say that, on the front end of the equipment there is highly advanced computerized technology that is providing the quality control and overseeing the operations. That requires a different skill set.
With respect to harvesting, one of our industry board members commented the other day that he may have finally found a use for video games because harvesting is being done by joystick. That is a different skill set than we saw in the past.
Does it present a problem for us? Conceivably. High school is not necessarily the magic answer. It is more about essential skills in areas like literacy and numeracy, ensuring that people have the baseline level of knowledge to acquire the skills they need to be part of a successful sector in the future.
Senator Plett: Thank you. Certainly I agree with you. A few of us visited some of the pulp mills and saw some of the equipment, and I sat in one of those big machines that cut down all the trees. You are right; my literacy in computers is questioned most times, and I would enjoy trying to operate one of those machines, but I would not be all that great for a while.
Mr. Lancastle: Perhaps the simulators present a better opportunity.
Senator Plett: Absolutely. Ms. North, I think you said we are second in the world now in supplying lumber to China. Is that correct?
Ms. North: Correct.
Senator Plett: That would be second to the United States?
Senator Mahovlich: Russia.
Ms. North: I believe my figures are that, yes, we are second to Russia. It is trending toward overtaking Russia, and certainly Russia is putting on additional export taxes, but it will take greater export capacity and stronger market alliances with China in order to achieve that.
Senator Plett: You said the biggest obstacle you have is moving our product. Is moving product a bigger obstacle for us than for Russia? Is it a bigger obstacle for us than for the United States?
Ms. North: It is. We have two ports on the Western coast, one of which is not moving out bulk product. You have to go into a very congested area in Vancouver to move out bulk product, so it is a problem. In Russia, product moves over land, or a number of ports ship just down the coastline into China. Our access to ports on the West Coast is a challenge.
Senator Plett: Thank you. Mr. Coles, I want to echo two of my colleagues' sentiments about your comment regarding people thinking this is a sunset industry. I think what we have done in the last almost year should show you there are some politicians who believe this is not a sunset industry. I am not sure where you get the idea that everyone thinks it is a sunset industry. I do not think we would have spent a year of valuable time studying this industry and indeed trying to prepare a report.
You also mentioned that someone should have made a prediction, and I am not sure whether it was the recession that someone should have predicted or what it was to prevent the forest industry from taking a hit. I wish someone had predicted 9/11. They did not predict 9/11. Canada was the last country going into the recession and the first country coming out. Were you hit abnormally high in the forest industry versus other industries, and if so, why?
Mr. Coles: First, my comment on the view of whether it is a sunset industry, I was by no means referring to this committee. This is the second or third time I have had the pleasure of being here. It is a very proper cause that this Senate committee is working on. It was no reflection on the politicians in this room. That is not my intent at all.
However, I think every CEO in the country would tell you the same thing — that for a whole number of reasons the forest industry has been looked at as on the way out rather than on the way in.
On your other question, the forest industry actually started to take significant hits well before September or October 2008. We — and I mean both workers and the industry — were taking significant job losses and closures several years in front and advance of 2008. One thing that is complicated is that we talk about the forest industry as if it is easily definable, but there are sectors of the forest industry doing extremely well now that never took a hit — sanitary products. Toilet tissue and feminine hygiene products are just flying ahead and doing very well.
It was the primary industry. Newsprint, for example, has had year over year 12 per cent to 15 per cent consumption reductions in North America and Western Europe for almost a decade. When 2008 came along, it took another 20 per cent on top of it, and that was the death knell at the same time as the cost of financing, and that is what pushed Abitibi and all those companies over the edge. They could not service their debt. At the same time, the demand was shrinking.
I am not trying to blow my own horn, but quite frankly, 15 years ago our union was hammering away at the industry to clean up its act and become more productive. It is a very strange situation, sir, when a union has to go to the employer demanding productivity improvements from the employer. That is what we have been doing for a long time, sometimes at my own political cost, but the record will show that for 10, 12 or 15 years we have been tabling demands for the employer to make their operations more competitive. The reason for that is we have international relationships with many of the very best gear in the world. The Scandinavians and Finns spent a lot of time in South America where they can put softwood pulp at the dock all costs in for about $240 a tonne, and most of our operating costs are about $450 a tonne. My data is 18 months, maybe 24 months old, but I do not think it is that far off. These are modern, very environmentally friendly mills.
There are many things the industry should have, could have and did not invest in. We have old gear in Canada. The gear we have is really old, except for the sawmilling side. I do not think there are any better sawmillers in the world than us and our companies. You look at the harvester bunchers, all of this gear — it looks like science fiction stuff. There are very few guys walking around in the woods with a chainsaw any more. It does not happen. They put a feller buncher in, and that is where it is.
A whole number of things should have been looked at. This is our view. The economists who work for us have the view that the CEOs and some of their directors were more interested in trying to compete in what the stock market returns were, which were fabricated anyway, rather than ensuring that their companies were producing solid, long- term, steady growth and profits.
It is a complicated mess we are in, and that is why I continue to urge that we try to get all the best of the brains in. We can be the best and most productive in spite of having old gear.
Senator Plett: I agree with that last statement. However, you have been the person here today who has been saying that there is doom and gloom and that we should not be putting out doom and gloom. You have talked about the death knell of the industry, and yet you had one very positive comment about some pulp mills being open because of the transition from cotton to rayon. I believe that is what you said.
A previous witness sat right in the chair you are sitting in and told us about the number of pulp mills he was buying up around the country and doing exactly this, opening them up and making lots of money. We have toured, throughout our country, pulp mills that are doing well, companies that indeed are making money.
People are going to Alberta and Saskatchewan because they can make better money there. It is supply and demand. I do not think the forest industry will ever pay what the oil industry in Fort McMurray is paying. I do not think that is reasonable, and I do not think anyone expects it. They are paying extremely high wages there because of the supply, and good on the young people who can go there and make some money. I do not think it is the fact that they do not want to leave home.
In fact, as Newfoundland is developing its oil resources, many young people are going back to Newfoundland and working at home there. I am from Manitoba, and we believe that the oil does not necessarily start at the Saskatchewan border; nor does the potash. I am hoping that we will develop that and maybe bring some of the Manitobans home, but this is all a matter of trying to generate something that will compete. I am not sure that is possible.
However, I want to assure you, sir, and I hope you feel the same way, that this group of politicians here believes in this industry. We may not all be in agreement on how we go about moving things forward. I further believe, and far be it from me to make a partisan comment, that our government is on the exact same page of trying to promote the forestry industry in Canada.
Mr. Coles: I take you at face value. Do not misinterpret my comment; never did I ever suggest that workers in the forest industry should be making the same rates as those who work in the patch. I was referring to when a community is under siege. People will stay and work for significantly less money in a nice, small community where there is a potential for long-term employment, and that includes young, skilled tradespeople. However, when the mill or sawmill or operation they are working in is under threat, then they may make an economic decision to get out of Dodge.
Senator Plett: However, the mill must be profitable, and maybe we need to diversify, as you are already suggesting some of the pulp mills are. We cannot simply heap money on top of a situation. If the operation is not profitable, we need to do something other than artificially keeping it going.
Mr. Coles: No question.
[Translation]
Senator Carignan: This question is for Mr. Coles. You have talked about the manufacturers' responsibilities and the demands you made to companies for them to improve their mills and upgrade their processes.
I have heard business people say that if they had known, they would not have gone public because they must now manage quarterly — and that comes around quickly — rather than taking a longer term view.
After the fact, if you take what we had 20 years ago up until today, would you say that you also have your share of responsibility in the crisis that hit you? If so, what would that be? What would you do differently so that any future recovery will not suffer from the mistakes that were made in the past?
[English]
Mr. Coles: I think everyone shares some responsibility. During the labour movement, not many of us in this sector were talking about productivity to save our industry. We should have been more strident in rejecting the view of the golden goose that would continue to provide jobs and employment while not being productive. We lived as a society on a 65-cent dollar in the forest industry. That is how we got through. While we did attempt to make an issue of it, we were not as effective as we should have been.
For example, when Abitibi and Bowater merged, we made a bit of noise, but we did not do what we probably should have. It was clear to almost everyone that you could not take that kind of debt on. It did not make any sense. We said a few things and then sat on our duffs.
It has not been easy to break the tradition of workers not understanding that without being productive and efficient, there is no work. That has been the weakness of the employer and the labour movement in the forest sector for 50 years. We just could not get the message through. We paid the price, and we paid it dearly.
Senator Mahovlich: Thank you. Many questions have been asked. I do not know if I have any new ones.
What I do not understand, with all the technology advancements that we have made, do we need as many labourers as we used to?
Mr. Lancastle: Certainly not if you are looking at individual mill operations. As technology advances, the number of workers required to operate a piece of machinery, a paper machine or a machine in a pulp mill, is reduced. With that said, growth and demand for Canadian forest products has continued to increase, and it is forecasted to continue to increase over time. It is a case of technology reducing the number of workers but production increasing. There is a to and fro, if you will.
Senator Mahovlich: With respect to some of the technology for cutting down trees, you do not see chainsaws any longer.
Mr. Lancastle: We are seeing significant efficiencies in harvesting. As Mr. Coles has indicated, we have world-class sawmills in Canada, some of the world's best, which are significantly using automation and producing considerable numbers of board feet with many fewer workers than in the past.
Senator Mahovlich: If we will have a national summit, we have to be prepared. What countries are our largest competitors besides Russia? Does the United States ship to China? Does it ship to India? Is the demand for wood products as great in India as it is in China?
Mr. Lancastle: I am not in a position to speak to that as definitively perhaps as my colleagues.
Mr. Coles: I have some limited knowledge. I do not have my research documents with me.
The United States is competitive in newsprint offshore. The U.S. is also trying to break into the new old-world markets. On hardwood kraft, Brazil in South America is a big producer. The Scandinavians are also very efficient. It is spread apart with respect to competitiveness.
Our biggest trading partner, the United States, is in a major slump. It takes about 1.2 million housing starts a year to stay stable in the U.S., and depending on who is counting, it is about 600,000, and the surplus is not going down. Our economists are telling us we have to look out four to five years and hope for big hurricanes, tornadoes or earthquakes to use up the surplus. It will turn around in the U.S. Housing starts will go up and we will use lumber. The harder one is pulp and paper.
Senator Mahovlich: In 20 years from now, there will be another 500 million Indians in India; the population will increase and people will demand more housing. Should the demand for lumber in India not rise for a country like Canada in that situation? Is this one of the things we can sell in a summit?
Ms. North: Our competitor is not the U.S. In fact, we should be working with the U.S. to grow the market. Certainly, we will have a competitive advantage in how efficient our mills are comparatively.
Also, with respect to our pricing structure in Canada, and certainly where we have Crown forests, our competitors are South America and Russia, although they have antiquated technology. They are competing purely in volume and proximity. Our other competitor is Scandinavia.
Senator Mahovlich: What about shipping from South America? Brazil is a large country. Does Brazil have better facilities with their trains than we do?
Ms. North: There are much stronger port facilities in South America.
Senator Mahovlich: Do they have more?
Ms. North: They have more than we have in Canada on the West Coast. In fact, once you get lumber onto a ship, it is cost-effective to move it to Asia.
Mr. Coles: Mr. Kruger has just taken a big newsprint order from Brazil at the Corner Brook mill, and what they are doing there is moving to larger deep-sea vessels and volume shipping to take advantage of the access to the big ports. South America has huge ports. If you can get big boats in, it will bring your unit costs down. It is not that people are not trying.
Senator Mahovlich: Shipping to India would be much more difficult for Canada than South America. Is that right?
Mr. Coles: It depends where you are coming from. If you are coming from The Pas, Manitoba, you may be able to get at it through the North. We do have coastal ports. Ms. North has the real problem on the West Coast with the issue of port access.
Senator Mahovlich: Access to ports is a major problem.
The Chair: Thank you. We have a supplementary question from Senator Mercer.
Senator Mercer: It is more of a correction than a question. We have to remember that we have a lot of surplus supply of port facilities on the East Coast, and the ports of the East Coast are much closer to India, parts of China, Indonesia and Pakistan than anything on the West Coast going through the Suez Canal. We can take post-Panamax- sized ships. The size of ships does not bother us in Halifax. The Port of Halifax is open for business and happy to take your business any day.
Senator Robichaud: My first question is to the only politician in the room, Mr. Coles. You talked about a summit. I think it is a good idea. Whom would you invite?
Mr. Coles: I think the consensus is that it would have to be the provincial governments, and then the question is why the federal government would be involved. The federal government has to be involved because of export, all the trade regulations and all those things. I think it has to be chaired or facilitated by the federal government.
It would be best to take a wide view. You want good representation from all the stakeholders, right from the industry itself — its workers, the communities, the First Nations. I think the environmental movement has to be there. Greenpeace launched an initiative a few days ago about jobs in the forest sector in Ontario.
After all these years of working in the forest sector, my radar is that we have something here, which is that it is an environmentally sustainable industry. We can play that to the hilt. It is a carbon sink. It is all of those things, and I think you can make it sexy. I am a cheerleader for the industry, I have to tell you, and I think there is enough evidence that fibre-based products are sustainable and environmentally friendly.
Senator Robichaud: Would you invite the bankers?
Mr. Coles: I am not sure. I have not asked the industry heads that. They will raise issues of capital; that is for sure. I would like to have the finance minister there for sure.
Senator Robichaud: You are talking about bringing many people together.
Mr. Coles: It is not an easy task, and that is part of the reason that people have run from it. However, other sectors have done it. You can expedite it, and you can find ways around it. I will take a back seat to anything as long as we can get it into gear to where there is a dialogue and debate about what it takes to turn this industry into a long-term viable one, not just to survive but also to be an economic driver.
Senator Plett: I do not want to get a debate going here amongst the panel, but I would like to ask Ms. North how she feels about the summit.
Ms. North: I do not believe we need a summit. I do not believe we need to talk anymore. I think we need to solve a few problems in front of us that are about taking risk and dealing with what we understand are poor balance sheets based on recent history, as well as accelerated depreciation for capital investment.
On the training side, the provinces have a handle on that; that is the case in my region. If we need to make a program happen in a local college, we do it between the province and ourselves.
This is not about talking anymore. It is about doing.
Senator Robichaud: How do you get talking if you do not bring them together?
Ms. North: I believe the industry understands what is in front of it. It understands now the need to diversify, and we have companies that are actively doing that, as long as they can get the capital. We have only seen one forest products company in the last 10 years go public. It was Conifex Timber in June of this year. It happened to go public when there was a market high in lumber, and the company did well. In fact, it had access to more capital than it needed for its acquisition program, which was expanding one mill it bought from a bankruptcy, and it was buying another one from Abitibi.
People in the industry know what needs to be done. If our 25 per cent — and even in one case we extended a 50 per cent loan guarantee — is not being taken up because the banks will not extend capital even with strong loan guarantees, we have a big problem.
Senator Robichaud: Our problem is with the bankers; is it not?
Ms. North: It is.
Senator Robichaud: Ms. North, do you know of any other community in Canada that would have the same kind of integrated approach to forestry as Williams Lake? We were there, and we saw the mill. It is very top-of-the-line technology, from what I have seen. You could see the logs go right through there. You would not believe how fast they were moving in there, and the computer got hold of each log and gave you whatever they could take out of the log. You could not even estimate the length of the log. They have the pellet mill; they have the oriented strand board; and they have power facility there.
Ms. North: There is the same integrated forest industry in Prince George, in Quesnel and in Mackenzie. There are a few pieces missing in each community. The Green Transformation Fund was hugely helpful in rejuvenating the pulp sector in Prince George and in Quesnel.
The challenges will be in selling biomass-based power. I am on the board of BC Hydro, and right now we are dealing with a biomass call for energy, exporting some of that power, and some of the regulatory hurdles in California around the export of clean power to California.
We do have clusters, and then we have developing clusters of industry, for example Burns Lake and Mackenzie and Smithers, to some extent. It has the dimensional lumber, and it has also the panel board plant. They do not have a pellet mill, so they do not have all the pieces for residual fibre they can use. They do have remanufacturing. You see clusters of communities in Central and Northern British Columbia, and you see some of the most efficient sawmills in the world.
Mr. Lancastle: I would simply recognize that we are seeing examples on the ground. I had the opportunity to tour a sawmill outside of Thunder Bay that had the same kind of computer optimization you described: chips going by a pipeline to a pulp mill across the river, sawdust being used to fire the kiln, biomass, and the lumber going off computerized grading. That is the kind of world-class performance we are seeing increasingly in communities across the country. Particularly on the lumber side, a number of companies have announced capital reinvestments. The Pulp and Paper Green Transformation Program allowed a number of companies to upgrade their biomass and bio-energy capabilities and increase the size of turbines. There are a many examples where things are beginning to improve.
On the question of Canada's position in the world, our sustainability practices do give us a competitive advantage. Many of our international competitors, particularly from areas of Southern Asia, are not practising forestry sustainably. We face issues around illegal logging. As consumer demand for more sustainably resourced products becomes greater, it positions Canada well for the future.
Senator Robichaud: Are we doing enough to promote that advantage over places where forestry is not done in a sustainable manner?
Ms. North: No, we are not. There is no market premium right now, and that is part of the challenge. There is a volume premium around Forest Stewardship Council-certified lumber, but we are not seeing a pricing advantage.
Senator Eaton: I want to pick up on something Mr. Coles said about forests being green and environmentally friendly. I asked Greenpeace this question when they came here. Why have you not been promoting wood? You are very powerful as a union and as an organization. It would be wonderful if you took up the challenge of going to schools and businesses and asking people why they are using plastic bags instead of paper bags. Is that something you could think about?
Mr. Coles: As to whether we are doing enough, the answer is no, obviously not. For the last 48 months I have been trying to keep half a dozen companies from becoming insolvent and being dismantled, and I am still doing that day to day.
We are not doing enough to promote wood, but we belong to coalitions that are. We need to do more. You have to remember that there was a war in the woods, and it took a long time to win over a lot of people to our current sustainable harvesting practices.
Ms. North hit the nail on the head. The problem we have is that it is not cheap.
Senator Eaton: Children think it is wrong to cut down a tree. Why are we not going into schools and explaining that it is good to cut down a tree and even better to replant a tree?
Mr. Coles: We do, but we do not do it enough.
Senator Eaton: There is a generation of Canadians who do not appreciate what a green wood product is.
Mr. Coles: That is true, and that is a problem for us.
They see a cell phone, for example, as a solution rather than something made from fibre. There are all kinds of social pressures on young people. They certainly are aware of bad logging practices. The industry and ourselves have not done as good a job as we should have.
Senator Eaton: We could all boycott plastic bags in stores and demand paper bags. How do things get done? How did we get people to stop smoking? If people feel strongly enough about things, they do something about them.
Ms. North: Rural Canadians in forest-dependent economies, from young children up, appreciate the forest industry. I have found the disconnect in urban centres and areas that have no exposure to the forest economy. We are taking kids from grade school out into forest operations. For high school kids we have Operation Heavy Duty, where they actually get on equipment for a couple of days.
I have led Rotary youth groups from across Canada that have come to Prince George and spent two days learning about the whole range of the forest sector. They go back with a very different opinion. However, we do need to do more.
[Translation]
Senator Carignan: There is a tool school children use every day that could raise their awareness of wood, and it is the pencil. Maybe it is something that could make them aware, but that is not where I am going.
I put this question to Ms. North. You say that you have negotiated with Hydro BC the sale and export of biomass energy to California. Can you tell me what BC Hydro pays per kilowatt/hour of biomass energy?
[English]
Ms. North: I believe the biomass contracts range from about $80 to $120 in the last call, and there is currently another biomass call. I will forward the exact figures for biomass-based power contracts to your clerk.
Senator Carignan: Thank you.
The Chair: Before we conclude, I would like to share with witnesses and senators that I participated on Friday, November 19, in New Brunswick's first forestry summit organized by the province's new government. It was the first such session ever organized in Canada . There is a summary online, where you can find the participants listed. They included woodcutters, fishermen, hunters, environmentalists, industry leaders, workers, non-governmental organizations and others.
At the end of the all-day session, the coordinator of the event said that the format had enabled all stakeholders to be part of the discussion. That was welcomed and appreciated. It provided an opportunity to look at a team approach to find solutions that would be sustainable for the forests and advantageous for the climate.
I wish to thank you, witnesses, for your participation. This has been very educational.
(The committee adjourned.)