Good afternoon, everybody.
We're going to get under way here. I'll ask everybody to take their seats.
We have three witnesses in the first hour. In the second hour, we're going to get into some committee business.
I'd like to thank our witnesses for joining us today. From the Canadian Wood Council, we have Peter Moonen. From Cobden Strategies, we have Catherine Cobden, and from Conifex Timber, we have Sandy Ferguson. We're grateful to the three of you for being here.
The process is that each of you will be given up to 10 minutes to do a presentation. Once the three of you have completed your presentations, we'll then open the floor to questions from around the table.
We have very tight time limits. Presentations are 10 minutes. Questions range from five-minute segments to seven-minute segments. If I interrupt you or one of the people around the table and tell you to stop, it's not because I'm rude but because I have to.
You have translation devices, if you need them. You may be asked questions in French or English and of course, you're free to deliver remarks or answer questions in either official language.
On that note, Mr. Moonen, the floor is yours.
Thank you for the opportunity to meet today. My name is Peter Moonen. I'm the national sustainability manager for the Canadian Wood Council. I'm not sure if you're familiar with the wood council, but we essentially provide technical support to designers and architects, and we represent the industry to that sector. Our principal job is to inspire, enable, support, promote, and recognize excellence in wood design.
I'm going to start with an area that I'm sure you're very familiar with: environment. We're facing a lot of different environmental imperatives: forest management, climate change, carbon footprint, and energy efficiency. I'm going to concentrate on where wood is, but I'd like you to think of a very simple acronym that I think demonstrates the attributes of wood. It's 4S: sustainable forestry, sink, sequester, and substitute. Those sum up the values that wood offers to the built environment.
Canada takes great pride in sustainable forestry. That's the first S. We have more certified forests than do the next four countries combined: Russia, U.S., Sweden, and Australia. I think you all know that our forests are sustainably managed, but they also act as a carbon sink. That's the second S. I know there are many researchers in the CFS who evaluate the carbon emissions from all sources, including forests. I work with them on a fairly regular basis.
The third S is “sequester”. When wood is used, it takes the carbon that those trees put into the wood and locks it up for as long as the wood remains intact. That's an important factor when we're designing our structures. I'll get into the fifth area, time, in a minute or so. By designing enduring and adaptable structures, we can actually extend the carbon cycling so the CO2 that is stored in the wood is kept out of the atmosphere.
The fourth S is “substitute”. You can also consider that to be avoided emissions, which is just as valid as buying an electric car to avoid future emissions. When you build with wood, you avoid the emissions that might have come about from a more carbon-intense material. There's no perfect material, but I think wood offers some very significant opportunities in the carbon realm.
The other aspect that is often overlooked when it comes to carbon is the matter of time. Since greenhouse gas effects are cumulative over time, both impacts and benefits accrue over the long term. I'm sure that most of you have a retirement plan. You can look at the carbon benefits or the carbon impacts in the same way as the money that we put into a retirement plan to grow and accrue over time. It's the same with carbon impacts or the carbon benefits. When we make our carbon savings is just as important as how we make them.
Wood is an incredibly interesting and wonderful material, and it enhances the abilities of architects, designers, and builders to build high-performing buildings. I'm going to focus most of my attention on the structural use of wood and the buildings into which it goes.
It can reduce energy use because of its thermal properties. It doesn't transfer heat very well. When you're designing a high-efficiency building that is trying to achieve a passive house level or net-zero energy, that thermal transfer is important. I think you've probably all put your hand up against a window in the winter and found that it's cold. If you put your hand up against wood, it's probably not cold because it doesn't transfer that heat. That's going to be important, because, as building codes move towards net-zero, passive house, or super E, we're going to have to pay attention to those little details about things like how we make our building envelopes airtight, how we make them thermally efficient, and how we design and build buildings that are comfortable, functional, and healthy to live in. Wood plays a role in all of that.
The carbon aspects of wood are being recognized by governments all around the world. I know that the national building strategy is recognizing carbon. The City of Vancouver has a carbon footprint requirement so that any new development has to report its carbon emissions, not just its operational carbon. This is in an effort to achieve net-zero carbon and net-zero energy.
We're undergoing a huge change from rural to urban, and that is putting a lot of pressure on cities. It's causing densification. It's causing change in how we build, where we build, and what we build with, so it poses a lot of challenges to the construction sector, which is arguably the largest industrial sector on the planet.
Canada is facing trades and skills shortages. Speed of construction is an issue, as are cost, precision, and building quality, which are necessary for high performance. A lot of those things can be addressed by prefabrication, which is an area in which wood excels in Europe, and one that is growing in North America and being recognized by contractors as an important component of future construction. As I say, it poses opportunities for wood.
I have some materials here, which I'm going to pass around. Aside from one product, they're all manufactured in Canada and they all present different opportunities for either the structure or the building envelope.
These first two products are part of heavy timber. There's laminated veneer lumber and TimberStrand, which is another form of an engineered wood product. They are increasingly being used in tall wood to be used in place of steel or concrete. They're very fire-resistant. They have been used in mid-rise construction around the country and in innovative green buildings at UBC and in Ontario, and we're seeing many more mass timber products being used.
I have three items that are actually non-structural products. They are wood fibre-based insulation. When I first heard of that I thought, “Why would you put that in a wall? It's just going to burn.” If I had a propane torch here, I could try to light the product, and it would not burn. It would char, but it would not burn.
There is research being done at FPInnovations, and we're putting this into buildings across the country, because it's not only a wood product but also a very efficient insulation product.
Building envelopes are going to be increasingly important. Wood plays a great role in those. There are many passive house buildings and mid-rise buildings in Vancouver that use wood because of its thermal properties and its ease of fabrication. It can be precision manufactured. It's a superlative product for what we will be trying to achieve over the next little while.
What's needed? One of the things we find most frustrating is that architects and engineers are not informed about wood. They don't take it in school. We need to incorporate that knowledge into learning for existing practitioners and contractors as well as for our future professionals. To my mind, every architect and engineer and contractor should have a comprehensive understanding of materials so that they know how they can merge, how we can have composite systems. To do otherwise is sort of like teaching a gourmet chef how to cook but not teaching them anything about vegetables. I think it's important that we educate our designers if we want to have these buildings.
There needs to be some research into advanced design on prefabrication, on understanding how materials can be combined to make the most efficient structures.
We also need to raise our skill levels in prefabrication, in hybrid design systems, and in retrofitting and renovation. The biggest change we can make for energy performance is to retrofit existing buildings and not just build all new buildings to net zero. That's a tough task, but I think it's an area where wood can excel because, again, of its thermal properties and its ease to be machined to tight tolerances.
We also need to have performance-based material evaluation in our codes. The wood today is not our grandfather's two-by-fours. It's very different. As you can see, these are products that weren't around 20 years ago. We need to upgrade our building codes to reflect the true performance capabilities. Don't put wood in a situation where it's going to fail, but recognize that it can do more things than we thought 20 or 30 years ago.
One hundred years ago most of Canada's buildings were based in wood. At the turn of the century, about 10 years after the Eiffel Tower was built, people started building with steel. In the thirties they started building with concrete. Michael Green is a friend of mine, and he's always saying that wood is undergoing a renaissance.
I think the 20th century may have been the century for concrete and the 19th century might have been the century for steel, but I think the 21st century is going to see the rise of wood, and I'd like to see that happen. I think Canada is in an excellent position to be a world leader in that.
Good afternoon and thank you for the opportunity to be here.
This is a topic extremely dear to my heart. My name is Catherine Cobden. I come by my interest in this topic quite honestly. I was born and raised in the shadow of a pulp mill in Espanola, Ontario, very close to Sudbury. I became a chemical engineer and spent many years in various communities right across our country that are 100% dependent on the forest industry. To say I'm passionate would be an understatement.
Prior to my current role, I was the executive vice-president of the Forest Products Association of Canada. I led a number of studies that investigated the way to create new secondary products and supply chains for the industry, which are very germane to the topic at hand.
Now I am president of Cobden Strategies Inc., a boutique consulting firm. In that capacity, I am pleased to work with innovative forest products companies and many other companies in other industries, like steel, that are interested in pursuing the opportunity that incorporating forest fibre-based materials presents for their businesses.
I actually see strong developments across the country in this space, from iconic tall wood buildings, which we have been talking about, to novel products like nanocrystalline cellulose, through to these manufacturing companies, in a wide array. I see steel and cement coming together with forestry as we try to reduce something that's critically important in Canada, which is our carbon footprint. The list goes on and on. This is an extremely timely topic.
The creation of secondary products is an exciting economic story that has already begun. It's creating jobs in both rural and urban Canada, but it's also an environmental story and it's very exciting. We know that wood stores carbon—we have just had a great description of that from my colleague Peter—so you know there's a direct link between the low-carbon green economy that Canada aspires to and what we call the forest bioeconomy.
It is with this in mind that I am pleased to be here today. I worked hard to try to think of some offerings I could give this committee, as it studies this topic, about the current industry and the development of those secondary supply chains.
First and foremost—and this goes almost without saying but let's put it on the record—sustainable use of forest resources must be paramount to ensure healthy and vibrant forests for generations to come. The sustainability of our forests, as we pursue these secondary supply chains, must be central to how we proceed. Our policies, regulations, forest-management practices, certification schemes, and so on must all keep pace to assure that we have that secure, predictable, and sustainable supply of forest material in the future.
Second, there are primary products. I've been asked to talk about my own definition of primary. I see primary products as being the traditional products of various wood products, lumber, and pulp and paper products. I see them being linked to each other in an extremely integrated economic model. This committee is probably very aware of that. When there's a problem in one part of the family, it impacts everybody. I believe, given some of the long-term structural challenges in pulp and paper, that we have an ongoing economic imperative to create these secondary supply chains that you're looking into.
Third, secondary products are already being created today. We're talking about some novel engineered wood products. I didn't bring any toys, but they're awesome. They're fantastic. We're talking as well about energy-generation capacity. I presume my colleague Sandy will talk about that in a bit more detail as well. Of course, right across this country, we're seeing biochemical biomaterial trials for the first time ever in the world, which is extremely exciting.
Fourth, none of us in this room and none of us who look at this issue deeply actually know how this will unfold in the future. I think we need to stay cognizant of the fact that the secondary products of today may become the primary products of tomorrow. Also, there may be brand new inputs that forest-based materials provide for these other sectors. We might even see entirely new segments of our bioeconomy emerge.
Fifth, the primary production of traditional products is currently the most economic and job-rich way for this to unfold, so while we don't know how this will actually take place, we do know a few things.
Bio-pathways looked at this and I believe the current analysis shows that you're best to take clean technology and bolt it on to some of these assets, or take residuals from existing primary forest product producers and convert that to additional bioproducts.
Finally, there are a lot of new entrants out there, a lot of new businesses that are extremely interested, and I think new market opportunities will emerge that will be quite significant. My advice is that primary product producers need to recognize and be encouraged to form these new business relationships to actually grab hold of those market potentials.
You're taking on this study at a time as well—and I'm sure you're well aware—when international competition is looking at this in all sorts of ways. We must be seized with the question of how we do this here in Canada.
While I have the floor, I'd like to applaud the Canadian Council of Forest Ministers for their recent launch of a bioeconomy framework. As you likely know, it provides a tool box for federal and provincial governments to think about how best to support the primary forest users and create those secondary supply chains that you're looking at. It got a lot of things right so I encourage you to take a look at it, but I'd love to ask you to go one step further.
I think we can do more. I would like to suggest we could take a leadership role and develop immediately a federal strategy that puts those elements of the framework into action that would support the provincial activities in this space, that would provide critical information, to all current and potential users of the resource, of feedstock supply, of what the inventory of clean technologies that are moving dynamically is, and really drive further innovation.
Globally, this is a very fast-moving space. I think we have to keep our eye on all of this. We have an enormous economic job and environmental opportunity that you're studying. We have a very strong base. We have 350 million hectares of beautiful forest that we know how to manage sustainably. We have a strong global reputation for those sustainable practices. Our development of “world first” clean technologies cannot be overlooked. I think if we marry these strengths with ongoing innovation and look deeply at how we can go further, Canada will be very well positioned to be a leader.
Thank you very much for taking on this study and for the chance to appear.
I'm not sure I can be as succinct as Catherine has been, so I'm going to time myself.
Thank you very much to the committee for having me here. I'm from Vancouver, British Columbia, and I'm the vice-president of corporate development with Conifex Timber.
I am very pleased that your group is taking a look at this area. It's a big topic. I was kind of daunted when I was first invited to talk about secondary supply chains. We could be here for years studying this, so I'm going to try to take just a particular slice, which is the area near and dear to us as a company and to me personally, and that's really around the bioeconomy. It's also around our company and what it's meant to us in terms of how it's changed our business and how it's made us more sustainable. I'll also talk a little bit about the opportunities and challenges and how the forest sector overall can really contribute further to innovation and to the low-carbon economy.
Our company, in case you don't know us, is not one of the giants of the industry, but we are a publicly traded company, so if you want to look up more information, most of it is online. We're a lumber and biomass power producer, and we had revenues in 2016 of around $400 million, so that puts us at the level of a relatively small entrepreneurial Canadian forest products company. We were formed in 2008 when our founder, Ken Shields, saw two idle sawmills in the interior of British Columbia. He thought maybe we could do a better job of restarting and running those operations, because the essential piece of them, the fibre basket, was still there and was still in place. In 2009 and 2010, we acquired sawmill assets from AbitibiBowater and Pope & Talbot up in the interior of British Columbia, in Fort St. James and Mackenzie. If you folks have ever been up there, you'll know it's just north of the Prince George area.
We hold over a million cubic metres of annual allowable cut licences in British Columbia. We did $128 million in our two sawmills, which produced over 500 million board feet of lumber, 90% of which is exported to outside of Canada.
Since 2009, we've contributed 600 jobs to our communities. These are resource-dependent rural communities, so those of you who live in these kinds of communities know how important these kinds of jobs are to them.
We have also recently modernized and rebuilt a sawmill in El Dorado, Arkansas, to provide further diversification. I'm going to talk a lot about diversification today, because the additional prong—we have sawmills and we have a new asset in the U.S. south—is that a big part of our asset base is our bioenergy facility, which is in Mackenzie, B.C. We moved into the bioeconomy really because of an opportunity that was created by government regulation. In 2010 when we acquired the Mackenzie site, there was very good government policy in British Columbia, which encouraged clean, independent power production, and we were successful in using some assets—an old newsprint facility.
Of course, being lumber people, we didn't know what to do with a newsprint facility, and there was also a reason the newsprint facility had gone down, so we thought that at least we could try to repurpose and reuse some of those assets to do something else. We found $103 million of financing out on the market—and I'll talk a bit more about how hard that was because it was not an easy thing at all—and we were able to get into an electricity purchase agreement with BC Hydro, to add to our load displacement. It's 36 megawatts, which puts us as the second largest in the province of British Columbia and at a pretty good size across Canada.
As I mentioned, we reused, repurposed, and refurbished as many of the assets that were on the site as we could, and then we looked at the really state-of-the-art pieces, which were a new turbine and a $12-million fuel-handling facility, to be able to take the residuals and process them appropriately to use as feedstock for the fuel source for the boiler.
We use 172,000 oven-dried tonnes per year, the majority of which comes from our own sawmill residuals—the lower-cost residuals, not the chips, as well as the hog fuel, which is the barky bit, and also the shavings. We successfully commissioned this project in 2015. We sold electricity the month after we completed it, and we're at 99% efficiency and very happy with the project.
Conifex gets a stable and diversified revenue source from Canadian fixed-dollar currency. In the lumber business, you're always producing in Canadian dollars and selling in U.S. dollars, so you invariably take on exchange-rate risk. This is also predictable. We don't have cycles of softwood lumber and cycles of commodity price drops. We have a 20-year contract that gives us stability.
We get assured markets for a significant portion of those low-cost residuals, and we've developed a $12-million platform, through which we are learning a tremendous amount about how to process biomass feedstock for our current project and for future applications. It's really enhanced the competitiveness of our Mackenzie site. We have greater assurance that the site will operate and will maintain employment even in the downturn because our sawmill and our power plant are so integrated. The province of British Columbia gets a 230-gigawatt-per-year clean-energy source or the equivalent of powering 20,000 B.C. homes, $103 million in new investment in the clean-tech sector, and for the town of Mackenzie, 24 new jobs, good jobs, primarily power engineers. We have heightened certainty that our company will be able to continue to account for one-third of the tax base in that town.
Has this been a good addition to our business? Yes. Has it been hard? Yes. We had a lot of challenges with the financing. That's a big chunk of change when you're a relatively small company. We've also had continuous learning around processing feedstock in a very different way from the way we get logs into the mill. Finally, we had to hire a brand new workforce with very different kinds of people.
What are the opportunities and challenges that face forest product companies as we seek to really scale up the bioeconomy? I think there is a very broad spectrum of activities that go beyond the core production of lumber and/or pulp and paper. If you look through a lens, I think of utilizing the sawmills and/or harvesting residuals to produce heat, electricity, biofuels, biochemicals, and advanced biomaterials. All of these replace petrochemical products. Bioenergy is the first level, and that includes things like bioheat, community district heating, biomass power—which we have produced—cogeneration at sawmill sites, and first nations diesel replacement through community heat and power.
There is, however, much more we could and should do, both in these mature areas and as we move to developing the types of opportunities that Catherine mentioned a moment ago, and on which other witnesses have shared. Those are around biofuels, especially chemicals, and advanced biomaterials in markets such as the automotive sector and the pharmaceutical and industrial markets.
At Conifex, our major investment decisions are driven by our duties of loyalty and care to shareholders. We always have to remember that, as much as we might want to move forward in areas, because it's the right thing to do. That is the primary reason our company exists. Our best value for the fibre we process still comes from using sawlogs to make dimensional lumber. There is more we can do to maximize value-added applications for our residuals; the two are complementary and additive.
Having a competitive forest sector, however, is crucial to providing a platform to move into some of these higher-value and riskier new applications. I encourage continuation of the efforts now under way in B.C. and other provinces to help with the competitiveness in our sector. I, too, commend the Canadian Council of Forest Ministers for taking the big step of creating the forest bioeconomy framework, and I join Catherine in calling for the evolution to a strategy as soon as possible and to collaboration with the provinces. That's so crucial, because in this space, as you all know, it's a very locally based business. It's a fibre supply in one area and an energy profile in another, and the applications are all going to be very different, depending on where you're based.
There's a big role for government here in encouraging all of these emerging sectors. We would not have built our biomass power plant without the good government policy and the regulation at the time in British Columbia. We need to have effective and long-term government regulation and funding programs to mitigate the risks that are beyond what those of us in the private sector can do ourselves. We can't take on regulation risk. That's where we need help.
Private and public sectors need to work together to educate stakeholders. I encourage all of you to attend the Scaling Up conference here at the end of November. It's a perfect opportunity for this committee. It's probably the best conference in Canada, and it's in just a couple of weeks.
We also need to develop better partnerships across all elements of the supply chain, including end-users. I was very disappointed to learn that the biodesign supercluster did not receive funding in the supercluster race. I know there were a lot of terrific proposals out there, but what was really exceptional about this was that we don't necessarily work that well together in the forest products sector, and the opportunity that was presented brought a lot of stakeholders, both in forestry and outside, together, with $400 million of potential project funding on the table. I think the momentum will continue, but we have to find the right mechanism.
I'd like to see some tax policy for the bioeconomy that's equivalent to the tax policies enjoyed by the fossil fuel industry. I'm sure I'm not the first person to mention that. We need revenue-neutral carbon pricing that's aligned with best-in-class equivalents in other parts of Canada and the U.S., because products will flow to whoever will pay them the most. We need to really become better at understanding how to access those very large volumes of biomass, but they must be economically available.
I see I am getting tapped, so I wasn't very good with my watch. May I say my last sentence?
That's a great question, because we are always asked about what people can do.
There are two elements to that. One is the education of people who are capable of designing and specifying wood. The other is their legal ability to use it in certain structures. The legal aspect is basically in the codes and the standards and the like.
I don't know that there is a really good understanding by a lot of people of what the new wood products can do. You've probably heard of Brock Commons. Who would have thought 15 years ago that we'd have an 18-storey building the main structural element of which would be wood? Many of those materials are still restricted in various jurisdictions, some by the national building code but often by locals, because people look at them and say, “Wood, fire, burn, bad”. The real question should be how the material will respond in a fire, not whether it will eventually burn. I can make steel wool burn, but it's acceptable.
That's one area where I think CWC has done an awful lot of work in helping people understand what's possible and where not to use wood. Don't allow it to be used where it shouldn't be used, but don't diminish its capability because you have a weird perception of it.
The other thing is how the architects and engineers learn about this. Very few architects 15 or 20 years ago took any courses. At the university I went to, UBC, the engineers have an optional course in wood, heavy timber design, and it's 12 hours long, out of four years of instruction. To be honest, they probably shouldn't use wood, but that needs to change. Laval University has a wonderful program. The University of Northern B.C. has a master's program. UVic wants to build a wood engineering program. These universities are recognizing that wood is going to play a role, but we really do need to teach today's practitioners as well so that they are comfortable in building with wood.
I really think there should be a requirement to learn about all the main structural materials if we're really going to be comprehensive engineers and architects. Does that answer the question?