NRGO Committee Meeting

STANDING COMMITTEE ON NATURAL RESOURCES AND GOVERNMENT OPERATIONS

COMITÉ PERMANENT DES RESSOURCES NATURELLES ET DES OPÉRATIONS GOUVERNEMENTALES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, March 12, 1998

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[English]

The Chairman (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): Good morning. I'd like to call this meeting of the Standing Committee on Natural Resources and Government Operations to order. We are continuing our study and consideration of the knowledge- and technology-based industries derived from the natural resources sector. This can be seen as part of a bigger study on rural economic development.

If you'll allow me to comment on this study, I think it's fairly obvious that Canada's natural resource history has been that of a hewer of wood and drawer of water, but what is unknown to many Canadians is how far we have evolved as scientists, engineers and technologists in moving past that and creating industries that use knowledge to make our industries more efficient. And that very same knowledge then becomes a product that we can export around the world.

I believe it's incumbent upon this committee to have a look at this subject area so that whatever government can do to enhance this evolution, it be done, where possible.

We're please to have with us this morning Mike Cleland, the assistant deputy minister in the energy sector at NRCan; and with him, Bryan Cook, director general, energy technology branch; along with Dr. Yvan Hardy, assistant deputy minister, from the forestry service. And with Dr. Hardy in place of Gordon Miller, who is ill, is Mary Mes-Hartree, director of client relations in the science branch.

With each meeting we're trying to cover off two separate departments, so starting with Dr. Hardy, we'll ask for a presentation of 15 or 20 minutes and then we'll move on immediately to Mike Cleland. Then we'll be able to ask questions of all of our witnesses following that.

Dr. Hardy, I invite you to begin.

Dr. Yvan Hardy (Assistant Deputy Minister, Canadian Forest Service, Department of Natural Resources): Thank you, Mr. Chairman. If you will allow me, Mr. Chairman, I will make my presentation in French and then field questions in whatever language they are asked.

[Translation]

It is a pleasure for me to accept your invitation and to join you this morning to speak of all aspects of the forestry industry. Our presentation consists of two parts. The first will be relatively short and provide an overview of the forestry industry. We would merely like to remind you of some facts that you know very well, namely that forestry is a very important industry in Canada and the leading industry in terms of exports.

It may be less clear to everyone that forestry is among the industries using state-of-the-art technology. Both in plants and in the field, forestry uses very sophisticated technology.

It is estimated that forestry accounts for from one-third to one-quarter of capital investments in industry in Canada. These investments are made in a certain number of fields. Obviously, there is the whole aspect of data processing and computerization. You know as well as I do that a modern sawmill uses a minimum number of employees. It is operated by an enormous console in a control room and everything is computerized. The industry spends approximately $25 million per year for computer hardware and software.

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Obviously, the pulp and paper industry made huge investments in pollution control in the past and continues to do so today. We regularly spend close to $250 million per year for pulp and paper processing equipment. This is on the processing side.

In the forest, the same holds true. Today, this is no joke; it requires a course to be able to operate complex forestry equipment. The procedures are computerized, ergonomic etc.

I merely want to say that this industry has history. It has had its ups and downs and, like any industry, has gone through difficult periods. However, whether it be in pulp and paper, sawmilling or further processing, forestry is a very modern industry. It continues to make large investments to stay at the leading edge.

However, perhaps less well known is where this knowledge comes from and the development and breakthroughs that have been made in Canada and which are applied here and abroad and which have practically created a secondary downstream industry.

I want to talk to you about some of our successes. You must have received the documents that we have prepared for you, and you can read about our successes. These success stories all involve cases where research conducted by the Canadian Forestry Service has been applied. We have also given you a copy of the first edition of our newsletter, Solutions. I have also brought another first, namely, a small volume called: Indicator of Plant Species of Canadian Forests. This may appear to be a small academic publication, but in fact it is very down to earth. It deals with the plant species in Canadian forests and how to use them to classify sites with a view to better development. You may wonder why I have brought it. It is because we learned yesterday that it had received the American Technical Communicators "The Best of the Show" award in a North American competition. So, this publication has achieved international recognition. Last week, we learned that the publication had been deemed the best technical communication. These two awards for the same publication are a credit to our researchers and indicate the quality of the work being produced by the Canadian Forestry Service and National Resources Canada.

I would also like to tell you about some of our other successes. The first is the Fire Information Management System. This is clearly a success story, because it is being applied across the country. This computerized system gathers all information related to forest fires and to past and current weather conditions. It can predict when and where forest fires will occur. It also enables us to better target our detection and firefighting efforts. This technology has ben sold under licence to the state of Florida and is used on the World Wide Net, as we do here in Canada. So, a foreign country has bought our technology and we are currently involved in discussions to this end with Indonesia, Malaysia, Thailand and other Asian countries.

As you can see, our successes have not been limited to research. This has given rise to a whole consultation industry, involving Canadian experts who are selling and marketing our technology.

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The second success that I would like to point out to you is in the area of plant biotechnology. The Canadian Forestry Service is a pioneer in somatic embryogenesis. It consists of reducing a seed to its basic element, the cell. Using that cell and clones from the same plant, we can develop a plant of the same quality. This is a breakthrough because it means that we can control the quality of the seeds used for reforestation. This also greatly facilitates the link with genetic engineering; it means we can now create insect- resistant plants.

Once again, at the end of the month the Department will recognize the achievements of an employee of the Quebec laboratory who is presently working at the B.C. Forest Research Inc. to adapt the technology developed in Quebec to west coast conditions. This biotechnology will be applied to a plant to make it weevil- resistant.

Another insect that you will all recall, particularly the people from eastern Canada, is the spruce budworm. We have not heard much about the budworm in the last five or six years, but those of you who are familiar with the eastern Canada forest are very aware of the budworm and know full well that in two or three years, or five or six at the most, there will be another epidemic. Our major problem with the budworm was that it spreads like a carpet, wall to wall. We have to be able to target our response and decide where we wish to control the pest and the conditions that favour success.

The researchers at our Fredericton laboratory have developed a computer-based model using geographical information that enables us to decide when to respond and under what conditions, depending on the state and quality of the forest and the progress of the epidemic. It is interesting to note that this research was carried out in New Brunswick and is not being generally used in Quebec and Alberta. Eight private companies, including J. D. Irving in New Brunswick, are now directly applying this procedure.

To continue in the same vein on the use of computer and electronic high technology, our fourth success story is the System of Experts for Intelligent Data Management. It uses satellite images that provide us with a clear and exact snapshot of what is below. Repeated readings enable us to see what changes are taking place in the forest and to bring our inventories up to date. Although this research may at first glance appear to be rather unexciting, it has given us an entry into the international field of space research, in the Canadian Space Plan. We have worked very closely with prestigious agencies such as NASA.

I must also point out the obvious link between this type of technology and a problem that concerns us all, namely, climate change and forests viewed as a carbon reservoir. We have been wondering how to give Canada the necessary tools to respond internationally if our forests were eventually to trap more or less carbon. This gives us the basic tool to do so.

NatGRID, the National Georeference Resource Information for Decision-makers is a similar project, although it is different in a number of very important ways.

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NatGRID is also based on a GIS, geospatial reference system, but it covers data related to meteorology, climate, altitude and biology. Therefore, NatGRID's uses include determining the optimum area for a plant species; for example, it can make it possible to determine the best area for planting white spruce. This tool makes it possible to simulate climate change and to determine the impact of an average increase of one-half degree in the summer on the distribution of the species and how to mitigate the impact. Development choices can be made by determining animal habitats. One piece of land cannot produce the optimum number of all desired species. Do we want partridge, wood or fish? This tool helps us to answer such questions, and is now used throughout Canada.

In conclusion, I would like to deal with another subject. Your committee is very interested in the industry, but we also have to consider the human aspect and the training of experts and researchers. This slide gives you an overview of the Department's initiatives in the forestry sector, other than our own staff. As you can see, there are 40 graduate students working in our libraries and continuing their master's and doctoral studies. Obviously, these people are always involved in state-of-the-art research.

There are 30 post-doctoral research fellowships awarded to researchers who have completed their degrees at recognized universities and are sharing their knowledge with us. We also have 14 trainees. Through partnerships established with our clients, the universities and other organizations, we have been able to create 72 research positions with funding from outside sources. There are 250 summer students; the CFS has always deliberately kept the number very high in order to create demand and also to generate an interest in forests sciences. Thirty-six aboriginal students participate in the summer program. We also provide training opportunities for 90 researchers in the Canadian Forestry Service, half of whom are adjunct professors at a recognized university.

As you can see, we are not only concerned with research development and state-of-the-art technology, but also with the human element and the development of knowledge.

I told you that the forestry industry is state-of-the-art. I should also point out that the forest industry is very aggressive. It would be very easy to forget to mention the small and medium-sized businesses that have been created through technological development and research breakthroughs. I will only name a few of them. Safer Agrochem is a western company that manufactures non-chemical insecticide soap for domestic use; this is another economic spinoff of research that we carried out. Bioforest Technologies Incorporated is an Ontario company specialized in the biological assessment of certain factors such as insects, diseases or the ice we recently experienced. It carries out major damage assessments, such as damage caused by air pollution. Multipher and Luminoc are distributing two technologies that were developed and licensed by the Canadian Forestry Service and which are marketed by two small companies, Bio-Contrôle and Comlab of Quebec. These technologies are sold throughout the world. One of the insect traps produced uses pheromones, a chemical signal, while the other relies on insects' reaction to light. Finally, Bio-Sag, a budding Saguenay company, is applying research on the use of bacteria. It also wants to apply leading-edge technology and the use of viruses to control insects such as the bud worm and the gypsy moth.

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To summarize, I think it is fair to say that forestry, in general, is a high technology sector using leading-edge technology, and a very competitive sector that needs constant support, because the competition is very stiff, and, moreover, it will continue to get stiffer and stiffer. This industry needs the sciences.

I would also like to add that Canada is exporting its knowledge. You are no doubt aware of the international forest model network, which is an extraordinary tool for exporting our technology. It is supported by a world-class Canadian consultation industry that is very much in demand. It is difficult to quantify it, but exists on the West Coast, on the East Coast and in Central Canada. It is enormously successful and our expertise is very much in demand.

Mr. Chairman, I will stop here. I would be glad to answer your questions.

[English]

The Chairman: Thank you, Dr. Hardy.

We will leave questions until after we have Mr. Cleland deal with the energy sector, because there may be questions that relate to both or either.

So, Mr. Cleland, I would ask you to make that short presentation, please.

Mr. Mike Cleland (Assistant Deputy Minister, Energy Sector, Department of Natural Resources): Thank you very much, Mr. Chairman. Like my colleague, I very much appreciate the opportunity to appear before you.

The committee has really put its finger on what is perhaps the essential question for policies surrounding the natural resource industries in Canada, which is how do we ensure the sustainable development of our resources and at the same time ensure the development of technology, which in itself becomes an important source of wealth and income for Canadians?

Copies of my presentation are with you, and if you want to flip through it with me, I'll let you know as I'm turning the pages. It's really in two parts. First there are a few points just to frame the discussion and then a series of case studies that I'll take you through.

So just to introduce the subject, the energy industry is indeed a high-tech industry, both in the sense of incorporating high technology and in the sense of being at the leading edge of developing high technology in Canada and for export abroad. That applies right across the spectrum of the industry, from resource evaluation through exploration, production, processing, environmental management throughout the piece, and energy efficiency right down to the end use, and indeed to the search for new energy resources in the sense of renewables and alternatives.

A lot of effects come from this: increasing the cost competitiveness of the industry, expanding the resource base as a result of that, reducing the local impact on the environment, reducing global impacts through lower emissions, and creating new Canadian export opportunities through the development of that technology.

In all of that, government plays an important role in working with industry to do the technological development.

Just to set the economic context for you, it's an important industry in Canada, at 7.6% of Canadian GDP. The number would actually be a little bit bigger—in fact all of these numbers would be considerably bigger—if you included things that aren't here. The industry is associated with the development of energy efficiency, for example, which is not included here, and a lot of the associated industries related to equipment and services. But the energy production sector itself is around 7.6%.

It has a smaller share of employment, because it's a very capital-intensive industry. It has a very large target for capital expenditures, and it's an important export industry for Canada.

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In terms of the further development of this industry, there are several roles for government. We're here to talk mostly about the technology support, but clearly there's a broad range of activities.

Providing the appropriate investment environment includes a number of things, such as setting the rules of the game, tax policy regulation, and trade and investment policy.

Fiscal incentives ensure that the particular natures of different parts of the industry are recognized, that the playing field is as level as possible, and that risk is recognized.

Direct support for research and development and for technology deployment is a very important part of the activities of Natural Resources Canada.

As well, a number of other activities are substantially supported by our technology activities: development of standards; technical assistance and support; and international brokerage, which is a role that has grown and a role that we play in close association with departmental colleagues in the Department of Foreign Affairs and International Trade and the Department of Industry.

I have one other point, just to frame the discussion a little bit, on where NRCan is focused in respect of science and technology related to energy. We have three laboratories, each with a particular specialty, just outside of Ottawa in Bells Corners and at 580 Booth Street.

They deal in a number of areas, such as energy efficiency in buildings, industry, and communities; and also advanced combustion. One of Canada's premier research facilities is our advanced combustion centre at Bells Corners, where we deal with matters such as the efficiency of combustion and emissions reduction. We work on alternative transportation fuels and renewables and we work on natural gas conversion.

At the lab at Varennes, just south of Montreal, we specialize in photovoltaics and in heat management, as well as having a program of renewables for remote communities.

In Devon, Alberta, just south of Edmonton, we have a program focused on hydrocarbon development, oil sands production, and heavy oil production and upgrading.

I should note just in passing that in the course of the last few years we've done a number of things: we've focused our activities more and we've also shifted them. We've moved our oil sands and our hydrocarbon activities to Devon to be closer to the industry and to the industry clientele, and to really provide a focus and a hub for a network of expertise in that area. Similarly, having identified a number of specialties at Varennes, we've continued to put activities there and indeed are just completing an expansion of the Varennes facility to further support the heat management specialty there.

All that is by way of framing. Let me make just make one point with respect to the balance of activities. In the course of these changes we've also shifted our focus very much towards activities in support of environmental objectives. We're constantly balancing the environmental and jobs objectives that are both in the forefront. But what drives it in many respects, and what really creates an important role for government, is the need to deal with environmental objectives through energy efficiency, emissions reduction activities, and support for renewable energies.

So now something in the order of 85% of the activity we do in the energy technology branch in Natural Resources Canada can be quite reasonably said to be supportive of the government's climate change activities and other environmental objectives, as well as the jobs objective that go with that.

Turning to the first of the case studies, one of our success stories, and one that perhaps isn't as well known as it should be, is what we've done in small hydro technology. For the last 20 years NRCan has been working on small hydro technology, working with Canadian companies on low-head hydro turbine and manufacturing processes, computer-aided turbine design tools, and computerized control systems.

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There are a number of important success stories. We've developed a software tool that utilizes topographic and weather data to estimate hydrologic regimes, which is a way of assessing the possibilities for small hydro development. We've also developed a control system called Hydrops, which uses data from satellite transmission and which allows for the remote control and management of small hydro sites. It allows them to be done more efficiently, making better use of the hydrologic regimes. We've had considerable success in increasing electricity generation by 5% to 10% and reducing costs substantially, and indeed affording export opportunities for Canadian companies.

We are in the process of transferring these technologies to other countries, notably China, where we have a memorandum of understanding with the ministry of water resources. We are in the process of working with them to help them more effectively and efficiently develop a wealth of small hydro opportunities. It's good for rural and remote communities in China, good for reducing what otherwise would be greenhouse gas emissions from hydrocarbon-fuelled power, and good for the Canadian companies that are exporting these technologies.

The next one is a different sort of technology altogether. It pertains to oil sands exploration. As I mentioned, we specialize in that at our lab at Devon. We have some considerable successes from working in partnership with companies in the oil sands industry: reduction of operating costs by 50%, energy efficiency increases of 35%, and environmental barriers very, very significantly reduced.

People may have noticed the spate of announcements of oil sands developments in the last year or two. These have come about for a variety of reasons, including policy changes made by both the Alberta and the federal governments, but they have come about very substantially because of the cost reductions that have been achieved by industry working in partnership with government.

It used to be that we thought of oil sands development as $25 to $30 or more a barrel. Now $15 a barrel and less is feasible. Where prices have been going these last couple of days, or last few months, puts a bit of a question mark around it, but we do have an industry that is cost-competitive, and more than cost-competitive, for example, with Venezuelan heavy oil, which is what we directly compete with.

What we have here, as I say, is a collaboration that has significantly reduced the greenhouse gas emissions impact of heavy oil production, made it more economic. A particular success story, again something you may have heard about, is that the tailings that result from the production of oil sands used to be a big issue, and still are. They used to be an intractable environmental problem. Through industry and government collaboration we've developed a technique, a consolidated sands tailings technology, which allows what used to be otherwise irreclaimable tailings ponds to be reclaimed and restored to their previous condition.

To come back to another technology altogether, the solar wall, another one where we've worked for several years with a Canadian company, Conserval Engineering Inc. they have managed to develop the most efficient solar collector in the world. It was selected in 1994 by R&D Magazine in the U.S. to receive the prestigious R&D 100 Award, which recognizes the 100 most technologically significant products of the year. This is a technology that has application in large buildings for the most part. One is installed at Canadair in Montreal. I believe there is a picture in your deck of the one that is also installed at our Bells Corners facility just outside of Ottawa.

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As it turns out, it also has other applications. We are in the process of doing a number of pilot applications in Malaysia, Indonesia and India. We are looking at the use of the solar wall for drying things like cocoa beans, tea leaves and spices. It would be a renewable energy technology with a very successful success story. I might also add that during the latest climate change discussions in Kyoto, Conserval signed a licensing agreement with a Japanese company to take this technology further afield.

You may be more familiar with enzyme technology. You may have noticed an announcement in the last few months that Iogen Corporation reached an agreement with Petro-Can to develop a pilot facility. In essence, what this amounts to—and I should note that there is an error on the deck—is the conversion of biomass into ethanol for transportation applications. Ethanol is easily produced from grain. It is much more difficult to do so from other biomass.

Iogen has been working with the NRC over the last decade, and has developed their enzyme technology to the point where partners such as Petro-Can see it as a very realistic alternative to ethanol from other sources. The expectation is that the pilot plant will be built. With any luck, there will be full production some time in the next three to five years and beyond. That will be an important contribution to reducing greenhouse gas emissions from the transportation sector in Canada.

The picture that you have is actually the transfer of the enzyme into tanks for shipment at the Iogen facility just out by the Ottawa Airport. I might also note in passing that the principal market for the enzymes that Iogen produces is, at present, for pulp and paper bleaching. This is a low environmental impact way of pulp and paper bleaching, as well as things like bleaching stonewashed jeans. It is the same technology by which as you bring biotechnology and energy together effectively as a very promising avenue for reducing greenhouse gas emissions.

Next is community energy, working with small and large communities to address their needs. There have been a number of successful projects in Charlottetown, Ouje-Bougoumou, New Glasgow, Nova Scotia, and Grassy Narrows. This is a technology that has particular application in rural and remote communities. There have been some good success stories with aboriginal communities. Effectively, by having centralized heating systems combined with alternative energy sources, you are getting maximum energy efficiency at the same time as you are using renewables. In the case of Ouje-Bougoumou, sawdust produced by the local forest industry—sawdust that would otherwise be landfilled and would be producing methane as it decomposes—is being used to displace diesel-powered energy in that community. The same technology has application in larger communities. We are also working with larger cities in Canada.

Again, there is a picture of Ouje-Bougoumou there. I might note that it received the United Nations We the Peoples: Fifty Community Awards in the category of human settlements. It was not just because of this project, but this was an important part of it.

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That's a series of case studies.

Where to from here? I think the point is that the energy industry in Canada has changed very dramatically in the past few years. We are still a big producer and exporter of all sources of energy, but at the same time, through the employment and development of high technology, the Canadian industry has become an exporter of expertise as much as it is an exporter of the resources themselves.

That's a development that has come about in part because of the partnerships that have developed between industry and government, and it's our expectation that those partnerships will remain a very important part of Canada's energy future.

With that, Mr. Chairman, thank you.

The Chairman: Thank you.

Colleagues, we're going to start with the questions, and if I may, I will ask you to try to stay on the subject of knowledge-based industries evolving from the natural resources sector.

We'll start with Mr. Canuel.

[Translation]

Mr. René Canuel (Matapédia—Matane, BQ): My questions and comments are addressed to Dr. Hardy.

We have heard about the need to develop technology and forestry techniques. I completely agree. However, Dr. Hardy has said that everything is electronic or almost electronic in the mills, and that there are very few workers.

Last year, I was a member of this committee and we discussed rural life. We said that something had to be done for the rural areas. Forests, as far as I know, are part of rural areas. Our forests are a primary resource. You push a button or two and out comes a plank. There are hardly any people left in the parishes. Go through the small parishes, particularly in Quebec, which I know the best, and you will see it. The situation is probably no better in New Brunswick. There are no more young people. Everything has been automated. Splendid! However, the other side of the coin is that the rural areas are still producing primary products and don't get any benefit.

Last year, we spent I don't know how many sessions discussing rural life. But if there are no longer any rural inhabitants in these areas, let's eliminate the word "rural" from the dictionary and get rid of it all together. This is what we're coming to.

What really bothers me is that there are no direct spinoffs or rural people. You said that something had to be done. As we know very well in my area, Dr. Hardy has been one of the spruce budworm. I even worked in conjunction with the Société d'aménagement des ressources de la Vallée de la Matapédia at that time.

I'm not making a political statement; I'm merely asking a question. Is there some way to ensure that rural people benefit directly from the primary products located in their area? Can we do something specific in this regard?

Should I put all my questions now? I have two others.

[English]

The Chairman: Ask the other question now.

[Translation]

Mr. René Canuel: It has been said that, in the past, Canada had a relatively advanced forestry equipment industry, and that now Europe and the United States are the leaders. A little while ago we heard about the upside of our activities, but now I would like to hear about the downside. How did we get behind?

There's another point that Dr. Hardy did not mention earlier. The manufacturers asked me to ask you this question because they knew you would be coming today and that I would be present at the committee. I am not a regular member of this committee. The issue concerns quotas with the United States. Is the Canadian quota being distributed among manufacturers as was the case last year? What is happening at the present time in this regard?

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The Chairman: Thank you, Mr. Canuel.

[English]

Maybe that third question is not relevant to the discussion, but, Dr. Hardy, please go ahead.

[Translation]

Mr. Yvan Hardy: As usual, Mr. Canuel knows how to ask difficult questions. This is especially true of the first question concerning the use of high technology which tends to eliminate jobs in the rural areas. I don't think that there is a complete answer to this, but nevertheless, there is a partial reply.

Mr. Canuel, I'm sure you are familiar with the example I am going to give. I know a village called Saint-Eugène, unless I'm mistaken, where things aren't exactly the way you described them. There is an inhabited model forest there. The purpose is to develop a part of the area for the benefit of the local people.

Mr. René Canuel: Not all rural areas can benefit from that.

Dr. Yvan Hardy: No, but work is being done. We are aware of the problem.

During our presentation I talked about the use of high technology, but at the same time, there is research being done on how to develop areas in a sustained fashion. One of the problems with rural life is mega-projects, if I could use that term. A company comes into a region, grabs everything, and then it moves on to another region, and so the region has to wait 40 years before it can benefit from development once again.

Inhabited forests are a model for sustainable development. One takes what the area can offer. One doesn't just take the fibre out of there; all of the resources are put to good use, such as fishing, hunting, medicinal plants and so on. Quebec is a pioneer thanks to its model forests and thanks to its government's policies on inhabited forests. So, I think that partly answers your question. I realize it's not a complete answer.

As for the equipment industry, Mr. Canuel, unfortunately I have to tell you that we lost it many years ago, back in the 1960s, when Forano and others... But, harvesting equipment and forestry equipment are making something of a comeback. People are starting to move away from the European competition. I really couldn't say just how optimistic we should be about that.

You asked about quotas. The current system provides a certain amount of flexibility for allocating quotas year-by-year. If an industry does not use at least 98% of its quota in a given year—be it small, medium-sized or large—it loses some quota. If an industry has received so many million board-feet, and it uses 96% of it, it will lose 2% of its quota, which will be put in a pot and allocated to those who request more quota and who used 98% or more of their own quota.

Mr. René Canuel: Did a lot of companies not use their quota last year?

Dr. Yvan Hardy: Yes.

Mr. René Canuel: Really?

Dr. Yvan Hardy: So, there are adjustments every year.

Mr. René Canuel: I see.

[English]

The Chairman: Thank you, Dr. Hardy.

We can come back to you, René, if you have more questions.

Mr. Wood, please.

Mr. Bob Wood (Nipissing, Lib.): Thank you.

I want to carry on with the theme that Mr. Canuel has set for us in the rural area. And I think one of the major concerns of this committee in recent years, Dr. Hardy—and you know this, because we've all been here awhile—has been the economic development of rural areas. Obviously the majority of tree harvesting occurs in these areas. I think we would probably all be a lot happier if more research and development into forestry technology were developed in the rural areas. I know that my community of North Bay would probably benefit greatly—and I'm sure others would as well—from partnerships between local industry and natural resources that are designed to develop new technology.

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I guess my question is really this. With budget cuts to your department, and with the fact that much of the natural resources department is now located in urban areas, are deliberate efforts being made to do research and development in more rural areas of Canada? By saying this, I don't mean just testing of new products and technology, I mean the actual creation and development of this technology.

Dr. Yvan Hardy: I believe, Mr. Wood, the perception you have doesn't reflect the reality. Sure enough, the labs are in urban areas, but some are more or less urban, such as the Soo, Fredericton, and so on. Even Quebec City is very close to the forest. All of them are fairly close to the forest.

There are always two phases to forest research. At this time of year you will find most of our staff within the confines of these labs, but come the month of April, and May, June, and July, you'll find them outside the labs, in the rural areas, where the research is actually taking place. We have crews of people criss-crossing the country, most of the time in the rural areas, where the actual research is being done.

Last week I was in Sault Ste. Marie. Some of my people—I'm still learning, actually—were showing me some of the work they are doing on forest fire research in the Northwest Territories, to determine the energy and so on. It's actually done right there. Not only that, but they are using local manpower as assistants, using local supplies, and so on.

Of course we're limited by our budget. In terms of economic development, our budget is far from being sufficient to keep communities going. But we do have a presence, and the problems we're trying to solve are problems that are associated with sustainable development, maintenance of a good forest, and multiple use of these forests.

Mr. Bob Wood: With the cuts to the forestry department and the offloading of many responsibilities to the provincial natural resources departments, I personally, anyway, am concerned that you don't really have the resources, or even the presence within the forestry industry, to make a significant contribution to research and development in the industry. Perhaps you could tell us in concrete terms the number of people within the forestry sector who are devoted to research, and maybe how many people the forestry department has lost in the last couple of years.

Dr. Yvan Hardy: You have many questions in one there.

Offloading to the provinces—I don't believe we did that. The only thing that, during program review and the period of reductions, might be associated with offloading to the provinces is what we used to call FIDS. That was the forest insect and disease survey, which was done by the federal government for traditional reasons but was in reality in provincial jurisdiction, the same way as forest inventories are. Some provinces are still in the process of trying to adapt to that.

Mr. Bob Wood: What about the FRDAs? What about the forestry development agreements?

Dr. Yvan Hardy: These were, as you said, development agreements with the provinces, but they were not a research activity per se. If there was some research, it was research that was an extension of major activities such as reforestation, for instance, and major activities such as woodlot management. It was a government decision for economic and even political reasons, because of overlap with provincial jurisdiction, to get away from that.

I don't have more comments than that to offer on that particular one.

Mr. Bob Wood: But how many people have you lost?

Dr. Yvan Hardy: We lost around 400 people. The Canadian Forest Service was more or less a 1,300- or 1,400-person organization. It's now a 900-person organization. But you noticed in one of the slides I showed that there's a new breed of people there, so maybe half of that slack has been picked up.

• 1200

The other question you asked was how many people are dedicating themselves to research? Out of the 800 to 900 who are ours, plus the additional 1,000 fellows and so on, 75% of that workforce is dedicated to research. So that's still a fair chunk of people—750 people and $75 million dedicated to R and D on an annual basis.

Mr. Bob Wood: Are they—

The Chairman: Bob, is this a really short one? We can come back to you.

Mr. Bob Wood: Yes.

We have an opportunity to go to Quebec, as you know, Dr. Hardy. Are most of the research people located in Quebec or in B.C. at Forintek or wherever? Where are they most generally located?

Dr. Yvan Hardy: We have five locations and they're about equally distributed: Victoria, Edmonton, Sault Ste. Marie, Quebec, and Fredericton.

Mr. Bob Wood: Okay, thanks.

The Chairman: Thank you, Mr. Wood. We can come back to you if necessary.

Mr. Chatters.

Mr. David Chatters (Athabasca, Ref.): First I must apologize to our witnesses for being late. I had to meet with one of the private sector companies you were speaking about when I came in, which is employing the kind of technology you were talking about in heavy oil production.

I have a couple of questions.

First, I've seen some of the tremendous developments in technology that have taken place in natural resources, and it seems to me we have made tremendous progress in energy and forestry in a number of areas, generally in partnership with the private sector, and then the private sector takes that technology and basically uses it in Canada and sells it around the world. Is there ever consideration given to the government retaining some kind of ownership of that technology and getting a return on investment on that technology, particularly when that technology is sold in other parts of the world? That is one question.

Secondly, there's been so much talk about this Kyoto initiative and energy efficiency and alternative energies, and I think it's a general concern of the public in Canada what kind of cost we're looking at in some of these technologies. In the solar wall in the Canadair plant, for example, could you tell me how the cost per BTU of energy produced through the solar wall compares to the cost per BTU of natural gas energy produced, for example, to give an idea of what kind of cost we're looking at?

Lastly, you have the list of government's roles in natural resources, and I certainly wouldn't argue with the list here, but one of the things that seems to be missing, which has certainly been part of the government's role in the past, is a direct investment in and a direct ownership of natural resource products. Is that no longer a role for government in Canada, or is it something that just isn't on the list?

The Chairman: Thank you, Mr. Chatters.

Mr. Mike Cleland: I'll go through all three of your questions, but with respect to the one on ownership of intellectual property, I'll ask either my colleague Mr. Cook, or perhaps Dr. Hardy, to add some things.

As a general proposition, the government policy for the last few years with respect to the sharing of the fruits of collaborative research and development is to ensure that the companies with whom we work are able to exploit the commercial possibilities and therefore to ensure that they have access to that intellectual property.

That said, we still retain rights. We are able to use that technology and take it forward in other applications. But it is quite a deliberate policy to ensure that the private sector partners are in a position to take that forward, simply based on the fact that they're better able to commercialize it. There's always a question of getting the right balance in terms of the public good that flows from the use of public investment versus the private benefit. We work on that balance on a case-by-case basis.

• 1205

In terms of the cost per BTU, I don't have that offhand. We can get that for you. Really, the question is whether the payback on a solar wall makes it an economic investment. In the applications to which I referred, the answer is yes, but we'll get you more details on the payback.

Mr. David Chatters: Thank you.

Mr. Mike Cleland: It's the sort of thing you would do if you were in a retrofit or a new building situation, for other reasons. Putting a solar wall in place in those circumstances is clearly an economic proposition.

With respect to the government role in direct investment, I would have to say that broadly it's something we don't do any more. I guess you'd have to go back to pretty much a decade or more ago, when that was clearly an important part of the government's energy policy, and for that matter, of all governments around the world. I think we've found since then that it's better to leave those sorts of investments in the hands of the private sector. Mainly our role is to ensure appropriate rules of the game. In fact, we are most directly involved in facilitating technology development.

Somebody else may want to add something on the intellectual property issue.

Dr. Yvan Hardy: I can say a few words.

In reality, we're changing. I guess it's fair to say that in the past, government organizations, at least the ones I know of, didn't benefit very much from their own findings. But we reorganized, and in our case, one thing was a network to work within partnerships. Second, at the same time, we created a group, and I now have a group within headquarters that is dedicated to marketing, licensing, patents and cost recovery.

Mrs. Mes-Hartree will give you a few more details.

Ms. Mary Mes-Hartree (Director, Client Relations, Science Branch, Department of Natural Resources): In the area of intellectual properties, certainly, the government owns the intellectual property of any of the research that we do. Only when we develop partnerships with industries or provinces or universities do we look at collaborative agreements. Before we initiate a project, we'll determine who gets the rights to the intellectual property. It's usually a joint ownership that we're looking for.

Some of the examples we've given are actually licensed technologies, such as the fire management system. We do license it to the State of Florida and the intellectual property rests with us. We do have biotechnology agreements, for example, with B.C. Research Inc. That's also under a licensing and collaborative agreement. In fact, there is another area, our publications. This is actually still owned by the Government of Canada. We do sell this and we get the profits from the sales.

But there's also an issue in that if we're looking at a knowledge-based economy, we have to be careful that not all of our knowledge is inaccessible to the general public. There have been cases where we want other people to use the knowledge and the data that we generate in the government, so it behoves us to make it widely available to the public. That's actually one of our initiatives now: how can we get other people and people within Canada to benefit from the data that we produce in creating new technologies and new information that they can then sell? It is always a balancing act, but we're quite cognizant of that.

The Chairman: Thank you. Can we leave it at that for now, Dave?

Mr. David Chatters: Sure.

The Chairman: Okay. Roy Cullen, then Yvon, and then Reg.

[Translation]

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you very much, Mr. Chairman, Dr. Hardy, Ms. Mes-Hartree, Mr. Cleland and Mr. Cook.

[English]

First of all, it's refreshing to have a department come here to talk about results and outcomes. Instead of talking about what's going in, you're talking about what's coming out.

I have three questions for Mr. Hardy and two for Mr. Cleland. I'm not sure if we'll be able to get to them all, but—

The Chairman: Make them short ones.

Mr. Roy Cullen: Yes.

Mr. Cleland, I put the questions on the energy issues to the department at the last meeting, so they're on the record. Maybe we could follow up on that personally or we could make the questions available if we don't have a chance for a second round.

• 1210

Mr. Hardy, on bio-pesticides, some excellent work was being done in Sault Ste. Marie by the Forest Pest Management Institute. Bio-pesticides offer a huge potential as a substitute for chemical pesticides in the forest industry and agricultural sector. Where is that now, and where is that going? Has anyone picked up the slack? I gather the FPMI in Sault Ste. Marie is not in operation in this area, but perhaps you could clarify that.

On the question of value-added wood products research, it seems to me the potential, in particular with global warming and climate change, for engineered wood products building systems, which have the potential for huge energy efficiency.... It's a niche that.... I think for some time it has been discussed in Canada how we could promote that side of our wood products business, not as a panacea but as an area with high potential. I'm wondering what the Canadian Forest Service is doing, what other stakeholders are doing, to advance this agenda.

Third, on carbon sinks, could you describe for us the real potential, on an emissions trading basis or some kind of trading arrangement, for us to promote carbon sinks as a way of demonstrating a commitment to greenhouse gas reductions and climate change? You could perhaps talk a bit about the research on this. Someone out of Alberta said the carbon sink case is overstated. I gather there's a timing effect in terms of the age of the forest.

Perhaps you could elaborate on those areas. Thank you.

Dr. Yvan Hardy: Your perception about FPMI is half right, half wrong. What we had in the Soo was two different institutions with two different administrations but under the same roof, and we unified them into one administration. Basically the work FPMI was doing on bio-pesticides still goes on.

Since that time we have scored a couple of successes. One was with commercial production of virus against the gypsy moth. That one is a plus.

We are actively working on two candidates now. One is a virus; T3, it has been christened. It's an improved virus that is active against the spruce budworm. We also have—I use the jargon—a recombinant virus against the spruce budworm. Both of them are being developed in parallel. The outlook is that it's promising, but with that kind of research you have to take it one step at a time, for all the reasons you can think of. First, it is complex and difficult. Second, there are the ethical and risk factors you have to take into consideration. But we do have good candidates there.

On value-added, I had some regrets about not having mentioned that in my presentation. I wanted to keep it as brief as possible. We not only collaborate with Forintek, which is doing most of that work on our behalf and on behalf of the solid wood industry, but support it very closely.

There again, there have been some very interesting breakthroughs—for instance, acceptance of Canadian standards in the Asian or Japanese market; the use of Canadian structural standards for housing. It opened markets because, as you can imagine, the Japanese.... I don't know if I mentioned that. We used to call it, at least in a friendly manner, the “shake and bake” project. It submitted our structural standards to earthquake and fire tests in Japan to see if they meet their standards, and they do.

• 1215

Carbon sink is a very complex one, and I've tried to simplify it as much as I can. Canada is blessed with an immense reservoir of carbon with our forests. We have an immense forest, and that forest is more or less intact in terms of forested surface in the country. If you remove the land we're using now for urban reasons, transportation and agriculture, we more or less have the same forested area that we had a hundred years ago.

The Kyoto protocol talks about the situation in 1990. In 1990, we had a hell of a lot of forest in the country. Our potential for sink, credit exchange and so on will rest with our ability as a country to enlarge our true afforestation, to enlarge our forest domain. Since our forests occupy probably 95% of their potential range in this country, the other 5% is still huge because we have a huge country. But if you look at a country such as New Zealand, for instance, which was—and don't quote me on this—wise enough to get rid of its forests a hundred years ago, most of the natural forests in New Zealand are gone. They can afforest the whole of the country, so there is potential for enlarging their sink. In other words, they have a very small reservoir but an immense potential for sink.

In terms of research, we have this Edmonton-based climate change network that we have selected. It's enlarging, and along with my colleague Mike here, I am part of the overall government file. We're definitely looking at our research efforts and we will reinforce many of its aspects.

What Dr. Apps is finding out is that if we take the Canadian forest as a whole, because of the very northern forest—it's the one that's not under management, and it's very old and subject to huge forest fires that are not controlled because the costs would be terrible—in some years this becomes a source. If you look just at the managed forests, the ones that are accessible and where forest fires are controlled, the ones that are harvested but are reforested at the same time, they are a sink. But those forests have had to recover from huge outbreaks such as the spruce budworm, which hit us between the 1970s and 1985 or thereabouts. The recovery is done now, so it's mostly a sink.

The Chairman: Is that all for now, Mr. Cullen?

Mr. Roy Cullen: Pretty much.

The Chairman: Mr. Godin, and then Mr. Bélair.

Mr. Yvon Godin (Acadie—Bathurst, NDP): It's nice to see that we have forty minutes left. There's almost nobody left here, so we're going to have a lot of time to ask our questions.

[Translation]

First of all, I would like to thank the two assistant deputy ministers who are here with us. The questions I will be asking are important to me, to my riding, to the region and to the department that I am the critic for.

[English]

The Chairman: Certainly on this subject, though, right?

[Translation]

Mr. Yvon Godin: Yes and no.

[English]

I want to be clear about one of them, and I want to ask Mr. Cleland a question first. That question is very short, and after that we'll see if we're on the subject or not.

Is natural gas under your department?

Mr. Mike Cleland: Yes, it is.

Mr. Yvon Godin: I see in your report that you don't talk about it, but I want to talk about it. My question is on that subject, so I just want to make sure I'm on track.

[Translation]

I will speak in French, because I'm more comfortable in French. I am specifically interested in the two goals you set in the energy field, which are to develop an integrated action plan to cope with climatic change, and to make a significant contribution to job creation and economic growth in Canada.

• 1220

Mr. Cleland, does your department have a mandate to invest in a region's infrastructure so as to create jobs and help offset the greenhouse effect? What role does the Department of Natural Resources play in the development of natural gas on Sable Island? Is the department looking at the possibility of building a secondary pipeline in northern New Brunswick leading to Quebec so that Canada's natural resources benefit the largest possible number of Canadians?

My next question is for Dr. Hardy. Sorry, you can run but you can't hide. I'll be asking you a few short questions, but I think they're important. You were telling us about the spruce budworm. We had that problem in New Brunswick, and I distinctly remember what happened in the time of the Hatfield government. We could see the planes from our house. We lived through that, and it's disturbing to hear that within three to five years, it will be coming back. I thought that some studies had been done in Sault-Sainte-Marie on biological control. Do you think that these studies will be finished in time so that we can use biological controls against the spruce budworm and avoid using chemicals if it comes back to New Brunswick? You said that the J.D. Irving company was currently using a form of biological control. What are Repap and Stone doing?

You also mentioned reforestation. There is a major question in humanistic terms. When a forest is clear-cut, our first thought is reforesting, with softwood such as spruce, which will one day go to the mills. But deer don't feed off spruce. Has anyone prepared a plan to determine what is to be cut and what is to be replaced and then harvested once again?

Last question. I think that no one has ever touched the native issue with a ten-foot pole. You say that you are present, and that you are promoting sound forest management. And now, all of a sudden a major decision just came out in New Brunswick that affects aboriginal people: from now on, they can go out and cut down trees in the forest. You would think that since they have won this match, they can start cutting without anyone bothering them. What is the federal government doing about training? What responsibility does it have in this area when they are told that they can go out and cut down trees in areas where the law allows them to? What's being done to help them and to make sure that things are done right? These are my questions.

The Chairman: Thank you, Mr. Godin.

[English]

We'll see if our witnesses feel qualified or not to answer some of those.

Go ahead, please, Mr. Cleland.

Mr. Mike Cleland: I'll ask my colleague to talk about what we do with respect to natural gas, particularly in the area of research and development, and then I'll come back to the question of Sable Island and our role with respect to pipelines, if that's agreeable.

Mr. Bryan Cook (Director General, Energy Technology Branch, Department of Natural Resources): Thank you.

With respect to natural gas, we have a major consortium involving a number of large companies looking at the conversion of natural gas to a variety of value-added products both in the fuels and petrochemicals business. It's a successful consortium.

Just by way of an aside, the consortium is featured as the lead article in the current edition of Scientific American. We are leading in the natural gas business from its conversion point of view.

We also have a substantial investment in the utilization of natural gas in things like residential home heating, ventilation, and cooling systems. At the domestic and commercial end use point we're doing quite a bit of work in natural gas.

The other point is that we're also doing quite a bit of work on efficient combustion of natural gas, all the way from your home furnace to major industrial and utility boilers.

Mr. Mike Cleland: In the matter of natural gas development and natural gas pipelines, the department's role is actually very limited. In the case of Sable Island, our primary role was facilitating a joint review process, but the review process itself was undertaken by the National Energy Board working in collaboration with the Government of Nova Scotia and the Nova Scotia offshore board. Once that process was up and running, it was the department's job simply to step back and leave that with the regulators, who then determined the outcome—and of course you're familiar with the outcome—based on the market support and the other aspects surrounding the project.

• 1225

It is not the government's policy to get directly involved in the development of energy projects or energy infrastructure. In fact, since 1994 it's been the policy quite explicitly to not be involved in those sorts of projects.

The Chairman: Do you want to move to the forestry questions, Dr. Hardy?

Oh, I'm sorry.

Mr. Yvon Godin: It's just that the statement the government has made is that the pipeline in Sable Island will benefit all Canadians. In terms of Moncton to Saint John to Boston, where are we? We are Canadian and it's not coming through.

Mr. Mike Cleland: Yes, that's obviously a difficult question.

Mr. Yvon Godin: Especially when you're in between and you don't have it.

Mr. Mike Cleland: Yes. You'll recall that in the era of the late 1970s and early 1980s, when the government was involved in direct investment in energy infrastructure, in fact the government supported the extension of the trans-Quebec and maritimes pipeline to Quebec, and subsequently there was a government investment in the Vancouver Island pipeline. But as I say, the policy since then has been to avoid those direct investments.

The point there is simply that on the face of it—and this is demonstrable—a good functioning of the market with an objective regulator has been much to the benefit of all Canadians, including Canadians in Quebec. Most of Canada is now served or will be served within the next couple of years with gas. I would have every expectation that it won't be very long before the economics of the projects will support the completion of the network. But the policy of the government is to leave that in the hands of the marketplace.

The Chairman: I don't think we'll ever get a perfect answer.

Mr. Yvon Godin: That's right. As I just said, when you finish it here, it's not over yet.

The Chairman: Maybe you can answer on the forestry and then we can move to Mr. Bélair's question.

[Translation]

Dr. Yvan Hardy: The first question was about the spruce budworm. When the epidemic begins, we'll be taking a totally different approach this time. I'm sure that the epidemic will happen, because we have never escaped it. There are three per century, and they last 15 to 20 years.

I told you about the decision-support system. This system was developed so that we could target our efforts better. Until the last epidemic, we had very few ways of knowing whether we should spray in one particular spot rather than in another. We developed a tool to help us make these decisions. So, we can target our efforts better and work in areas where it's worth it. That's the first area where we've made progress.

Secondly, there are no longer any chemicals that have been approved in Canada for use against the spruce budworm. We will not be able to use fenitrothion, which was our main tool in New Brunswick and other places, during the next epidemic, unless we get a special permit that could be granted for a very specific emergency, for a one-year period.

On the other hand, other tools have been developed. The first one, which is our first line of action, is BT, bacillus thuringiensis. It has been approved and improved, and is currently going through trials. It's a bacteria that is subject to the weather. Some varieties are more resistant to cold, or more resistant to ultra-violet radiation, or can be produced less expensively. So that is one tool.

We also have semiochemicals. They simulate the natural products of insects, such as hormones, and at present they have been approved temporarily. We probably will be able to use them regularly.

As for the companies, I will only mention Irving. Repap is on the list. Eight companies in New Brunswick have adopted this system.

• 1230

As for reforestation and seedlings, I think that you raised a good point. We tend to replant forests with commercial species such as spruce. In Canada, we do not create gardens. In Canada, particularly in ecosystems such as the Maritimes, Acadian forests and the forests of the Lower St. Lawrence region, when we plant trees, we plant about 2,000 specimens per hectare. One hectare of forest contains between 20,000 and 25,000 different shoots. At first, we do some work in the reforested area, but quite quickly, once the seedlings begin to take root, the natural vegetation fills in the holes, which creates an environment that is much more hospitable for animals such as deer, hares and so on.

I know of very few stands in Canada where you can see from one end to another between the rows. Generally speaking, Mother Nature takes over quite quickly.

You're smiling. You seem to have had a different experience.

Mr. Yvon Godin: I will check again, because that's not what I've seen. No comment. If that's what you say, I'm very pleased.

Dr. Yvan Hardy: Generally speaking, that's what happens. I'm not saying that there are no exceptions, but in general, that's what happens.

Shortly after harvesting, preparing the site and planting the seedlings, it's like the situation you describe. The next year, there are a lot of stump shoots and sun plants that start growing. Quite often, we have to go in with machinery or we have to spray so that the seedlings can take root. Once the seedlings grow above the level of the snow, in eastern Canada, we don't do anything. We let nature take its course, because the tree has started to grow. One hectare of forest has room for 20,000 shoots of that age. So, the other 18,000 will be mountain maple, white birch, aspen and so on, species that in general are good for wildlife.

We could continue the discussion, show you some examples and put you in touch with our scientific people if you have any other problems.

Mr. Yvon Godin: I will check with the department, and perhaps I could... I'm talking about trees this high. You don't see a lot of aspen or birch in there.

Dr. Yvan Hardy: I agree. We could...

Mr. Yvon Godin: Yes.

Dr. Yvan Hardy: It's always hard to talk about specific cases when you are far away.

The Chairman: Thank you.

Mr. Yvon Godin: Thank you.

[English]

Dr. Yvan Hardy: There was another one, the one about natives.

[Translation]

What you said about the situation in New Brunswick is not exactly so, since it's currently being appealed and the decision about the aboriginals could be overturned or modified. However, what you describe is correct. Several native groups have gone into the forest and are harvesting in one way or another.

What are we doing? Several things. The Canadian Forestry Service has a First Nations program, and the goal of this program is to develop skills and entrepreneurship. It's a fairly modest program, which does not reach everyone, but it does exist. There is a small group of local natives in each province who determine which priority will be funded, but the focus is always on developing knowledge and skills.

Mr. Yvon Godin: When I said that they could appeal it, perhaps I didn't mention everything, but I do know the entire story.

Dr. Yvan Hardy: Yes, I know that you know it.

Mr. Yvon Godin: It is in my riding.

Dr Yvan Hardy: I know that you know it very well.

The Chairman: Thank you, Yvon.

Mr. Yvon Godin: Thank you.

The Chairman: Mr. Bélair.

Mr. Réginald Bélair (Timmins—James Bay, Lib.): I would like to go back to a comment you made, Dr Hardy, in answering Mr. Wood's questions.

• 1235

You talked about constitutional devolution. As you know, I have been on this committee for 10 years and I have never agreed with that. I will never agree with it. I would like to talk about the consequences of this offloading to the provinces and to the forest industries.

To give just one example, the timber rights in Northern Ontario have risen from $8 to $23 a cubic meter. This is one of the consequences of offloading because, at the same time, the forestry development agreements with the provinces have been cancelled, as has the 75 million dollars that used to be given to Ontario.

Today, because of this offloading, the industries have to do their own reforestation as well as meet the stunning increase in timber rights. We are therefore less competitive, with the result that producers and processors have lower profits.

I am coming to my question about this offloading that has resulted in the Canadian forest service limiting its promotion of our products almost exclusively to the foreign sector and to research and development.

My question is a very simple and direct one. I have already asked it, but I have never had an answer. Is there a process for transmitting the results of research that can benefit, and I mean benefit, our pulp and paper mills and our lumber mills? Our mills have to get something out of this because they are paying high income tax to the government of Canada.

Is there such a process? I have never heard of one. I have never seen an example either. I am starting to think that the results of this research trickle down to the industries in a concrete way through the Canadian Pulp and Paper Association, but I am not sure, and in my particular case, through the Ontario Lumber Manufacturers Association. Is it these two associations, working with the government, that are passing the research results on to the industry?

Dr. Yvan Hardy: Should I answer the first question?

Mr. Réginald Bélair: No, not really.

Dr Yvan Hardy: I do have a comment to offer. I think that we will have no trouble agreeing that the government is investing less money in forestry. That is clear. Even if we tried to present things in some other light, there is about 150 million dollars a year in federal money that is not there any longer.

Have timber rights in Ontario increased directly because of that? I really doubt it. The industry's obligation, though, have increased because of it; that is an almost direct effect. Under the old agreements, much of the reforestation was done by the province. The industry washed its hands of it. Today...

Mr. Réginald Bélair: With financial participation from the federal government.

Dr Yvan Hardy: That is correct. Today, there is no more federal financial participation. With respect to timber rights, the changes have happened differently. The provinces in general were looking for additional revenue, and also...

Mr. Réginald Bélair: To compensate, Dr. Hardy.

Dr. Yvan Hardy: Reforestation was where much of the compensation was given. The forest industry has taken responsibility for that. Neither the federal nor the provincial governments were paying.

The issue I want to raise is that of softwood lumber and the United States. Timber rights have increased greatly in response to pressure from the Americans. They claimed that cheap timber tights constituted a subsidy to the Canadian forest industry, which made it more competitive than the American forest industry. Both these factors have probably played a role.

• 1240

With respect to technology transfer, you have never had a clear answer because I think there is no clear way of explaining it.

I can give you a clear answer on the final result. The final result—I can say this here publicly and I could say it in front of 2,000 people—is that the techniques, technologies and methodologies used in the Canadian forest industry are almost entirely derived from research carried out by the Canadian forestry Service. Look at the fire protection services, its insect control techniques and its decisions-support system, and I could name many others.

The final result is coming, but that is where things become quite a bit more confusing. Each of our labs now has a liaison unit. They do liaison work. Their mandate is to go to the clients, work with them, pass on the information and put that information into understandable language. Some promotional documentation has been provided to you.

To do more along those lines, we are working directly with users. We are now linked through a network. For almost all our research projects, we have industrial partners. The project comes into being because there is a problem. The industrial partner gets involved. It participates in the problem and the solution.

Mr. Réginald Bélair: Are you talking about our local industries when you speak of partners?

Dr. Yvan Hardy: I am talking about forestry associations. I am talking about the Canadian Pulp and Paper Association. I am talking about the Ontario Forest Industry Association, the QFIA in Quebec and the COFI; I am talking about the industries themselves, MacMillan Bloedel, J.D. Irving, Kruger. If you take any one of our research projects, there are one, two, three or four of these partners involved and applying the results as they come out. Our researchers give talks. We use various ways of promoting our work.

I currently have a small working group and I am asking these people to find even more aggressive means to do this. We are using the Internet more and more. We are thinking about having a sort of road show once a year. We have people giving seminars on applied cutting methods. In the west, we have a team that has completely changed the forestry operations in the Rockies, because of one insect, the pine engraver. They are doing a road show. They are doing sessions with the industry and with users.

There is no cut and dried answer, because there are many ways of going about it. We are not always as effective as we would like. But ask the forestry companies. They probably do not know where their technology comes from, but they are using our technologies.

Mr. Réginald Bélair: Yes, I will do that. Thank you.

[English]

The Chairman: I would like to thank our witnesses. I believe, as our colleagues do, this study will lead us to some conclusions that will assist the government of the day to encourage knowledge-based development in the natural resources sector.

With that, we'll adjourn for today.