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Proceedings of the Standing Senate Committee on
Agriculture and Forestry

Issue 7 - Evidence - June 17, 2010


OTTAWA, Thursday, June 17, 2010

The Standing Senate Committee on Agriculture and Forestry met this day at 8:06 a.m. to study the current state and the future of the forestry sector in Canada.

Senator Percy Mockler (Chair) in the chair.

[Translation]

The Chair: Honourable senators, I call this meeting to order. I welcome you all to the sitting of the Standing Senate Committee on Agriculture and Forestry.

[English]

I am Senator Percy Mockler from New Brunswick, and I am chair of the committee. This morning, we welcome the representatives of J.D. Irving, Limited. Before I introduce them, I will share with our witnesses around this table that there are senators who planted trees in New Brunswick. I would like to thank the witnesses for accepting our invitation.

[Translation]

We are honoured this morning to welcome from the J.D. Irving Company Limited, Mr. Robert Pinette, Vice-President of the woodlands of this big corporation.

[English]

We also have Blake Brundson, Chief Forester for J.D. Irving, Limited. We acknowledge they are leaders in the domain of forestry.

The committee is continuing its study on the current state and future of Canada's forest sector. Before I ask the witnesses to make their presentations, I would like to start by asking senators to introduce themselves.

[Translation]

Senator Rivard: I am Senator Michel Rivard from the province of Quebec.

Senator Eaton: I am Nicole Eaton from the province of Ontario.

[English]

Senator Plett: Senator Don Plett, Manitoba.

Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.

[Translation]

Senator Robichaud: I am Fernand Robichaud, senator from New Brunswick. I think that I have already heard the name of J.D. Irving in my region.

[English]

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

The Chair: Mr. Pinette and Mr. Brundson, I will ask you to make your presentation, which will be followed by questions from the senators.

I have been advised by the clerk that the first spokesperson will be Mr. Pinette, with Mr. Brundson following.

Robert Pinette, Vice-President of Woodlands, J.D. Irving, Limited: Good morning and thank you for having us here to present to your committee. We are very pleased to be here to share with you some of our vision about forestry in the future and of the forest products industry in Canada. We hope our comments are helpful in your deliberations and committee work.

We will make our presentation in English. We will leave copies of it for your benefit.

We will share with you a description of what and who we are within the Irving organization as well as the impacts of forestry operations in New Brunswick. It is not that we are operating solely in New Brunswick, but it is a major part of our operation and we have a significant impact on the economic development of the province. Forest management, silviculture and the climate change implications would be some of the topics we want to speak about. Having a forest machine replacement fund is a discussion we would like to have regarding making credit available to forest operators as we have in Canada in agriculture. We will also talk about investments in research and development, and energy efficiency.

We are members of a broader group of companies operating in the Maritimes, mostly in Maine by the Irving family. We are involved in forestry and forest products. We are also involved in transportation, shipbuilding, manufacturing, distribution, retail, food processing and construction.

Starting with transportation, we operate three significant transportation companies across the country: Midland Transport, Sunbury and RST, which is Road and Sea Transport. Combined, they make up the third largest commercial trucking fleet in the country.

We also operate Irving Shipbuilding and Industrial Marine Operations, which is Canada's largest shipbuilding network. It is located mostly in the Maritimes. We operate four repair and fabrication facilities in Eastern Canada and we do new construction, engineering, heavy fabrication, in-service support and facility services.

We are also Atlantic Canada's number one home improvement retailer and we are number five in the country.

Associated with us are the Cavendish Farms, food folks. We produce French fries. We are the fourth largest in North America, producing 1 billion tonnes of frozen French fries per year.

Our construction group of companies is composed of Irving Equipment, which is Canada's largest heavy lift crane specialist; Gulf Operators is a general contractor; and Kent Homes is a manufacturer of homes and industrial shelters in Kent County.

Our part of the business is the forest products side, which is the main discussion today. We are a fully integrated value-chain company, from seedlings to consumer products. We will spend some time talking about the value of long forest value chains later.

We are one of North America's top three largest private landowners with 3.4 million acres of freehold land. We have planted over 800 million trees since the inception of the program in 1957, which is a national record for a private company.

We are third-party, independently audited, and we are certified internationally under the ISO 14001 and the sustainable forestry initiative certification system.

This is a map of our operations, generally. You will see a strong concentration of activities in New Brunswick as well as northern Maine from a timberland perspective. You will see that the stars represent the sawmill operations, mostly in New Brunswick. The diamonds represent the pulp and paper operations we operate. The purple triangles are the nurseries that produce the seedlings we grow and the different colours represent the different types of sawmills that operate within the region.

Bringing it down to the impacts on the New Brunswick portion of the business, we represent 7 per cent of the New Brunswick GDP, gross domestic product, one of the most forestry-dependent provinces in Canada, as you know. We are also the most export-dependent province in Canada, which is a significant issue. It might be news to many of you but forestry and our forestry operations are more high tech than the auto industry throughout the organization. As of 2007, there were 16,500 direct and indirect jobs associated with forestry in New Brunswick.

Moving on to value streams and value adding, we call this our value-added pyramid, which is really a reflection on our way of doing business to generate wealth through forestry. Starting from the bottom of this pyramid, you see the activities associated with growing trees. This is very small print but, by the time those activities of taking the trees to maturity are done, the individual trees are worth roughly $20 per green tonne. That is the value of standing trees.

When we work our way up that pyramid right through to value-added products in tissue, home building, et cetera, the value of those trees has been multiplied 35 times in our value-added supply chain.

The yellow portions are the transportation associated with the different phases of the operation. You will see that transportation is a very significant part of producing forest products. Then the various forms of manufacturing add value as you go up the value streams.

Our vision and mission is to maximize the amount of trees that we can take to the very top of that pyramid to create more wealth for everyone involved.

The JDI, or the J.D. Irving, economic impact on the province on this page is roughly 4,800 full-time-equivalent associates, directly or indirectly, related to our operations. We have $320 million worth of direct payrolls for our own employees and contractors. The wages paid in our operation are 65 per cent higher than the provincial medians, and our folks pay double the average personal income tax to both provincial and federal governments.

We purchase $453 million worth of supplies locally. In the last five years, we have invested $442 million in capital expenditures in our forest products operations. That is fully 1 per cent of the entire New Brunswick manufacturing sector in that period of time.

In 2009, $5 million in property taxes have been paid by our folks in the local communities; $7 million in employee HST, harmonized sales tax, paid in support of provincial budgets; $12.7 million worth of property taxes paid by the company; and up to 22 per cent of a municipality's total tax revenues in some instances come from our operations. Over 15 non-Irving mills in New Brunswick are supplied by forest and forest products that we manage.

Yet, we are small on a global scale. This gives you an indication of where we are compared with our competitors in the forest industries.

In the paper sector, we make 420,000 tonnes of products a year, and that compares with 11.5 million by the Finnish company, UPM, our biggest competitor. In the pulp sector, we make 350,000 tonnes a year, and that compares with 5.5 million tonnes associated with the Brazilian operations of VCP. In the tissue sector, we make 220,000 tonnes compared with 3.7 million tonnes produced by Kimberley-Clark in the U.S. With respect to lumber, we make 700-plus million feet of lumber a year, and that compares with 6.5 million board feet of wood produced by West Fraser Timber in Western Canada. Then, in the container board business, we make 200,000 tonnes a year compared with 10.5 million tonnes made by the International Paper Company in the U.S. which operates 23 mills.

Those are a lot of statistics, but it is to make the point that we are viewed as large in our region but are a very small player on the world scale. Forestry truly is a commodity global business that we have to compete in.

What makes competitive businesses in our sector? First and foremost, all of the jurisdictions we know of with successful pulp and paper operations have low-cost energy. Competitive-cost energy is critical to success. Second, we need to have access to competitively priced fibre. You cannot operate a forest product company globally if you are in the high-cost region for wood. It does not work. Third, you need a secure and long-term and growing wood supply. That sets the base for development and investments in forest industries. Fourth, we need to stay current in technology. We need to keep investing in new technologies as they develop, such that our operations can stay competitive. Fifth and most important, because about 50 per cent of the costs are affected by government policy, in every jurisdiction that we see successful forest products companies, they have good partnerships with government. That is critical to success.

I will pass the floor to Mr. Brundson who will talk about sustainable forest management.

Blake Brundson, Chief Forester, J.D. Irving, Limited: Forest management is really a long-term business and it is a lot more sophisticated than people think. It is not a bunch of people driving around in half-ton trucks and getting out and chopping down a tree with an axe or chain saw. It is a cutting-edge, highly sophisticated business, and we have to look ahead 100 years. Our management planning fully looks ahead at the next 100 years, and the harvest of every tree is planned in that sort of intricate detail. We need good inventory; we have to do very sophisticated computer analyses to ensure that our harvest levels are sustainable and we are doing the right thing on the right site. We have 100-year management plans; 25 years of the harvest is planned actually on the ground, and then we go out in the forest every year and implement these operating plans. The industry is heavily regulated. Third-party audits are standard fare in our business today. When I first got into the business, that was not the case, but third-party auditing is standard procedure in our business.

It is all about ensuring our supplies are sustainable, and our industry can grow, and our plants can expand and compete in the world economy we are competing in. It is important we do the right thing on the right site and that we grow more wood while at the same time looking after this public resource, looking after biodiversity, wildlife habitat, air and water, and these are key components in our management plans.

What is forest management? Canada is a forested nation and is dependent on its forest economy. There is 1 billion acres of forested land in Canada, and about 600 million of those are productive forested lands that are economically of value to the industry and the people of the country. Forest management activities aim to optimize production and enhance conservation values. When I think about forest management, I think about fire and pest control; silviculture, like pre-commercial thinning and tree planting; responsible, sustainable harvesting; and research and improvement so we do things better and smarter in the future.

Just like in agriculture, there is lots of potential to improve the yields, to improve the amount of wood that can be sustainably harvested from the land while looking after wildlife, air and clean water values. This chart explains to you the value on one acre or one hectare of land. If you do nothing and just manage it passively, you can expect to get somewhere in the neighbourhood of 17 cords per acre at 50 years, or somewhere in the neighbourhood of 100 cubic metres per hectare for the newer generation. However, if you decided to plant trees on that land, you could grow four times the amount of wood on a single acre. That does not mean that the forest industry wants to plant every acre, but it means that there is lots of potential to increase the yield, increase the value of the forest, increase Canada's economy by planting more trees. You can grow four times more wood on a single acre by planting trees versus just doing nothing.

To give you a real life example of the benefits of silviculture, the federal government in April 2009 announced an enhanced silviculture program as part of the stimulus funding, and they directed $7 million through ACOA, Atlantic Canada Opportunities Agency, to be spent on silviculture in New Brunswick. That was over two years at $3.5 million a year, and half was spent on public Crown land and half was spent on private farm woodlots. As a result of that $7 million, there has been $5.5 million in additional wages. Investing in silviculture is very labour intensive, so it is people planting or thinning trees, people doing manual labour, so that $7 million immediately in 2009 and 2010 will pay people new jobs worth $5.5 million in additional wages. It will provide 375 direct jobs and will tree 10,000 hectares more of land, more planting, more hardwood silviculture and more softwood silviculture.

That $7 million will provide even more growth down the road. In addition to the immediate economic stimulation it provided, in 50 years those trees will grow, and the Government of New Brunswick, from selling those trees to the industry as those trees grow, will collect $10 million in royalties, in stumpage, selling standing trees. The industry will be able to cut 1.2 million cubic metres more of wood because of those little trees that were planted. There will be an additional $8 million worth of work created in harvesting those trees which will create 200 more jobs, again 50 years from now when those trees are big enough to harvest. So there is a big economic spinoff to investing in silviculture today, immediately and in the long term.

I talked about the fact that you can grow more wood by doing silviculture as part of forest management strategy, and that is also excellent news from mitigating global warming, fixing carbon, because as trees grow, they are carbon. That is what a tree is. It is largely carbon. In order for Canada to meet its climate change objectives, there are different things they can do. One is reduction. Everyone can reduce their energy use, cleaner fuels, more energy efficiency, new technology, reduce demand. That is a laudable strategy, but it will conflict to a certain extent with industry growing. The other thing you can do is sequester more carbon by pumping it into the ground or by growing more and bigger trees, which is the easy way to fix more carbon.

We think it is of the utmost importance for Canada to get interested in forest management as a key to our carbon sequestration strategy. The same graph that I showed you on the value of planting trees to grow wood also shows the carbon value of that same level when invested. You can fix four times more carbon per acre by planting trees than you can fix by doing nothing and passively managing the area.

A 2006 report from the National Round Table on the Environment and the Economy said that forestry in Canada is a potential sink of an additional 100 million tonnes of CO2, carbon dioxide, per year, simply by managing better and that this would make a significant contribution to our overall climate change objectives. It is most important that the federal government have forest management as a key component of its carbon sequestration global warming mitigation strategy.

It needs to be a top priority for the federal government, and if the federal government incents the right behaviour, forest management will result in more CO2 being removed from the atmosphere. As well, it will provide opportunities for forest owners and managers to get credit for their environmental efforts of managing land and growing more wood.

I will hand it back over to Mr. Pinette.

Mr. Pinette: This is one of my favourite topics. Basically, this speaks to credit availability for reinvestment in forest operations. Throughout most of the country, forest operations are small independent businesses and contractors that own and operate their own equipment. This equipment is worth anywhere from $250,000 to $700,000 per unit. Generally speaking, the equipment has a lifespan of five to seven years and needs to be renewed. Each generation of renewal in equipment is improved because of technology advances, making it a competitive advantage to renew the equipment. Like any other business, it is also a requirement to reinvest in equipment. The forest sector has become complicated with the recession and the reduction in activities in Canada. In the last five or six years of forest operations, the aging of the population working in the forest is increasing fast. Fewer and fewer younger people are entering the business, so the average workforce age is higher. As they continue to age, they tend not to reinvest as much as they should near retirement time. Because there have been few opportunities and in the last few years for new entrants to the industry, the equipment has aged and is in need of replacement. As well as the equipment, we need to replace many members of our aging workforce. Who will log in the future is a major question within the forest sector. A viable workforce is critical to our competitive future. The challenge for us is to attract new and younger people to the forest, and to make it available to them in a way that they can finance their start-up operations with some of these sophisticated machines that are required.

We have been working at this with our local teams, but it is becoming a bigger challenge not just for us but also for the rest of our partners in the industry. For example, over the last 20 years, we helped new small contractors to invest in equipment and recapitalize their operations by guaranteeing bank notes so they could get access to capital at prime plus 1 per cent. I use that as an example because it is a key element of the idea to make credit available to new operators at competitive rates if we are to stay competitive in the forest. Credit must be available and competitively priced.

We have 95 such contractors operating, and the average number of years of service is eight. Associated with them are an additional 500 people who operate the machines as employees to the contractors. Mostly they function in the rural woods areas of the province. These are not urban jobs, but the wages are significantly higher than the average wage. They earn an average of $18 per hour to operate these machines. They are important to us because they provide 80 per cent or more of the forest supply for our mills. It is critically important that they be competitive.

We increased our financial assistance to these folks by 30 per cent over the last six years. We know that without this help, we could not keep our operations competitive. They would slow down to the point where they would become uncompetitive, forcing us and others out of the forest business. Therefore, we are committed to these investments, and we believe it is important to the industry and to the country. As I said, each new generation of machines improves productivity 3 per cent to 4 per cent just by accident. It is designed into the machine systems. With continuous improvement being part of the forest sector business, reinvestment in these machines is critical.

Currently, we use a $12.5-million revolving credit line for the contractors, which has been adequate to maintain our activities to date. However, the use of it is expanding beyond our ability to support it. More and more contractors need help to reinvest in the business. In our case and more generally in the Atlantic region of Canada, I believe there will be a need for $30 million to $40 million in available credit to these contractors if the industry is to sustain itself over time.

Speaking of productivity, we focus heavily on competitiveness and control is a key element of competitiveness. We focus on increasing productivity using the best tools and technology that we can find. We invest heavily in training our folks to use these tools and the technology. We apply data collection and measurements at all stages of our operations so that we can know and track any issues. We then work on the improvements by looking at the variances we find.

We use technology that was associated in the past with the military in the form of GPS navigation control of the equipment. That results in fewer incidents in the forest of machines operating where they should not be as well as increasing productivity in the planning process. We intensively train ourselves and our folks on the use of process improvement technology. We are all educated in Lean Six Sigma manufacturing processes and industrial engineering tools to increase productivity. This training is done right down to the seed production area. The whole value stream is Lean Six Sigma-operated. We have best practices in all parts of the operations. We support and apply a lot of research in our operations through the assistance of the Forest Engineering Research Institute of Canada, FERIC, to improve the ways that the contractors do business.

One element of workforce replacement is skills and skills development. A lot of the equipment requires new skill sets, so coaching and training are critical. We provide support and professional coaches to help folks learn these skills before they operate these machines. As well, we help in the procurement side by buying some of the equipment for the contractors so that they can get the best possible price from their suppliers through our purchasing power.

To give a sense of what that does to our teams and the potential involved, this graph shows how our harvesting teams have improved over the last five years, averaging 11.8 per cent improvement in earnings. That is a measure of productivity gains because we pay on a unit basis, and the more they produce, the more they earn. This has been a record with our folks since 2004. In total, that has meant for this group of contractors that their earnings have improved by $40 million over the last five years for the same work done. They have become more productive.

The next slide shows what that means in terms of costs and savings compared with no improvement. The red line on this graph shows what would happen if you just inflate costs, which is normally the way things go in the world, at a rate of 1.75 per cent per year. Our costs would have increased by 10.1 per cent since 2004 had we not gone through this process improvement initiative, but they have actually been reduced by 7.1 per cent over the same period of time, which is a difference of 17 per cent savings in our case, at the same time that the contractors were improving their income at a rate of 11 per cent per year. It is not magic. It happens by process improvement. They get better at what they do. They learn more efficient ways to do things. The costs go down. We share the benefits. They keep some and we keep some, and that is how we both win. They are win-win partnerships.

How can government help? We believe that either the federal or the provincial government, or both in cooperation, should make available competitively priced funds through commercial banks for these contractors to acquire and replace their equipment on a regular basis. This would be a revolving credit line available for contractors in our part of the world.

The buyers of this equipment should be sponsored by wood procurement agencies, wood buyers, others that use wood so that they are legitimate contracts behind the requests for this fund. I believe that the wood purchasers should sponsor these borrowers for these programs, and we should take our responsibility in assuming any loan losses that occur as a result of these transactions. The sponsors should be responsible for the losses, if there are any, so there is no net risk to governments, but, at the same time, a clear advantage of credit for the small owner-operator so they can have access to credit. The funds should be priced competitively, and I believe it should be no more than 1 per cent over prime so that they clearly have an advantage as they start. It could happen in our region of the world through the auspices of ACOA, if that is what governments choose to do.

I will change gears now and move on to research, and research and development. I will speak to some of this, and Mr. Brundson will speak on the more technical piece on forestry.

We provide the largest annual investments in forest research in New Brunswick. We invest about $5.5 million a year on research. That has been going on for some time, and it continues. We are certified and supported by a blue ribbon scientific advisory committee made up of scientists from the local universities who provide us guidance on the most useful research initiatives that should be undertaken.

Since 1995, we have completed over 100 forest research projects, with significant results. We are the only company that we know of in the region with a full-time wildlife biologist on staff. We have five public advisory groups in New Brunswick that are actively providing us input in our management of forests, and we are contributors to the funding models.

We have had good outcomes on the management of the licences that we do for the Province of New Brunswick over the last five years, and we are managing, for all of the things that Mr. Brundson mentioned, for values other than timber associated with nature and water and air.

Mr. Brundson: One of the things we have been working on with respect to improving forest management is the trees that we plant. We are trying to plant the best tree on the best site. We are trying to find the trees in nature that grow faster than their neighbours, and we focus on planting that best stock and matching it to the best site.

We have a world-class genetic improvement program that is working at breeding bigger, better, faster-growing trees with more insect and disease resistance. We are recognized for our excellence in genetic improvement in forestry. NASA, a couple of months ago, sent trees to space. They asked, "Who has the best trees in the region?" J.D. Irving. They asked us to send some trees to space because they wanted to see how trees grow in a zero-gravity basis as compared to trees on earth. We have some Irving trees up in the space station, growing faster than any other trees you could possibly take to space.

We are working on increased pest tolerance. Budworm is a big problem in Canada, and we are seeing it in the Saguenay area of Quebec. It is an infestation that runs on 20-year cycles, and it has been devastating to the industry. It is similar to the mountain pine beetle out West, but this is a devastating insect in Northern and Eastern Canada. Our company has a long history of fighting the bud worm.

We are working with Carleton University on some world-class research to put natural fungi in the leaves of these trees when they are still very young in the nursery. This fungus is naturally there, but we are putting it there right away. The budworm does not like eating trees that have this fungus on it. We believe we can minimize the amount of budworm spraying we will have to do by having trees with this natural resistance to the budworm. That is a technology that the turf grass industry has pioneered. Today, if you buy grass seed, it will say endophyte enhanced. We are putting endophytes into the trees right in the nursery so that they will be budworm resistant, and hopefully we will not have to spray them, or not spray them as much, when the budworm comes into our area again, which is forecast to happen in the next five years.

This is world-class work, and we have a patent on how to do that. It is a patent in Canada, the U.S., Europe and Australia to do this work with trees. We are the only people in the world who have managed to be able to do it with trees and prove that it works. That is work between ourselves and a professor at Carleton University here.

There is a lot of research going on in climate change, and we need to continue that and support that research. An individual tree can absorb a tonne of carbon in its life cycle. That is good news for mitigating global warming. Again, there is lots of opportunity to increase growth. On our lands in northwestern New Brunswick, we are growing almost 50 per cent more wood on a year-by-year basis than the public land in the area, and that is all because of the improvement work that we are doing and the higher level of tree planting that is being done than on the public land. Over the next 50 years, we will be able to increase that by 40 per cent again. Over the next 30 to 40 years, we will be growing double the amount of wood that is growing on the public land today. On our private land, we are doing more, and our message to you folks here is that any support or coercion you can do to get more focus on growing more wood on the public land would be good for the industry, good for the economy and good for mitigating global warming.

Mr. Pinette: Mr. Brundson and I are not the resident experts on the next part of the presentation. We are getting out of forestry and into the pulp and paper mill operations. We thought we should summarize some innovations taking place in our industrial operations, starting with the world's first application of reverse osmosis at our pulp mill.

This is a patent-pending technology that our folks have developed at our pulp and paper mill in the city. Those of you familiar with Saint John will know that the pulp mill resides in the heart of the city and is one of the only pulp mills in the country operating inside a major urban area. As time requirements for treating water came of age, there was no space to have the traditional water treatment facilities installed in the city. Therefore, we went with a totally different and new approach of treating effluent waters from an industrial site by going to this reverse osmosis process.

Luckily for us, the system is working very well and it is a world-first in the pulp and paper industry in that we have no sediment ponds around our pulp and paper mill in Saint John; all our water treatment is done internally via this system of reverse osmosis. The system is basically comprised of large membranes through which you put water effluent to clean it out before it returns to the ocean.

It is a good closed system for water treatment and we are proud of the technology. We have been awarded various research certificates to support it.

There is another piece of technology we are currently working with in the area of stream water quality protection for fish habitat improvement. We are using remote sensing equipment on some of our aircraft so we can detect pools of cooling water that are usually along major streams which carry fish. These cooling sources of water are critical to keeping temperatures down for migrating fish like salmon and other important fish in our rivers.

We have been finding all of these cool water places along the major courses and main rivers in New Brunswick. Doing so, we can put them in protected areas and keep them in that state for the future protection of the water resources. That is working very well.

I will now talk about a federal initiative put in place more than a year ago now, which is the federal green transformation funding program. It has been good news for business and very good news for the environment. We are recipients of some of the benefits of these funds, so we can continue to enhance the improvements to environmental protection we are doing in our operations, and to reduce the greenhouse gas emissions coming from our operations.

To that end, we have targeted and are making investments to reduce our energy input per tonne of product by 50 per cent from 2008 to 2011. We are well on track to get this done. We will then be making forest products at 2.5 million BTUs, British thermal units, of energy per metric tonne of product, which will be more than a 50 per cent reduction over a three-year period of time.

At the same time, we will be, and have been, reducing greenhouse gas emissions. On this chart, you will see we started in 1996. We were producing 564 kilograms of greenhouse gas per tonne of product. In the fall of 2009, it was producing 283 kilograms of greenhouse gas emissions per tonne of product. We are on the way down, as we speak, as we implement more of these energy reduction projects that are supported by the federal government program.

I listed 10 for your reading but I will not highlight them all. I just wanted to note that we are very significantly investing in energy self-sufficiency and energy-efficiency projects, aimed at both reducing the amount of energy requirement to make forest products as well as reducing the amount of greenhouse gas when we do need to put energy in it. In that way, we have the greenest forest products we can make.

The outcome of all of this is that we have invested over $69 million in these projects over the last four years. That has meant we have reduced the use of oil by 400,000 barrels and we have reduced greenhouse gas emissions by 163 metric tonnes in that same period of time.

Building and changing these processes has provided work for 110 local contractors, and over 283,000 main hours of work on these projects.

Currently, we are quickly installing biomass projects in our sawmill operations as well as our pulp and paper operations. It is always with the idea of reducing the fossil fuels we burn. At the same time, we want to increase the productivity of the mills and we want to focus into future renewable energy reduction on the sites where we can. We have already installed three of the boilers listed there at Deersdale, Grand Lake Timber and Saint-Léonard, and we are building the one at Lake Utopia as we speak.

At the same time, we are working in Saint John in the city with a model to improve and enhance the efficiency of the biomass projects we have there now. We have and have had a biomass boiler at the pulp mill for over 25 years.

We are continuing to improve the efficiency of that system, with the latest being the idea of collecting all of the wastewater that results from these thermal plants and collecting the wasted heat along the system onto this wastewater. Therefore, when the water leaves the building, it is still quite hot and we want to distribute this hot water to other users and collect the energy in this hot water by distributing it first to industrial sites next to our pulp mill.

We have already connected our tissue mill to this and we are connecting the Moosehead Brewery to this process. The idea is to continue to connect more commercial and industrial sites in the city to heat them with this wastewater. We are also working with the city to bring that warm water to the municipal buildings in the city to heat more of the facilities in the city to make good use of what was wasted energy in the past.

By doing all that, we make the whole system more efficient. This sheet is an explanation of how it works. Basically, you take biomass that is an offshoot of the production of wood from our pulp and paper mills. Using an efficient boiler, we produce steam which we can put through a turbine to generate power which we do at the pulp mill for our internal use. We also use the direct heat from this boiler to dry the products in the flue gas heat recovery system.

Once we have all that done, you are running at about 65 per cent efficiency with the whole recovery system. All of the water associated with this now contains a certain amount of energy. We are collecting it and we will transfer the heat out of that water through buildings, whether industrial, commercial or private. When we finish the use of this energy, we will have collected 85 per cent of the energy content of that biomass rather than the initial phases of it at 30 per cent, 40 per cent, 50 per cent and 60 per cent.

The more integration of these energy systems we can have wherever they are installed, the greener we can be and the cheaper the process is in the long run.

The next page is a picture of where the pulp mill resides in the city and some of the installations currently being supported by the hot water for the pulp mill. The next sheet will show a gross diagram of the water distribution system being planned in the city so we can heat with some of this hot water some of the larger municipal buildings in the core of Saint John.

In summary, we have four recommendations that we would like the committee to consider. First, as we have cited many times, invest in tree growth through tree planting with both hardwood and softwood silviculture to sustain and increase fibres to the forest sector and to achieve a higher level of carbon sequestration to reduce global warming. Second, to realize the potential value of the capture, forest management needs to be the top priority of the offset system currently being designed by the federal government. It is critical that it becomes part of this offset system.

Third, in the same way that capital funding is available to the agricultural sector, we believe that forest operators and truckers should have a way to access interest-competitive credit so they can modernize and replace their equipment.

Fourth, we think there should be an increase in the availability and timing of funding for research and development to advance forest science and commercialization of new technologies and its application in the field. If Canada is to remain competitive in the forest sector, we need to make more investments in research and development and apply it in our operations throughout the whole value stream.

That is the end of our formal presentation. We are hoping to take questions in both languages.

The Chair: Thank you very much. We will turn to Senator Mercer to begin questioning.

Senator Mercer: Thank you very much, gentlemen, for a detailed and thorough presentation. A number of us have visited some of the Irving operations in Saint-Léonard and we were very impressed. As Senator Mockler said, some of us planted trees. I was intrigued with the demonstration of the thinning that takes place in the forest and the fact that the young man operating the equipment was a private contractor. You covered a lot of this here. You talked about the cost of equipment and availability of capital for a contractor to buy the equipment.

I have two questions related to that. Where is that equipment made? Is it Canadian-made or is it made offshore?

Mr. Pinette: Most of the equipment is made offshore. Much of it originates in Scandinavia, Sweden and Finland particularly. There is an industry of a kind here in Ontario that is significant. The rest of it comes from the U.S.

Senator Mercer: You mentioned several times throughout your presentation about the training of the workforce. I am making an assumption, and you can correct me if I am wrong, that we are talking about two types of training. There is the training of that young man or woman who operates the skidder or the machine that thins out the woods as we saw, and also training forestry engineers who do the top-end planning, et cetera.

Recognizing that education is a provincial responsibility but that some training is sponsored by the federal government, is there a program on the ground in New Brunswick at the high school level exposing young men and women in New Brunswick to the opportunities of working in the woods?

As a Maritimer, I know one of our biggest problems is that we export our greatest product of all — our young people. It seems to me that we have good-paying jobs — hard work, no question about it — in the Maritimes. We need to start training our young people at the high school level. Are there programs like that in New Brunswick, or are there models of good programs like that elsewhere in the country?

Mr. Pinette: There are no formal high school programs for forest-worker training in New Brunswick today. There has been, in the past, various pilot projects, I think at the Grade 10 level, introducing the vocation of forest workers in different school systems, but no formal program exists today.

You are right in your assumptions that there is a requirement for two types of training. Certainly, the vocational training for machine operators is in critical shortage as we speak, and growing, and the professional development training for the higher learning is slowing down in the Maritimes and needs to improve significantly if we are to sustain ourselves over time.

Senator Mercer: You mentioned the use of boilers at three different locations. We have had a number of discussions here recently about boilers and about the fact that the availability of European boilers is limited due to meeting North American standards. Do you encounter that problem or are you able to get boilers with the proper approval? If I know Irving, you are liable to find your own solution and build your own and find a way to market what you have built. Have you had difficulty getting approval?

Mr. Pinette: You are right. The demand for biomass boilers around the world is high now as people are converting their fossil fuel energy sources to biofuels across the piece. No, we have not had any significant issues finding boilers for the projects we have been trying to put in place. Deliveries on new boilers is longer than we would like, but we are able to source the boilers we need for the projects we anticipate doing.

Senator Mercer: It may be too early to give me an answer, but will the yield be as great with the endophyte-enhanced trees you talked about? It was a fascinating process. Will the volume of the product be as good at the end using the endophyte enhancement? Does it change the growth pattern of the tree?

Mr. Pinette: The endophytes themselves will not change the growth rate of the trees, but they will minimize the losses due to insect damage. As a net result, we will get more fibre at the end of the rotation because of the endophyte, but not because they have enhanced the growth but because they are protected.

Senator Mercer: You cannot introduce that later on in the process; you do that at seedling stage?

Mr. Brundson: Yes, we do it right at the seedling. There are endophytes in every needle of every tree. They naturally go there. It is a symbiotic relationship. The professor at Carleton University has found certain of these endophytes the budworm does not like, so instead of waiting for nature to take whatever endophyte happens to come along, we spray the trees in the nursery with water and this endophyte that the budworm is very averse to early on, so the apartment is already rented by the endophyte that the budworm does not like.

[Translation]

Senator Rivard: I regret not having visited the facilities in Saint Léonard, but I will surely have an opportunity to catch up some day.

A few weeks ago, the Forest Products Association of Canada suggested that the government should create a fund for renewable energy, to provide loans with competitive interest rates. This comes back more or less to the suggestion that you made. You are not the only ones to demand this. Do you think that the said fund should also include bioproducts?

Mr. Pinette: Personally, I think that any kind of investment that will increase the added value of forestry products should be encouraged and projects should add to the final value of the resource material. Otherwise, it becomes a competition for the use of products that are already in place and if the investment is directed toward a product of lesser value, the added value of products made in Canada will be reduced.

Senator Rivard: Earlier, in your presentation, we saw that you are making good use of your biomass.

Mr. Pinette: Yes.

Senator Rivard: Have you ever thought of producing wood pellets that could be used for heating or is your current system more profitable the way it is?

Mr. Pinette: We know that there are discussions currently going on across the land regarding wood pellet production. In some cases, it is a good use of biomass, but it is not necessarily the best use.

Let me elaborate a little. The most efficient use of biomass is near the source; whether we are talking about pellets, shavings or anything else. The closer it is to the source, the more efficient it is and we should support the regeneration of the energy of this biomass.

If you ask whether we are in support of exporting pellets from Canada to foreign countries, I would say in general that we do not because we do not see this as an added value for our industry. If you ask us whether there are domestic pellet applications that could replace petroleum products, the answer is yes, but when it is used "internally," here, to reduce the damage caused by the use of petroleum.

Senator Rivard: Mr. Brundson spoke of the well-known problem of the spruce budworm. Does your enterprise pay for the spraying? Does the province pay for it? Does Environment Canada pay for it?

Mr. Brundson: Usually, it is under provincial jurisdiction and the province pays for it. However, there is an exception; if the pest is introduced, then it all becomes the responsibility of the Canadian Food Inspection Agency.

[English]

If it is an introduced pest, the federal government has responsibility.

[Translation]

However, if the pest is indigenous, it is a provincial problem. Public lands belong to the provinces.

Mr. Pinette: The other exception is found on our private lots where the spruce budworm is attacking our private forests. We have to spray at our own cost. This is not public expenditure on public land, but a private expenditure on private land.

Mr. Brundson: For the private woodlot owners, the provincial government normally pays in almost every case. However, for the industrial forest lands, we have to assume the cost.

Senator Rivard: The biological product used for spraying was developed in Quebec, at the Environment Canada Research Centre by the late Dr. Vladimir Smirnoff, who developed it, but he has no relation to the vodka producer.

[English]

Senator Plett: Thank you, gentlemen, for a marvellous presentation. I was fortunate enough to visit and see part of what Irving is doing. Not only is the Irving name a great success story, but clearly you are doing a marvellous job in managing what you are harvesting. I commend you for that.

I need to, for the record, chair, if I could, just state that I did plant one of the 800 million trees that Irving planted. I have been duly compensated for that before 600 people. Mr. Irving presented me with my 4.5 cents for planting a tree. He gave me five cents. When I looked later on, I found they were American pennies, so I am not sure whether I have been overpaid or underpaid. However, I have five American pennies that Mr. Irving had to borrow from his wife, by the way, so I have been duly compensated. I do wish that we had tagged our trees, because I would like to know whether mine is doing better than Senator Mercer's. I believe it probably is.

I want to touch a little more on what Senator Rivard asked about the credit. As I said, I was in New Brunswick a week or two ago and visited a pellet factory as well as a farm and a composting factory. I did that in order to see whether we could not bring some of this to Manitoba. There is not a pellet factory in Manitoba, and composting hog manure is a difficulty. In all three places, the lack of available credit was the key issue. I appreciated that none of these people were saying the government should give them money. Their concern was the lack of available and affordable credit. A farmer there said it cost him $2 million to build his 1,300-sow barn, which is not a large operation when you compare it to many barns in Manitoba, but if you have to borrow money at the regular rate at the bank and put down 65 per cent, it is impossible for a new person to get into the business. I certainly support that and the other initiatives that you suggested the government should get involved in.

If I understood you correctly, you said that the purchaser should guarantee in some way the losses on these loans. If that is the case, why would the purchaser not simply guarantee the loan as opposed to the government?

Mr. Pinette: That is a good question, and thank you for it. For the most part, and as I said in our case, we do guarantee these loans, and we have been for over 20 years, on a revolving line of credit for these people. We are a privately owned forest products company with a board that is committed to long-term sustainable forestry management. A fair number of our competitors in the country are not in that position, and they require long-term commitments to the banks so that these guarantees stay in place to give comfort to the banks to make these preferable term loans. You need a board of directors and owners who are willing to make that commitment and stick to it and absorb those losses, if and when they come. There is a collateral commitment from the guarantor that, if one of these loans goes bad, you will make good the losses that the banks incur. It is a financial commitment that owners of industries have to be willing to make. In our case, we said yes. Not everyone says yes.

Mr. Brundson: It is beyond the value of the machine. The bank is looking for more collateral than just the machine.

Senator Plett: I understand, but I am still a little perplexed. If the purchaser is guaranteeing the losses, if they have the wherewithal to guarantee the losses, then they have the wherewithal to guarantee the money at the bank. If they do not have the wherewithal to guarantee the losses, then what point is there in putting that into the equation that they will guarantee the losses?

Mr. Pinette: That is the fundamental question here. Our view is that the purchaser that wants to sponsor a contractor to one of these commercial loans needs to be willing to commit to take these losses if he wants to sponsor someone like this. Otherwise, we say you do not qualify. It is a shared-risk proposition where the industry, the wood buyer, the banks, in this instance, the government, whichever government does it, and the contractor share risk so that you can capitalize this project.

Senator Plett: Senator Mercer asked about the equipment, and I — as well as other senators — was amazed at the type of equipment and what they do in cutting these trees and stripping them. What would be the typical cost for a person wanting to start up? I think they need two or three pieces of equipment.

Mr. Pinette: A minimum of two, yes.

Senator Plett: What would be a typical cost for someone wanting to get into that type of an operation?

Mr. Pinette: Most of the systems similar to what you saw would require an investment of about $750,000, with two machines.

Senator Plett: You said that your wages were 65 per cent higher than the provincial median wage. How does that compare to wages in the other provinces and nationally?

Mr. Pinette: Unfortunately, I do not know the answer to that question. If you could give me the relationship between the national average and the New Brunswick average, I could answer it, but I do not have the figures with me.

Senator Plett: Fair enough; I appreciate that.

Is the backstop in the amount of $30 million to $40 million for forestry for all of Atlantic Canada or for New Brunswick?

Mr. Pinette: That was our estimate for Atlantic Canada. For these purposes, I define Atlantic Canada as Nova Scotia, New Brunswick and P.E.I. I have not seen and I do not know the situation in Newfoundland. For the Maritime provinces, it would suffice to support the base of the required equipment renewal.

Senator Plett: My questions pertain to Crown land versus private land. How much of New Brunswick's forest is Crown-owned? How much of that do the Irvings manage? How much land do the Irvings own privately?

Mr. Brundson: Crown land in New Brunswick is about 51 per cent of the forest land base. New Brunswick is a big anomaly to most places. Across Canada generally, it is about 91 per cent, with New Brunswick and Nova Scotia being the exceptions. Only 30 per cent of the forest land in Nova Scotia is Crown-owned. That is the answer to your first question.

J.D. Irving, Limited owns about 2 million acres in New Brunswick, which would put us somewhere in the neighbourhood of 15 per cent of the forest land base in New Brunswick.

Senator Plett: How much Crown land do you manage?

Mr. Brundson: We manage somewhere in the neighbourhood of 30 per cent of the Crown land base with two of the ten larger licences in New Brunswick.

I should mention that, under the Crown system, management happens under the direction of the province's Department of Natural Resources. They delegate the on-the-ground work to the five largest companies in the province with the idea that they have the infrastructure, the wherewithal and willingness to make the long-term investments. However, every mill in New Brunswick has an allocation on the public land. While we manage the land base, we have to deliver wood to 15 other mills from that land base as part of the smaller mill's allocation or call on Crown land.

Senator Plett: Thank you very much. We should make a point of keeping abreast of how these trees are doing and, if we are looking for a place to make another Senate trip, we might want to consider that.

Senator Ogilvie: Thank you both for a remarkably well organized and presented summary of very important aspects of the forest industry. I am not at all surprised. There was a period of time when I had the good fortune of seeing your properties and facilities up close with high-level tour guides. One thing that really impressed me was that, while flying over New Brunswick's lands, I could identify from the air which properties were likely J.D. Irving, Limited properties in comparison to the competitors. Flying over your facilities, the lumber mills in particular, there was no question about which facilities belonged to J.D. Irving, Limited and which ones belonged to a competitor. Your organization is exemplary. I also had the benefit of hearing some fabulous stories from the original K.C. Irving-days and how roads and other things were developed. The stories were fascinating, but the conclusion was important: In this industry, even the grade of the roads and the radius of curvature of turns is important in terms of the overall energy inputs into a facility.

I want to come back to the 3.4 million acres that you mentioned at the outset. You indicated that 2 million acres are in New Brunswick. Where are the remaining 1.4 million acres located? Are they in Atlantic Canada or in Maine?

Mr. Brundson: We own about 1.25 million acres in Maine. We are the largest private landowner in the state of Maine. Almost all of that wood either comes to our plants in New Brunswick or is sold to local competitors in the state of Maine. We also own somewhere in the neighbourhood of 250,000 acres in Nova Scotia.

Senator Ogilvie: A number of years ago, I was very active in the science of biotechnology and the early stages of tissue culturing and so on. Canada was the first country in the world to clone, through tissue culture, evergreen trees, which are much more difficult to clone than most plants.

You were the first forest company in Canada to incorporate the term "elite species" in your descriptions of trees. Those were selected from the forest and not developed through tissue culture. Today, you indicated that you are using tissue culture from these elite trees in your seed production, I assume.

Mr. Brundson: From a breeding perspective, our operational stock is still 98 per cent from seed.

Senator Ogilvie: That was going to be my question. Your juniper breeding facility, for example, would be 98 per cent from the traditional seed.

Mr. Brundson: Yes. We are trying to improve our tissue-culturing techniques. We tend to use tissue culture as a way of holding the genetic material available. Operationally, well over 97 per cent comes from our seed orchards.

Senator Ogilvie: You also showed a marvellous pyramid of the value-added development from the base forest product and the accompanying value in real dollars. I was interested to note one aspect was not included: The extraction of chemicals from the biomass. Yet, your sister company is one of the world's best at distilling petroleum into refined products, and the technology is not hugely different. Many of the principles are similar. Is it possible to remove from the sawdust or other by-product material any cellulosic-based chemicals?

Mr. Pinette: Like the rest of our competitors in the industry, we have much interest in the evolving technology. Currently, we do not extract any. We have no commercial plant that functions in that capacity and we do not have one planned, although we are following the technology closely. We believe that there is some potential in this area, but our current evaluation is that the technology is not available for commercial use.

Mr. Brundson: We are doing research on that. I am sure if we are invited back in 15 or 20 years, it will be on the pyramid.

Senator Ogilvie: Back in a former life, I had the opportunity to look at a unique situation in Europe and the deliberately planted forests in Scotland. We tend not to think of Scotland when we think of managed forests — we tend to think of Scandinavia — but they are doing fascinating things, as well.

I wanted to come to the issue of the total amount of biomass you collect where you showed the escalation through management of return in terms of tonnes of biomass per acre. I will draw a parallel to some of the forests I drive by in New Brunswick that are clearly J.D. Irving, Limited-managed — the Scottish plantations were planting frees very densely with very deliberate stages of harvest, before the final full mature harvest. You used the term of a 50-year cycle roughly on this.

When you talked about the total biomass removed per acre, were you including selective harvesting throughout that 50-year stage, or was that the amount from the mature?

Mr. Brundson: That would have been the rotation level amount, minus what we conventionally biomass. The numbers I actually had out on the chart were what we call "whitewood to a merchantable top." You could have increased that volume by 30 per cent if you took the branches and tops.

Senator Ogilvie: However, if you removed a 20-year period and removed those trees, is that whitewood counted in the numbers?

Mr. Brundson: Yes.

Senator Eaton: As you can see on this committee, we support making Canada greener with the use of more wood.

Mr. Pinette: Thank you.

Senator Eaton: You talk a lot about climate change. Has the change in climate, which I think changes back and forth cyclically over long periods of time, changed what you plant?

Mr. Brundson: Yes.

Senator Eaton: What is the difference?

Mr. Brundson: It has not so much changed the species we plant but it may have changed the mother and father trees — the seed sources — that we use.

I get this question all the time: What are you doing about global warming? I would fire back quickly that our tree-improvement program is the best possible investment we could make to mitigate global warming. When we test the different seed sources, we will test them at the climate of Boston. The Yarmouth area has the same climate as Boston, which is the predicted climate we will have in central New Brunswick in 50 years. Therefore, we will test the seed in a southern area of range and the very northbound area of our range and the trees we will plant next week will be ones that have consistently performed well in the very southern and northern test areas.

Senator Eaton: It is a form of hybridization.

Mr. Brundson: It is good adaptation.

Senator Eaton: Are you still planting more hardwood trees or are you interested and focused on softwood?

Mr. Brundson: It means that things like black spruce are not as big a component of our planting program as they were 15 years ago. Ones like white pine are a bigger component of our planting program than it was 20 years ago because those trees will tend to grow better in a warmer, slightly dryer, climate.

I should say the Maritimes will not be impacted to the same level as the boreal forest as a result of global warming because of the moisture and coastal impact we enjoy.

Senator Eaton: You have a different climate than we have here.

Mr. Brundson: It is a prime consideration for us every day.

Mr. Pinette: We should answer the question of deciduous trees versus conifers. We do not plant any deciduous trees simply because they come back naturally in abundance.

Senator Eaton: Yet you have made the argument that, by planting trees, you increase your harvest, so does that not apply to deciduous trees?

Mr. Pinette: We solely plant coniferous trees. In those areas best suited for conifers, we can grow more in all those areas all the time with planting trees.

Senator Eaton: It does not apply to deciduous trees.

Mr. Brundson: The second-highest bar we had on the graph was doing pre-commercial thinning. That is the treatment we do in mixed-wood stands and hardwood stands.

Senator Eaton: Yet your emphasis is not on hardwood trees, is it?

Mr. Brundson: Our planting emphasis is not on hardwood trees but we have a strong silviculture emphasis on the hardwood and mixed-wood trees.

Mr. Pinette: On the sites that are appropriate for hardwood trees.

Senator Eaton: If you were planting conifers, you do not let the hardwood trees grow up amongst them.

Mr. Brundson: At the same time, we would not plant softwood in an area that had good quality sugar maple and yellow birch. We would leave that in hardwood.

Senator Eaton: Going to the top of your pyramid, which I could not read, one thing we have discussed in this committee over the last year is value-added wood products. Getting away from biomass, which you can think of as using the leftovers of what you cannot use, are you looking at things like cross-laminated timber or at making products for non-commercial building or even commercial buildings to get away from just the two-by-fours?

Mr. Pinette: No, we do not have any active program today to invest in that area. We are interested in it. Again, it is a developing market. The technology there has evolved to the point where you can commercialize some of these, but we are not in this business today. We keep looking at the opportunities to get at them.

Senator Eaton: We have had witnesses here who have talked about making prefab building components. You are considering that, but you are not in it today.

Mr. Pinette: That piece — the modular home building business which is at the top of that pyramid you saw — has a big interest in that area. They are experimenting with annualized construction as we speak. We have been building modular homes with our wood products for years in the Maritimes. As those technologies evolve, we are staying current and competitive.

Senator Eaton: Do you export mostly to the United States? Have you started looking at foreign markets or are you in foreign markets already?

Mr. Pinette: My answer is "yes" to the first piece; we primarily export to the United States. My answer is "no" to the other two questions. We have had various export markets other than the United States over the years. It just happens that, over the last 10 or 15 years, it has been better for us to export primarily to the United States, although we still export different products to other parts of the world and we continue seeking other opportunities.

Senator Eaton: Having heard testimony about softwood lumber and what you cannot export to the United States, would it be in our interest to look at other markets as you develop more value-added products?

Mr. Pinette: I believe it is always in our interest and the interests of others to look at new and different markets. It is part of the continuing business cycle that we have to go through. We keep looking for other opportunities around the world.

Senator Eaton: Thank you.

[Translation]

Senator Robichaud: Are there any more questions to be put, Mr. Chair? Witnesses came here to tell us that for the traditional use of fibre, the market was saturated and that there are many other producers in the same field.

We hear that increasingly we have to look for materials other than fibre, as Senator Ogilvie mentioned in his question. You answered that you had not gotten there yet. But will the problem not crop up at some point? You must find other uses for the entire source of wood rather than simply producing fibres for paper or for biomass, do you not?

Mr. Pinette: Certainly, we are always looking for new markets, new applications for our products, and for making new products.

We are not against the production and development of new forestry products. However to answer to the initial question, namely are we doing certain things with certain specific products, the answer is no. We believe that the commercialization of this process is not yet finished. It will take more research and development before being able to invest in commercial plants that can receive this kind of technology.

Senator Robichaud: Are you associated with any research centres or universities?

Mr. Pinette: Yes, absolutely. We support the research that is going on, but the development is not yet there today. Many people speak of biochemical products that can be extracted from cellulose fibre. The answer is yes, it can be done, but it has not been commercialized yet. We are not ready to make these investments because the process has not been commercially developed.

Mr. Brundson: But we are spending large sums of money each year on research on biochemical opportunities at our Saint-Jean factory. We are obliged to do it.

Senator Robichaud: That was the answer I was looking for.

Mr. Pinette: The commercial development is not ready yet.

Senator Robichaud: In how many years do you expect it?

Mr. Pinette: We hope that it will be on the list in 5 or 10 years, that would be good.

Mr. Brundson: We hope that we will have this opportunity within the next five years. We think that because of our processes, we have advantages over the other companies. But we will have to see.

Senator Robichaud: Especially given the fact that Irving has a great deal of experience in the refinery business, these processes must be somewhat similar as Senator Ogilvie said.

With regard to biomass, in New Brunswick, we import coal. Have you looked into the possibility of replacing coal with some biomass that you could produce?

Mr. Pinette: Absolutely. We are very interested in this new development. This could be done fairly quickly and easily in the province given the fact that the coal installations are already there and that the conversion is not very complicated.

Is this the best way to use biomass? This is another issue. However, in view of the availability of fibre in the proximity of the plants, the answer is yes. We have looked at it and we are interested. If the owners of the installations are ready to make the conversion, we are ready to provide a part of the biomass.

Senator Robichaud: I understand that this is not the best way to use biomass, but if we consider greenhouse gases, all but one person told us that burning wood caused more greenhouse gas emissions than burning coal, but some still find this hard to believe. Nonetheless, we should know whether or not there is an advantage to burning wood instead of coal?

Mr. Pinette: There is a great advantage. The only reason why I made the comment about the follow-up, if this means that the biomass has to be transported over 200, 300 or 400 kilometres to a coal plant, the answer is not as clear. If the transportation distance is for 40 kilometres, the answer is different because the distance to the market has an impact on the energy value of biomass. Thus, if the biomass is close to the plant, it is very good. When it is far away, things become more questionable.

Senator Robichaud: Would such questions apply to coal plants in New Brunswick?

Mr. Pinette: Yes. And the other part is that the coal plants are big energy plants and it takes a great deal of biomass to replace a smaller amount of coal. If you want to replace a coal plant with biomass, you must go further to meet the requirements of the installation because it will use a great amount of biomass.

Senator Robichaud: There is no question of totally burning up the biomass of wood fibre, because in Europe, coal is gradually being replaced by biomass that comes either from agriculture or from forestry.

Mr. Pinette: It would be a good idea to do this progressively until there is a balance of energy between the value of the biomass, the coal and the emitted gas.

Senator Robichaud: What percentage of biomass do you leave in the forest? Could you use it without hindering the regeneration of the forest soil?

Mr. Pinette: According to the best information that we could find world-wide, no more than 80 per cent of the true biomass should be extracted, such as waste branches et cetera. Twenty per cent of this volume should be left on the ground to protect the sites.

Otherwise, on sensitive sites, infertile sites with thin top soil, no biomass should be taken away at all. However as for the rest of the sites a maximum of let us say 80 per cent of the biomass can be extracted.

Senator Robichaud: My question was are you taking out 80 per cent or are you leaving some?

Mr. Pinette: On the average, 80 per cent is not taken out. It is more like 40 per cent. But as I said, we are building plants that will use biomass and as these plants come on stream, our consumption will go up and within three years, we will be using 80 per cent of the biomass on our sites.

[English]

Senator Mahovlich: They told us they have small trees, seedlings, in space research centres. What will be the benefits of this?

Mr. Brundson: It was not my idea to send the trees to space but, when they asked, we heeded the call and said certainly. They are trying to see what the wood fibre qualities will be of trees growing in zero gravity. Will they grow faster? Will they have the same lignin content? Will they grow straight up? All of those questions.

Senator Mahovlich: I have another question with regard to biomass. If we use wood residues lying in the forest to produce bio-products, bioenergy and biofuels, what should be the proportion that we leave on the soil to have the proper level of nutrients and avoid soil erosion?

Mr. Pinette: I thought I answered some of that in the previous question in French, but I will repeat it in English. We believe, based on the best science we can find today, that we should leave at least 20 per cent of the waste material or the waste biomass on the site for those intended uses.

Mr. Brundson: It would depend on the site. If a site has thin soil, you probably should not harvest any biomass.

Senator Mahovlich: And away from the lakes.

Mr. Brundson: Absolutely.

Senator Mahovlich: What distance from the lakes?

Mr. Brundson: We have buffer zones along every stream and river that we operate on, and the smallest unmapped stream would have 100 feet on each side. A lake would probably have 300 feet to 500 feet, depending on the lake and the recreational value.

Senator Mahovlich: A few years ago, we were in Timmins, Ontario, and it was 20 feet. Things have changed now.

Mr. Brundson: I am from New Brunswick. New Brunswick does not have many lakes, and they are protective of them.

Mr. Pinette: We would not want to operate that close to a lake.

Senator Mahovlich: So fishing is still good.

Mr. Brundson: Salmon fishing is excellent.

[Translation]

Senator Robichaud: Regarding Senator Mahovlich's question, logging must be done within a certain distance from streams, rivers and lakes. I know many hunters who, in the autumn, spend their time in the woods. They told us that recently, forestry companies were logging right up to the edge of streams, which totally destroys the habitat of deer and moose.

Are you saying that this is not the case?

Mr. Brundson: It is against the law.

Senator Robichaud: I was told that the regulations had changed. Are you saying that this is not the case?

Mr. Pinette: It is not the case in New Brunswick. On crown property, there are strict rules for protecting wildlife zones, riparian areas and lakes. You have to obey the law or else you lose your stumpage rights. You might be referring to small woodlots where people do things differently. The legislation regarding private lots is different.

Senator Robichaud: But on crown land, does this apply to the land that you own?

Mr. Pinette: We have the same standards on private land, industrial land, and crown land, we follow the same regulations.

Senator Robichaud: Could I reassure them regarding this?

Mr. Pinette: Yes.

Senator Robichaud: I do not know if they will believe me. I thank you.

The Chair: I have a few questions to follow up on some questions that were already put, and I would also like to have your opinion, given your experience and in view of the fact that the J.D. Irving Limited company, more specifically Mr. K.C. Irving himself, had a vision, as he was the first North American to plant trees in the 1950s.

What role do communities play given the fact that 300 communities across Canada, from east to west and also in the north, are impacted by forestry operations or depend on jobs created for forestry operations?

What role do communities play in your vision and in your decisions regarding forestry, to make sure that there is a long-term creation of quality jobs?

Mr. Pinette: Thank you for your question. We have two municipal committees in the province of New Brunswick, one for the francophone regions in the north of the province and another similar committee in the south of the province, especially in the anglophone regions, who give us their opinions, their points of view regarding development in their region. The company's requirements from the two committees are complementary and all the communities are represented, mayors, regional public agencies, regional development institutions sit at the table and we meet regularly. They provide us with their information and with their requirements on a regular basis. They offer us proposals for various municipal and other needs in the regions. And each time that a new project is proposed, it is discussed in these committees to make sure that communities are closely involved in the work and also to serve the needs of these communities as much as possible.

Let us remember that 95 per cent of these activities take place in rural communities where people depend on the success of our efforts, and it is important to know their vision of the future and to take it into consideration as our industrial development progresses. We very much appreciate the information that these people provide to us. These are volunteer committees, people attend these working meetings on a voluntary basis. Their contribution is very important.

The Chair: Can we conclude, Mr. Pinette, by saying that the community participates in your decisions regarding forestry?

Mr. Pinette: It does not necessarily participate in the decisions, but their vision of the future and their needs are reflected in the files. When we analyze our projects, we take the requirements and the requests of communities into consideration.

[English]

The Chair: We also had previous witnesses saying that governments should look at encouraging the use of wood in non-residential construction. With the experience you have, both as professional foresters and analysts, and with your knowledge of emerging markets, plus the vision you have with modular homes and Kent homes — which was certainly a leader in Atlantic Canada if not the main leader — what would your comments be to use wood in non-residential construction?

Mr. Pinette: I will comment as an individual. I am an engineer as well as a forester. From a perspective of an engineer, I believe that wood is good. There is much more use that can be made of wood in building structures and in the appearance side of commercial-industrial surfaces and so on.

Wood has not really been at the heart of many architects' and engineers' training and development. There is more capability to use wood in different applications in construction, in Canada and elsewhere. Codes needed to be amended in different places to allow for the use of this in a structural way. Architects need to be educated in the value of wood for appearances and surfaces and so on, so they can make better use and value of it. I would suggest that governments need to show leadership in directing professionals in those areas to develop the codes and the applications that will make better use of Canadian resources.

There is much more capacity to use wood in construction, whether it be residential or commercial.

The Chair: I have noticed that you do a lot of research and development. There is one sector I am curious about, and that is research and development in hardwood strains. Do we have enough research and development in Canada now, or should governments and the private sector look at more research in that particular field of forestry?

Mr. Pinette: I cannot speak for the whole country. I know there are more deciduous forests in Southern Ontario and Quebec, where experience with hardwoods are more prevalent than they have been in the Maritime and in the rest of the country.

In our parts of the world, we do not have enough knowledge about the appropriate and best management of hardwood forests. We believe that new research and development, especially applied research and development in managing hardwood stands, would be useful in getting a higher value out of the hardwood forests we manage. Therefore, we would definitely like to see more research.

Mr. Brundson: We may sound like a softwood company, based on the presentation we made here, but we are a big hardwood user. I think we operate the biggest hardwood sawmill east of Montreal. Something like 35 per cent of our standing inventory of the lands we manage is hardwood. We are vitally interested in hardwood and are working with the local universities to improve our knowledge and expertise on hardwood management.

The Chair: Yet, in Atlantic Canada, we do not have research and development in hardwood, per se.

Mr. Brundson: Not to the level we would like. I would say that about Canada, too. Certainly, there is room for some increased expertise in New Brunswick. To plug a recent project, we are working right now with the Université de Moncton at Edmundston in northwestern New Brunswick, which has some of the best quality hardwood in the country, to get such a centre of excellence up and running.

The Chair: Thank you. On behalf of Standing Senate Committee on Agriculture and Forestry, we thank you for the knowledge you have shared with us. It was well presented. As Senator Plett mentioned, in meeting Mr. Irving, we will certainly send a little letter to him stating that you both did an outstanding job this morning.

There being no other comments or questions from senators, we will thank you again for sharing your knowledge with us in helping us look at the vision of the future in order to have a better forest. Canadians will be certainly prouder.

(The committee adjourned.)